The last 18 months have been a financial struggle like no other, and families are discovering that the typical money-saving tactics used in difficult times just aren’t cutting it.
Cooking at home, canceling your Netflix subscription, spending your vacation days on the couch — for many people, these kinds of moves are no longer enough to balance their budget.
So let 2021 be the year you go beyond the basics. Here are five ways you can save significant amounts of money that you’ve probably never tried before.
1. Take out a loan to defeat your debt
It sounds counterintuitive, but taking out a loan could be a critical first step to becoming debt free.
When the pandemic struck, many families relied on credit cards to get them through the first few harrowing months.
It’s a fine short-term survival strategy, but the brutal interest rates on credit cards — often topping 20% APR — can bury you over the long term. Payday loans are even worse.
To consolidate your debt, you apply for a new low-interest loan and use the money to pay off all of your high-interest bills.
You’ll still owe the same amount, but your new rate will help you save you money on interest and potentially free yourself from debt years sooner.
2. Ditch your traditional bank account
If you’ve got money to spare, you’re probably socking it away in a standard savings account from one of the big banks.
That might seem like a safe strategy, but with every passing day, that money is losing its value.
Traditional bank accounts pay practically nothing in interest; as of September, the average interest rate for a savings account is 0.06% APY. Any meager earnings you see will be obliterated by inflation.
To give your money a chance to grow and maintain its purchasing power, look for a high-yield savings account.
Some banks — especially digital banks that don’t have to pay for physical branches full of employees — are offering interest rates as high as 0.55% APY. That’s over nine times as much interest as a normal account.
3. Trade houses — or at least mortgages
Moving may seem like a drastic measure, but some of your neighbors are probably mulling it over. A LendingTree study late last year found just under half of Americans were considering a move to reduce their living expenses.
Living just a little further away from an urban center can make an extraordinary difference. Depending on where you live, a $500,000 home could be a stunning mansion or multifamily investment property — or a one-bedroom condo.
But if moving is out of the question, you can still save a ton by taking advantage of today’s incredibly low mortgage rates.
Many homeowners have already refinanced in the last year, but an estimated 13.9 million Americans who haven’t can still act fast and save an average of $293 a month, according to mortgage technology and data provider Black Knight.
4. Trade in your overpriced insurance policies
When it comes to insurance, people are eager to “set it and forget it.” It’s easy to stick with the same companies year after year, and a recent ValuePenguin survey showed a quarter of Americans have never bothered to compare quotes at all.
To make sure you’re not getting ripped off, experts recommend checking for better prices every six months.
That might sound a little tedious, but it’s worth it to make sure you’re not overpaying on your policies by $2,000 a year or more.
Start by using a handy quote-comparison site to check for the best rate on your homeowners insurance, then use the same strategy to save on your car insurance.
5. Invest your ‘spare change’
When your budget is tight, investing for the future is probably the last thing on your mind. But given enough time, even pocket change can become a source of wealth.
Take willpower out of the equation by using an app to automatically invest spare change from your day-to-day purchases. Say you buy a doughnut for $2.30 — the app will round up the cost to $3.00 and invest the 70 cent difference in a premade portfolio.
Saving a few cents at a time may not seem like much, but $2.50 worth of daily round-ups becomes $900 in one year — and that’s before counting the additional gains you could make in the market.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.