After a brutal 2021, many people are focused on improving their finances and building a safety net. Whether you need to pay off debt or boost your emergency fund, there are multiple ways to cut corners and save money. Below, learn how to save money on student loans, credit card debt, car insurance, and more.
How to save money on student loans and other expenses
Saving money doesn’t necessarily mean you have to work a second job or live on rice and beans. You can improve your finances by using these nine tips:
1. Deduct charitable donations
Because of tax rule changes, you typically can’t deduct charitable donations unless you itemize your deductions. If you take the standard deduction, you usually can’t deduct your cash donations.
However, the Coronavirus Aid, Relief, and Economic Security (ACT) changed that. When you file your taxes in 2022, you can deduct up to $300 in charitable donations ($600 if you’re married and file jointly).
By taking advantage of this deduction, you can lower your taxable income and get a smaller tax bill, putting more money in your pocket.
2. Consider mortgage refinancing
If you’re a homeowner with a home loan, now is a fantastic time to refinance your mortgage.
Consider that in November 2018, the average interest rate on a 30-year fixed-rate mortgage was 4.94%. As of February 2021, the average interest rate on a 30-year fixed-rate mortgage is just 2.81%. By refinancing your mortgage, you could save thousands in interest charges over the life of your loan. Contact a mortgage lender to discuss your options.
3. Use the debt avalanche strategy
If you have multiple forms of debt, such as credit card balances, student loans, and auto loans, the most effective way to tackle it is the debt avalanche strategy.
With this debt repayment method, you make all the minimum required payments but apply any extra money you have to the account with the highest interest rate. Once that account is paid off, you take that payment and put it toward the account with the next highest rate every month.
By targeting the most expensive debt first, you can save more money and pay off your debt faster.
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4. Compare car insurance quotes
Your car insurance bill can be a major expense,
When you’re a recent college graduate, you may not know where to start when it comes to insurance, so you likely used the same insurance company as your parents. However, that can be a costly mistake, as rates can vary by company, and you likely have very different insurance needs than your family.
Instead, plan on shopping around and comparing insurance quotes once every year. By comparing auto insurance rates, you could save up to $670 per year.
5. Sell extra stuff
You likely don’t realize it, but the unused clutter in your home could be a source of extra cash. According to electronic reseller DeCluttr, the average American household has $264 of unused devices in their homes.
If you have a day without any plans, spend some time cleaning out your home and gathering unused clothes, toys, furniture, and electronics. You can sell those items on eBay, Poshmark, Gazelle, and Craigslist and use the money to make extra debt payments or to add to your savings.
6. Consolidate credit card debt
As of November 2020, the average interest rate for credit cards that assess interest was 16.48%. With such high rates, it can be difficult to make any progress paying off your balances.
If you’re struggling with high-interest credit card debt, consider applying for a debt consolidation loan. Debt consolidation loans are personal loans you use to pay off your credit card debt or medical bills. They typically have much lower interest rates than credit cards and fixed monthly payments, so you can save money and know exactly when you’ll be debt-free.
7. Claim the student loan interest deduction
Under the CARES Act, interest was set to 0% on most federal loans. However, if you made payments before the CARES Act was enacted, paid interest that had accrued, or made payments toward private student loans, you can still claim the student loan interest deduction on your taxes.
You can claim the student loan interest deduction even if you don’t itemize your deductions. If eligible, you can deduct up to $2,500 or the actual amount of interest you paid during the 2021 tax year, whichever is less.
8. Cancel recurring subscriptions
With so many apps, streaming services, and other subscriptions readily available, it’s easy to sign up for things without thinking about it. But when you add up the cost of all of those services, it can really cut into your budget. Canceling just a few of your subscriptions can help you save hundreds.
If the idea of calling each service provider is intimidating to you, Trim is a tool that can simplify the process for you. According to the company, the average yearly savings for users that enroll in all of the app’s features is $1,498.
9. Refinance your student loans
When it comes to student loan statistics, the average borrower has a loan balance of $29,650 with a 5.8% interest rate and a monthly payment of $393. With such a high interest rate, thousands in interest charges can accrue, causing you to pay more than you initially borrowed.
If you’re looking for ways to lower student loan payments or are wondering how to lower student loan interest rates, consider student loan refinancing.
By refinancing your federal loans or private loans, you consolidate them into one. Rates are at historic lows right now, so you can qualify for a lower interest rate and save money over your loan term. Or, if you’re trying to figure out how to lower your student loan payment, you can opt for a longer loan term.
Just how effective is refinancing? Consider this example. Jane had $29,650 in loans at 5.8% interest and a 10-year repayment term. By the time she paid off her loans, she paid over $9,400 in interest charges.
To save money, Jane decided to refinance her loans. She qualified for a 10-year loan at 4% interest. With the lower rate, she paid only $6,373 and saved over $3,100 in interest charges.
|Original Loan||Refinanced Loan|
|Loan Term||10 Years||10 Years|
|Minimum Monthly Payment||$326||$300|
If you decide to refinance your student loans, make sure you get quotes from multiple lenders. You can use Purefy’s Compare Rates tool to get quotes from top refinancing lenders without affecting your credit score.