How to Save Money: 5 Tips for Financial Freedom

culled from:bankingsense.com

The ability to be financially independent is a goal that many people have. However, many people find themselves with thousands of dollars of credit card or student loan debt. What are some ways that you can get rid of your debt, save money and declare financial freedom for yourself and your family?

1) Go on a Debt Freeze

If you have thousands of dollars of credit card debt or owe thousands of dollars on a car loan, you need to go on a debt freeze to look at your current debt situation. After you have gotten a clearer picture of your debt, it is now time to think about ways to eliminate that debt. Credit card debt can be consolidated at a lower interest rate, you can sell your car to get out of that loan and you may be able to consolidate student loans to save on interest as well.

2) Save as Much as You Can

Once you have a handle on your debt, it is time to allocate a certain amount of your earnings to savings. Even if you can only save a few dollars a week, you will get into the habit of putting money in a savings account each pay period. As your financial situation improves, you can start allocating more money toward a savings account, retirement savings or into an investment portfolio.

3) Don’t Look at Monthly Payments Only

When you are in a better position to take on debt again, make sure that you take into account the amount of interest that you will pay on a loan. Many car salesman and mortgage lenders will try to convince people that they can afford more car or house because they artificially lower the monthly payment. This is done by stretching out the loan term for up to 96 months for car loans and up to 40 years for mortgages. While you may enjoy the lower payment, you will ultimately pay more for an asset that may or may not hold its value.

4) Work to Improve Your Credit

Becoming financially independent is a lot easier when you have good credit. This is because you can qualify for lower interest rates on loans. In some cases, you may not have to pay interest at all because the business making the sale wants your business. Those with good credit can also tap into equity that they have in their home to consolidate their other bills.

5) Use Your Good Credit to Your Advantage

When you have good credit, you can get concessions from creditors that you may not otherwise be able to get. For example, you may be able to convince your landlord to waive a security deposit or give you a lower rent because your landlord knows that you are going to be good for it. Landlords in general would rather take slightly less and know that they are going to get it as opposed to charging their full rate and rent to someone who may stop paying after a month or two. Additionally, those with good credit are often seen to be more responsible than others. This can help you get lower rates or extra discounts on things like your auto insurance policy.

Financial freedom is something that you can attain if you commit yourself to managing your debt, increasing your savings and working to obtain a higher credit score. Those with good credit, high cash reserves and a low debt-to-income ratio have more flexibility to do what they want because they will always have plenty of cash on hand or access to cheap credit to finance their lifestyle.