Remember a few weeks back when we walked you through the benefits of making an extra payment on your mortgage every year? In short: one extra payment each year = thousands (if not tens of thousands) in savings over the life of your mortgage.
Well, what if you took that great idea and applied it to every loan you have? Your car loan, your student loan, your credit card consolidation loan, your RV loan or whatever else you might have.
Just one extra payment each year on each of your loans will cut both your payment schedule and the amount of money you're paying in interest.
(Don't be frightened by the total amount of an extra payment: divide it by 12 to get your monthly amount. See, that's not so bad!)
Want to see the power of an extra payment in action? Go to pages 56 and 57 of your Red SHOES book for an example. Apply it to each of your loans to see just how much money you could actually save. It's a great incentive to back away from the takeout menu and tuck that money away!
But where is the cash for those extra payments going to come from?
Unless it's been a really long time since you cleaned under the sofa cushions, that's probably not going to be a good way to come up with the extra money. Never fear! There are lots of little ways to "find" it. Get in the habit of saving your change (you'd be amazed at how quickly it can add up). Put aside the money you save when you buy something (that you need!) on sale. "Pay" yourself first when you get your paycheck and sign up for automatic deposits.
And don't forget those lump sums like your tax return or raises or bonuses. Discipline yourself to earmark that money to pay off your debts. If you do it right away you'll (hardly!) miss it.
Want more ideas that could work for you? We're happy to help you figure out your options. Just stop by any Summit branch or give us a call.
Two ways to pay
You can either save up your payment on your own over the year and put it against your loans in one chunk at the end. Or you can pay an additional 1/12 of the payment amount each month. Whichever is a better fit for YOU.
Make sure your extra money goes to PRINCIPAL. THIS IS CRITICAL.
As we mentioned in the mortgage article, your lender will have no way of knowing you want extra payments to go to your principal balance. Contact each lender and specifically tell them to apply any payments over the standard amount to your principal.
Can't afford extra this month?
There's always going to be a month with an unexpected car repair, school bill or medical need. But that's the beauty of "extra"-you're not required to make the payment in any given month and you can pay more next time. But try not to let too many months slip by or it will be hard to get back on track.
Hey! You're on the way to your million! And Summit will be with you, every step of the way!
Not a Red SHOES member? Gain control and be confident in your financial decisions with this exclusive financial wellness program. Learn more and register today.