The following is a guest post.
Improving cash flow to slash debt has common benefits but unique challenges. The more money applied to principal balances now will save large sums of interest expense later. However, increasing income in the short term may be more difficult for some than others.
Thankfully, there are common expenses that can be slashed for most homeowners. The monthly savings provides money to accelerate paying off your debt or other financial goals.
Here are a few ideas:
Increase Your Tax Allowances:
Answering this question will tell you a lot about your money psychology. With the average refund topping $2800, many taxpayers earmark these funds for debt reduction. Instead, lump sums often fuel impulsive buying binges.
If you receive a tax refund every year, yet are struggling to save money, consider increasing W-4 deductions. Using a free tax calculator will help tweak your W-4 so that you don’t owe money at year end.
The increased cash flow each pay period harnesses compounding to slash debt, start investing, or build an emergency fund. Investment managers such as Elliott Broidy and taxpayers alike can use compounding to increase financial results.
Unlike the adrenaline rush of tax refunds, your money psychology is more likely to wisely use extra cash in smaller increments. You can also gain control over where your state taxes are directed by taking advantage of tax credits, such as in Arizona.
Review Homeowners Insurance:
Many well intentioned homeowners over insure their houses. The most common causes are low deductibles and insuring the land.
Losses or damage to property can be quite expensive. Even basic claims will often exceed deductibles. Raising your deductible provides month over month savings that can be used as leverage to pay down high interest rate debt.
A credit card bill is guaranteed whereas the likelihood of filing a home insurance claim is lower. The return on investment by upping home deductibles from $500 to $1000, for example, makes it a viable choice.
From a practical standpoint, fire, storms and natural disasters rarely affect residential land. Unless you use land to generate income for farming or other purposes, it is unnecessary to insure property grounds. In efforts to get premium coverage, many policies do cover both the home structure and land.
Check Car Insurance:
Most cars do not appreciate over time. Yet, many motorists do not adjust deductibles as the value of their cars change.
The cost of car repairs or body work to major components may be impractical for older vehicles. Unfortunately, drivers often overpay for low deductibles on depreciated vehicles. Raising your deductible to sensible levels offers instant savings.
You may also check for overlaps between auto insurance and drivers’ clubs such as AAA. Glass coverage and towing are often redundant coverage between separate policies.
Money has Time Value:
Dollars are more valuable today than in the future. This concept underpins inflation and other economic theories, but has everyday value for taxpayers.
By economizing costs on necessities such as insurance and income taxes, your personal balance sheet can quickly improve.