Borrowing with smarts (part 1)

Planning for those larger expenses

Even if you have just released yourself from your debt by working hard to become debt free. There are certain circumstances that will happen in your financial future that will cause you to go into debt again. When you do, you should do it will smarts. Even if you already have debt (as most of us do) - you can be smart about the next situation that will come up in the future by borrowing with smarts. Play it smart and you will not only have piece of mind when you borrow again, but you will also save money no doubt.

Whether it is your next car, a house or whatever, you will have to go into debt in your future. The more money the situation (car, home) costs, the harder it will be for you to buy without going into debt. Housing is really an obvious reason fro having to take a loan, so we will focus on other expensive situations in this debt free article about borrowing wisely.

You know that big expenditures will come up in the future, so you have to have a plan for them. The further ahead you plan for such things, the better off and the smarter you will be about the debt. In fact, if you are saving on the side fro such expenditures, you will find that the more you do save, the less you will have to go into debt. For instance, you know you are going to need a new car down the road. If you plan ahead and save a bit of money whenever you can, you will find that your down payment will lower the amount of your loan which in turn will lower your debt and chances of being in over your head.

If you need to but a high priced item today, then setting up a savings plan really is not a practical idea. But, maybe you know that your house needs a new paint job or your septic tank is getting ready to need repair – even a vacation. Then you need to start preparing for it as far ahead as you can.

For instance, say your probable painting costs will run you $2,500. If you plan to repaint in 2 years time try saving one hundred dollars a month for two years. This will get you $2,400 at the time you plan to paint. You will have interest from your saving for the 2 years as well. This way, you can pay fro the paint job upfront.

Even if you set aside $50 a month, you will be half way there and the debt you go into for the rest will not be as overwhelming as taking a $2,500 home improvement loan that will charge you interest. This is borrowing with smarts. Even if you can stretch the paint job date out a couple of months it is a good idea. As long as you are not doing damage to your home by doing so (that would cost you even more to fix), you will be borrowing with smarts.

The same concept can go for saving for a holiday with the family. If you want to take a major vacation with your family, try setting up a savings plan as far in advance as you can in order to pay for most of the trip upfront, causing little debt on credit cards. This is borrowing with smarts. You are much better off saving money in an interest baring savings account for 2-3 years to pay for a vacation than you are by taking the trip on credit cards only. You want your money to perform for you – not for you to go into too much interest baring credit card debt that will take years to pay off.

Yes, good saving discipline is a necessity for anyone to possess when planning ahead for major expenditures in your future. You have to be able to actually put the money into a savings account every month and you have to be able to not use it at all during the savings plan duration. If a true emergency comes up, you obviously need to access the money, but only for an emergency. At least you will have some savings instead of none.

You also need to pay attention. You have to be able to be sure the money you are saving is performing for you at its best. Be sure you are getting the highest interest possible paid on your savings. Also, be certain that the money id in a safe environment. You can go with a CD or Roth IRA but the penalties are stiff you have to get to the money before it matures – so talk your options over with your banker ahead of time. Otherwise get a good savings account.

Not only do you want to study up on your savings account options, but you want to study up on your expenditure’s costs too. Make certain you are getting the best quotes and such for the item you are saving for. Yes, quotes expire and if you are saving for multiple years, you have to consider this – just be sure that you are reading up on the latest info regarding your future purchase. For instance, if it is a vacation you are saving for watch out for specials and look for the best rates possible.

Be sure to read on in our next section of this borrowing with smarts article that will be covering automobile purchases. Click below for it and the main news page.

Part 2 - Automobile Purchasing...

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