Being frugal is key to lasting financial health. But sometimes you can save too much — or be so concerned with costs that you miss out on a great value.
This can be especially true when it comes to financial tools. Some of the most useful financial services have an upfront cost. And sticker shock can scare savers away, even if the price is well worth the return.
So how do you know if a financial tool is worth the cost? Figuring out how to spend money wisely includes identifying opportunities to spend a little and get more — more time, more knowledge, or even more money.
Here are five ideas for how you can spend to save in ways that will improve your financial world.
How to spend money wisely to save money
Refinance or consolidate debts
Finding strategic approaches to handling your debts can net significant savings. Consolidating or refinancing debt can both lower monthly payments and cut the interest you pay over the life of the loans. It’s worth your time to look into refinancing student loans, refinancing a mortgage, or consolidating credit cards to lower interest rates.
Restructuring debts can incur new costs. Refinance a mortgage, and you’ll often face closing costs. And personal loans used to consolidate credit cards often carry loan origination fees.
Use the calculator below to compare the costs of your current debts with the savings of refinancing a loan.
Even with an origination fee or new closing costs, you might still come out ahead by consolidating or refinancing your debt.
Student Loan Refinancing Calculator
Make extra payments on a debt
On top of refinancing your debt, you’ll also get guaranteed savings by paying ahead. To do so, make your minimum monthly payment — and then some.
Finding extra funds to put toward repaying debts isn’t always easy, but it can have big payoffs. Depending on your balance, loan term, and interest rate, extra payments could shave years off your debt repayment and save thousands in interest.
Take your tax refund, for instance. A recent Student Loan Hero analysis estimated the savings of applying the average $2,973 tax refund to repaying student debt. If a new college graduate used an average-sized refund to pay down a $37,172 student debt, they’d get out of debt a year faster and save $1,504 over the life of a standard 10-year loan in student loan interest.
Use the prepayment calculator below to see how much interest you could spend to save with extra monthly payments toward debts.
Invest in an excellent financial app
Sometimes, all you need are the right financial tools to get ahead — even if you have to pay for them. At times like these, financial apps can help you manage your money and get ahead financially.
Many popular financial and budgeting apps are free. But don’t discount a promising financial tool just because it has a cost. For instance, every person I’ve talked to about budgeting app You Need a Budget swears by it. Even with its $5 monthly subscription fee (it has a free, 34-day trial, too), they love it and think it’s well worth the cost.
Then there are investing tools like the app Acorns, which charges just $1 a month to invest your spare change from digital transactions. Or you could get the help of a robo-advisor like Blooom to maximize your 401(k) growth — without having to become an investment expert overnight.
Whatever the problem area is in your finances, the right tools can help you solve it simply and efficiently. And even for a price, that could be worth it.
Hire a financial professional
Maybe you have a financial problem too complicated to solve with an app. Consider hiring a human’s help instead — such as certified financial planners (CFPs), investing advisors, or certified public accountants.
Financial planners can help you quickly understand your financial situation, including the cause of your problems and potential solutions. They can point you to tools and products that will maximize savings and profits. And they will be more familiar with the complex world of finances and taxes and can find opportunities to save that you would miss on your own.
When preparing my taxes for 2015, I got a nasty surprise: a tax bill of $8,100. With this enormous bill hanging over my head, I opted to get the professional help. With a better knowledge of tax rules and benefits, our tax preparer found almost $1,000 in additional tax savings.
There is a caveat, of course: make sure you understand how your financial expert gets paid. Fee-based advisors are often preferable because costs are easy to anticipate and understand.
Last but not least, make sure you’re adequately protected — especially if you can get insurance for a cost you know you’re likely to face down the road. There are the obvious options like renter’s insurance, car gap insurance, life insurance, and disability insurance. But you should also consider insuring things like electronics or your pets.
For me, I’m pretty hard on my belongings, and my smartphone is no exception. So when switching to a new phone plan, I opted for the insurance policy. So far it’s replaced a phone dropped in the ocean and one with a cracked screen — and more than paid for itself.
To find your ideal level of insurance, think about the big costs you could be facing if something went wrong. Then look for an insurance policy to match. For example, pet insurance can make a huge different when you’re facing big veterinary bills.
Make sure you compare premiums to how often you expect to use the policy to ensure you wouldn’t be better off just contributing to and emergency savings fund, instead.
Sometimes you have to spend to save
When it comes to building financial security, sometimes it pays to spend to save. Spend money now to give your finances a little extra boost, and you could see significant returns for months — or years — to come.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|