Generally speaking, I am not a fan of spending money to get money but Dave points out 8 situations where spending actually helps you save- helping you to ultimately get out of debt quicker.
Dave B. is a small business owner who resides in Atlanta and writes about strategies to save money and get out of debt. – Anna
When it comes to getting out of debt, it seems obvious that the first thing you should do is save money, right? And the best way to save money would be to spend less of it, correct? Well, yes and no. Actually, there are some instances where spending more money can actually help you get out of debt. Once I finally wrapped my head around this idea, I managed to conserve more money than ever before and ended up getting myself out of debt much faster. Here’s a list of things that worked for me on my quest.
8 Ways Spending Money Can Help Get You Out of Debt…
1. Down Payments
The zero-down offers made by car dealerships are tempting, but you might pay more in the long run. For example, I recently purchased a car for $15,000, and put $5,000 down. I financed the rest for 60 months at 4% interest. In total, I’m going to be spending approximately $21,575. Had I put $0 down, this number would be $22,100. That’s $525 I saved just by making a significant initial payment. The same is true for money put down on a home. Bumping up your down payment from $6,000 to $10,000 on a $200,000 30-year fixed mortgage with a 4% interest rate saves you almost $3,000.
2. Insurance Premiums
In the past, when my auto insurance bill came in the mail, I just made each monthly payment and moved on. After I took a look at it, though, I found that I could save a full month or even more by paying it all off at once. My provider had a discount program in place where I essentially got one month free by paying it in full. I also noticed that I was being charged a $3 processing fee each month, so by paying the full balance I saved another $36 for the year.
3. Large Purchases
If you spend $400 on a 46-inch flat-screen TV made by a lesser-known manufacturer, you may think you’re getting a deal. However, if the TV malfunctions a year after you buy it, you might be left out in the cold. Most of the time, it’s cheaper to replace these high-end items rather than pay to have them fixed. If the power supply or picture tube on your flat-screen TV goes out, plan on spending $400 or even more to have it repaired.
That’s why it makes sense to spend a little more on quality. In most cases you can get yourself a mid-level flat-screen TV for about $100 extra, which is money well spent. You don’t necessarily need to purchase a Sony or a Samsung, but stay away from the really cheap brands like Seiki, Westinghouse, and Dynex. The same holds true for laptop computers and any other major purchases.
4. Car Maintenance
Consult your owner’s manual to make sure you’re on top of all scheduled auto maintenance. This includes tune-ups, proper tire inflation, and more. Spending this money upfront adds more longevity to your vehicle and makes it possible to drive your car long after it’s been paid off. You also enjoy better gas mileage by regularly performing these tasks and you reduce the risk of major repair issues. Drive your car on under-inflated tires and you increase the chance of a blowout. Skip a few tune-ups and your timing belt could go south. Depending upon the severity of the damage, other pistons and valves could fail as well, which could as much as triple your repair costs. Ignore your brakes and rotors and discs may also need replacing, which would double the cost of that repair.
5. Home Maintenance
Although it’s a pain, I religiously change my AC filters every sixty days at a cost of about $2 to $3 per filter. This lets my system run more efficiently and it saves energy. I also have my chimney cleaned once a year for around $100 to reduce the risk of a costly chimney fire. A friend of mine inspects my roof every so often for possible damage and I replace shingles as needed rather than waiting for the damage to get worse.
I also inspect doors and windows a few times per year for drafts, and I peek my head up in the attic twice a year to check on my insulation. A well-insulated home can significantly reduce energy expenses. I check the hoses on the back of my washer as well. Let one of those crack and you could pay through the nose to clean up flood damage. Although home maintenance costs you in the short-term, you avoid more expensive repairs in the long-run like roof replacement or a new AC unit.
6. Energy Audits
Pay a nominal fee to your energy provider and a company rep can come to your home and provide you with a complete inspection, inside and out. Some companies do these for free. You get a comprehensive list of all the ways to reduce home energy costs. Invest the money in any recommended upgrades and your energy bills are sure to go down. Apply those savings to your debts.
7. Stocking up
Whenever I see a grocery item I use on special, I always stock up. This is especially true for non-perishable items. Saving 50 cents on one box of pasta is great, but saving $2.50 on five boxes is even better. Do that with ten different items like frozen vegetables, cereal, beans, rice, or cooking spray and you can save $25. Just make sure you stick with the items your family uses the most so storage and waste don’t become an issue.
8. Membership Fees
Invest in a membership to wholesale shopping clubs like Costco or Sam’s Club and you can recoup the cost of your membership after just a few visits by buying in bulk. Both stores also have attractive pricing on items besides food such as clothing and consumer electronics. If you purchase a lot on Amazon, get an Amazon Prime membership. For $79 a year you get free two-day shipping on the majority of items plus a huge selection of streaming videos. You can have access to free eBooks if you own a Kindle device as well.
Approach the process of getting out of debt with objectivity and forethought. Save wherever you can on groceries, utility bills, gas, and other monthly expenses, but also be aware of when spending more can save you over the long haul. This can significantly shorten your path to a debt-free life.
Do you know of any other ways where spending more in the short-term can save you money overall?