When you are on the path to your best financial future you can often get into a routine…and that routine can feel pretty good. You can be actively saving, actively investing, living well within your budget and you might be thinking…I can’t possibly get better than this, I just need to keep working on the plan. While we certainly wouldn’t discourage you from continuing to work the plan; especially when the plan is working, there are times when we would encourage you to look at a portion of the plan that might go ignored when everything is working.
The portion of the plan we would encourage you to evaluate, on an annual basis, even when everything is working, is that of your expenses. Certain expenses, even when they are within your budget, are up for review on an annual basis to help ensure you have the best advantage for success. Let’s examine a few major expense items and what to consider.
Car Insurance
Car insurance generally falls under the rule “if it ain’t broke, don’t fix it” but in a household where you have two cars this can easily mean $200+ a month even with a stellar driving record. Now there are always ways to save money on car insurance, but not all of them will help you to achieve your best financial future. As you are looking to save on car insurance consider the following:
- Coverage: Make sure your coverage is reflective of the assets and challenges you could incur. Many states have a “minimum coverage” but that is quite often not enough when it comes to an actual accident.
- Agent: Saving money online is great, but will you have an agent to talk to? A small increase in annual premium can be worth having a local agent that will help you get maximum coverage given an incident.
Remember shopping your car insurance doesn’t mean you have to change, simply take the opportunity annually to see if there is a better opportunity to save and get great service.
Home Mortgage
The home mortgage process is fraught with some of the larger paperwork requirements. Most people avoid refinancing because they remember the paperwork nightmare that was associated with the purchase of their property. While the paperwork (even in the online world) can be daunting, just imagine saving $200 or even more each month! As rates move down you have a tremendous opportunity to save money on a monthly basis. If you are considering refinancing consider the following tips to save:
- Break Even: Looking at the fees and monthly savings amount, how long will it take you to break-even on your refinance? This is a key factor as it can tell you how long it will take for you to truly save and get ahead.
- Term: While a 30 year is traditionally the most popular if you aren’t planning on being there that long (or turning your residence into a rental in the future) you might consider an interest only loan or one that floats with an index (i.e. like the LIBOR) to help minimize your payments.
Car Loans
If you got your car loan at a dealership there is a good chance you didn’t get the best possible deal. Sure it’s possible you got the best rate and term but that doesn’t mean it isn’t worth checking. With car notes being shorter term when compared to a home mortgage it isn’t often one that people think of evaluating and while you might not save a huge amount you still can save. Take for example the following two car loans:
| Loan | $20,000 | $20,000 |
|---|---|---|
| Interest Rate | 3.11% | 2.3% |
| Term | 60 Months | 60 Months |
| Payment | $360 | $351 |
You might be thinking, you are suggesting I refinance my car loan for $9 a month? While that might not seem like a ton of money, let’s say you refinanced after 6 months of having the car. That means over the life of the loan you can end up saving $486…or more than a monthly car payment! Even the small savings can help you to get to your larger goals.
Student Loans
Student loans can be one of the larger expenses that you have on a monthly basis, especially if you went to a graduate program. Payments can often be daunting, adding up to nearly as much as a mortgage payment monthly and while you might be used to paying it it doesn’t mean you can’t shop it to see if you can save.
Competition for refinancing loans is intense, especially in the professional fields of Law and Medicine as the student loan companies understand that those loans are often north of $100,000. With a quick search on Google you will inevitably find a myriad of options; however, we thought we would highlight a few and nuances to consider with each option.
- Traditional Banks with Student Loan Products – There are traditional banks that will refinance student loans and one of those is the bank of First Republic. With an asset size north of $100 billion (Banks are ranked by Asset Size) they would be considered a larger bank and they truly want a full relationship, not just your student loan refinance. While their programs can change, they often provide additional discounts when you have a banking relationship with them. They are considered in the class of a “wealth bank” and do offer a suite of services that could benefit you long term.
- Pure Online Refinance – One of the reasons student loan refinancing became easier was due to the entrant of SoFi into the marketplace many years ago with their innovative online decision making system. While they have expanded their business to online banking as well they started as an online student refinancing company and as such you can likely get the fastest decision on if you can refinance your loans through them.
- Hybrid Online Refinance backed by a Bank – Refinancing student loans comes with the need of a large amount of capital and one such FinTech company realized that and had an early bank as an investor. The company, Laurel Road, consistently competes alongside the likes of SoFi and First Republic for student loan refinancing and could be the best match for your business.
In refinancing your student loans there probably isn’t a wrong answer, and not all loans can be refinanced efficiently. Take time to evaluate your options and see where you can get the best value and savings monthly.
Evaluating your larger expenses might seem initially like a hassle; however, when you have the approach that time spent investigating cost saving options can help you to live your best financial future then that time spent becomes worth every minute.
Twins Rules for Financial Success
As with all of our content here we want to encourage you to follow three core rules :
- Have an Emergency Fund/Squirrel Funds
- Invest for the Long Term
- Invest Automatically & Consistently
