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It’s Stimulus Time!
Whether we end up with $600 or $2000, you might be wondering what you should do with that cash that we might get. These recommendations are meant to free up money each month so there is a lasting financial benefit, instead of a few purchases now.
House and Home Disclaimer
The first suggestion is the most important one. If you are in a situation where your house and home is at risk, you should take care of these necessities before reading on. Especially if you’ve lost your source of income.
- Rent/Mortgage, You cannot afford to be on the street. Protection againts eviction is temporary and can be taken away by a congress lockup or govornment shut down. Make sure you’re paid up or saved up.
- Food in the Pantry, You should be stocking your pantry with food that has a long expiration date. We don’t know what these next months are going to look like and there are no downsides to this. It will alleviate future grocery expenses, delivery fees and costly fast food trips.
- Pay ahead on some critical bills, Take a look at your bills, you could make a large payment to a critical utility bill to float a credit to make sure that light/gas/water does not get shut off.
- Save It! Please have a good understanding of your finances and be sure to save this extra money if your financial situation is uncertain.
As long as house and home is in order, keep on reading to find out how to make the most out of your unexpected deposit.
Refinance That Car
Car dealerships make money by selling cars, protection plans, protective sticker and most importantly finance deals. If you took dealer financing, you probably did not get the best interest rate. Take a look at a few websites for credit unions and find which is providing the best interest rates. You should consider refinancing your car if the current rates offered are lower than your current rate. The bigger the difference the higher the savings. Car loans are larger than credit cards so even 1% APR is a big difference on a car loan. This is even the case if your credit rating is exactly the same as when you first bought the car.
Quite simply, the dealership has no qualms with providing you with bad financing if it means getting the car out the door and potentially getting a kick back from the lender. Even if it means signing you up with a predatory lender.
To give you an idea of what a difference it could make. When I was young, I picked up a sweet Camaro at a big box used car dealer. I took dealer financing at 10.25% APR. The payment for that was $608 monthly. A year into that loan I refinanced with a credit union at 3.49% APR and my new payment was $456 per month. That saved me $152 per month on the payment and a ton of money in interest fees.
If re-financing your car seems outside of your comfort zone, get over it. Call up whichever credit union is offering the best rate and let them know you want to refi your car using that sweet check as a down payment.
Decreasing your monthly expenses with little/no risk might seem to good to be true, it’s not. Your fancy bank is making a lot of money from your payment and the credit union is making none. This is the process with which banks compete for your money, meaning the credit money would rather make $40 bucks a month in interest than $0 and they have no concern about undercutting the big guys.
High Interest Credit Cards
This might sound boring but it’s and incredibly effective way to free up some cash each month. Making these payment reduces your minimum payments and interest charges. Interest charges do in fact come out of your pocket, even if it doesn’t immediatelly feel like it. Consider you make a one time payment of $600 you would save 12.50 per month which comes to 150 per year. If instead you make a one time payment of $2000 you would save $41.67 per month which comes to $500 per year.
If you see those numbers and think “Hey that’s not a lot of money” consider if your neighbor was asking for $12.50 per month and offered nothing in return. You would likely tell him/her to bug off right.
Since minimum payment are typically calculated at the monthly interest fees plus 1% of the balance, you will likely see your minimum payment reduce by more than the interest savings alone.
Does this really help the economy? Considering that less money is going to the big banks and more to your pocket, I would argue yes it does. Having more cash on hand means you’ll spend that money on goods and services, hopefully at small businesses.
This should go without saying but, this only works if you do not immediately use that same card right after. If credit usage is needed again in the future, use the card with the lowest interest rate and push the heaviest payments toward the more costly cards.
Subscription Fees
If you have any services that are charged monthly, check to see if they offer annual plans at a discounted rate. Some companies off big savings when paying anually. Similar to the previous suggestions, this reduces money going big companies and keeps that money in your pocket. There’s also the added benefit of having one less auto payment coming out of your account each month for the next 12 months.
Here are a few services that offer savings with annual subscriptions.
- Google One 1.99 per month to 19.99 per year saving $4 per year. This is small, but the savings increase slightly the larger the plan. If Google One is one of your necessities. No reason not to save a few bucks. $4 dollars is $4 dollars right.
- MVNO Phone Plans Some MVNO Plans such as Mint Mobile offer larger savings the longer you pre-pay.
- Playstation Plus $9.99 per month to $59.99 per year saving $60 per year and $4.99 per month.
- Nintendo Online 3.99 per month to $19.99 per year savings around $28 bucks in total and a few bucks a month.
- VPN Provider It’s common for VPN services to provide discounts when purchasing longer plans.
This should go without saying but, consider discontinuing services that you do not use. Please comment if you know any other services that offer savings when paying annually.
Smartify Your Thermostat
Swap out that old dumb thermostat with a smart thermostat to help reduce your monthly energy bill. It does a lot better job turning on and off when needed to keep things comfortable. Make sure you collect a rebate from your Gas and Electricity provider by checking both of their websites to find a unit that meets both of their rebate program requirements. I received a $75 dollar rebate by switching to a Nest Thermostat.
Greenify Your Appliances
While searching for the right thermostat. Also take a look at other rebates offered by your utility companies, These provide your rebates and reduces energy cost per month.
Some of the appliances listed on my local gas companies site include:
- Natural Gas Dryer
- Tankless Water Heater
- Furnace
Short List
What about an extra car payment?
Well. . . there is a financial benefit to this, It’s just not on the top of my list. Here’s what happens, if you make an extra payment on a non-zero interest car loan, it will go directly to principle. It will reduce how much you are charged monthly in interest fees. The reason I’m not a big fan of this is that the payoff isn’t immediate since the monthly payment is locked by the contract. You will see the savings at the end of the loan, shortening the term by the extra payment and the avoided interest fees. The savings are larger the higher the interest rate and the earlier the extra payment.
The savings are so distant and they can be minimual is most scenarios. It has the most savings when you’re on a predatory loan and if you’re on a predatory loan you should be focused on refinancing to get out of that predatory loan. Truthfully, making an extra payment pales in comparison to simply refinancing with cash as a down payment. I included this simply to address the issues with the idea.
Pay Ahead On Your Car Insurance
You could cut down your monthly insurance payment by making a one extra payment. You could even pay it in full to not think about it for a while. The issue with this is its a dollar for dollar reduction. There’s rarely a discount attached to it and there are better ways. Some insurance companies charge a few bucks a month when paying monthly. You could avoid that extra fee, but there are better ways to free up monthly cash.
Why not Invest?
A dive deeper into why I’m not really suggesting investing right now. The market is volatile right now. It’s been making “records”, but a market is supposed to steadily increase year after year for many reasons. Calling these milestones “records” I think is an oversell. The problem is the risk factor right now. You could buy stocks and hope it goes up and end up with some returns in your pocket, which are taxed. But, if you can save 20 bucks a month by making a payment on a high interest credit card, that is a guaranteed return. It’s not a gamble or calculated risk, it’s a sure fire thing and there are no tax implications.
But I Needs Big TVs Yo!
That was in the voice of Beast Boy if you didnt catch it. Go buy your TV then Beastie. LOL. I’m not doing that right now because the mom and pop electronic stores aren’t really open and the big box guys are actually making a killing right now selling essentials. I’m not confident that buying stuff from the big guys is really making a dent in the economy, those guys tend to pay their execs and buy back stocks instead of giving bonuses to employees. If I were to buy a TV I would be sure to replace the TV or device that is the lease energy efficient with something that is better.