5 Tips for Spending Your Money Wisely

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Tips for Spending Your Money Wisely
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Whether the economy is doing well or poorly, and whether you’re making a ton of money or a little, it’s always good to spend your money wisely. There’s a sense of pride that comes with getting a good deal and avoiding unnecessary expenditures. Wise spending also helps ensure you have more money for the things you want to do in life, like travel or retire early. Many people don’t realize that you can save thousands of dollars a year just by changing the way you spend. Just look at these steps you can start taking today.

1. Shop Around for Service Providers

The first thing you can do is start with where you’re already spending money every month. So many people stick with the same service providers because they haven’t taken the time to make some calls. What might take a few hours out of your life can save you hundreds of dollars, especially if you haven’t changed providers in several years. New competitors may have excellent offers for savings and better service!

You can start with your current providers and see if you can get a better deal than you’re getting. If they don’t reduce their prices, start calling cell phone companies, internet providers, and car insurance companies. You can probably even get a better home insurance quote. While you’re at it, make sure you’re not paying for services you don’t use. If you’re not watching Peacock or Paramount Plus, for example, cancel them.

2. Apply More Money to Principal Payments

One handy trick a lot of people miss is paying down the principal on your loans. Principal is the part of your loan that you use for the house, car, or whatever else you buy. Interest is the portion the bank charges you to borrow money. For many loans — like auto and home loans — a large portion of your payment goes to interest. But, unless you have an early payment penalty, you can pay extra toward the principal any time you like.

Taking this approach will reduce the interest you owe over time because interest is charged on the principal balance. So, in the end, you’ll end up paying a smaller total loan amount. One way to pay down the principal is to split your mortgage payment in half each month. Doing this means you’ll make 26 biweekly payments — one full month’s payment will be applied to the principal. You could end up saving tens of thousands of dollars over the life of your loan.

3. Buy Aftermarket or Off Season Goods

Smart spenders will tell you the golden rule of spending is, “Never pay full price for anything.” It’s a good rule to live by if you want to spend wisely. You can shop sales, cut coupons, and join rewards programs to save small amounts of money that add up over time. Another way to never pay full price is to buy items you need either aftermarket or off-season. It’s a matter of supply and demand.

As summer approaches, for example, watercraft, water shoes, and above-ground swimming pools cost a ton! But during fall and winter, the prices can be cut in half or more. The same rule applies to aftermarket goods. In many cases, you don’t need the brand name part to fix your car, your bike, or your lawnmower. You can save hundreds of dollars buying the “knock-off” versions, and usually no one but you will know the difference.

4. Don’t Buy Brand New

To follow up on the golden rule of spending, you should also never buy large items brand new. Of course, you’ll probably want your clothes and shoes unused, for the most part. But things like cars, boats, tools, appliances, and electronics can come in “like new” condition and save you hundreds. Sure, you don’t want an old refrigerator that no longer works, but an open-box item may have been returned just because the original owner changed their mind.

Shop around for the products you need, and don’t be afraid to ask for open-box, refurbished, and gently used items. Make sure you’re buying from a reputable source, and search for reviews to cover all your bases. You can also get great deals on large items that might have damage that is barely noticeable and doesn’t inhibit function; think of a couch with a scuff mark on the back leg. Take your time and be persistent, and you’ll spend wisely.

5. Choose Investing over Saving

Finally, there is a huge difference between investing and saving. Far too many people still think of saving as the ideal way to prepare for a rainy day, a large purchase, or retirement. In reality, putting your money into a savings account is only slightly better than putting it in your mattress these days. At the same time, you don’t want to risk your retirement money on a volatile stock market.

Fortunately, there’s a happy medium. You can put the money you’re not spending right now into a high-interest-earning account. It doesn’t even have to be in the stock market. You could buy government or corporate bonds. If you want to earn a bit more, you could look into preferred stocks, which are only slightly riskier than bonds. The bottom line is this: almost anything is better than a low-interest paying savings account.

In the end, there are many ways you can spend your money wisely, and a lot of them have to do with saving your money. When you save it, on interest payments, on high service fees, or on full-priced items, you have more to live the way you want. The goal for most people is to be happy and free, and having more of your own money is a pathway there. Start taking the steps to hold onto more of your money today.