A Little Goes a Long Way
Sometimes it is difficult to visualize or imagine something little having a large impact. That very mentality oftentimes keeps us from implementing strategies that can help us reach our own financial freedom.Instead, we may find ourselves overwhelmed, procrastinating, and trying to justify doing nothing as a result of this almost paralyzed state. It only takes one small act to operate as the trigger for a series of positive financial steps that will unfold in an almost serendipitous manner. It helps to see examples or have it explained in a plain and simple manner. I’ve selected three core areas to demonstrate how a little can go a long way.
- Add an extra amount to your monthly payment ($20 or $200…either way it will make a difference). Doing so will reduce your interest, as more is being applied to your principal, and this will also shorten the length of your loan.
(Make sure the extra is being applied to the principal and read your contract to ensure you won’t have to pay pre-payment penalties).
- Making biweekly payments is a good option to consider if you can arrange to have this done automatically by your mortgage lender without third party intervention and without fees! By making half of your regular mortgage payment every other week, you are in essence making 26 half payments or 13 full monthly payments at year end. The extra annual payment can take about 6 years off of a 30 year mortgage.
Visit www.dinkytown.net for calculators that can show how much interest you can save or how many years you can chop off of your loan.
Credit Card Debt
- Pay more than the minimum! Take a $10,000 balance @ 18% APR – that would work out to be $250 minimum payment, which would cost you an extra $14,423 in interest (not including the $10,000 original balance you owe)
- Use balance transfer cards offering 0 percent interest. (You will have to pay a transfer fee of between 3-5% but if you know you are going to be making payments for a year or more—it is worth it).
- Putting aside a little extra money every week can have a huge impact! For example, just $20/week will equal to more than $1,000/year. If you assume a 5% annual rate of return, after 10 years you will have $13,700. After 20 years that number would grow to $36,100…and on and on.
- Set up an automatic transfer from your checking account to your savings account, or have money automatically flow through to your savings account from a payroll deduction. This way you are paying yourself without actually having to remember to and without requiring action on your part.
The important point to take away from all of this is that no amount is too small.Every little bit helps when you take the time to put on your macro lens and view the big picture.