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Small Wins for a Big Money Plan in 2017

The start of a new year is a great time to take stock of your money habits and where to make easy improvements. We dug into some Earnest data to help you see how small wins can add up to major financial headway in 2017.

Put the Reins on Your $9 Coffee Habit

Earnest data showed that the average transaction at Starbucks this past year was nearly $9. If you’re a coffee fiend and going every weekday, that adds up to $2,340 per year.

Among personal finance bloggers and experts, the debate is never ending on whether saving money in small ways makes a huge difference in your budget. But if you have $50,000 in student loans, foregoing that daily Starbucks trip could help you chip away at an additional 5% of your loan balance.

Benchmark Your Grocery Spend

Do you tend to buy groceries and make food at home or buy every meal from a restaurant? If you’re in the latter category, you’re not alone. Americans’ spending on restaurants surpassed spending on groceries in 2015 for the first time in history, Quartz reported.

Earnest data showed that people are still grocery shopping, but internet grocers are beating out traditional stores in terms of consumer spend per visit. Both delivery-based grocers Fresh Direct ($85) and Instacart ($71) had nearly double the transaction size of traditional places like Trader Joe’s ($41), Safeway ($39), and Kroger ($35).

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In other words, you are likely paying a premium to get your groceries delivered. By fetching your own, you might be able to cut your grocery spend by almost half. The difference between shopping at Trader Joe’s and Instacart will save you $1,560 over the year if you’re shopping once a week. On your $50,000 student loan balance, that’s another 3% of your debt you can reduce.

Every Percentage Point Makes a Difference

Interest payments show up nearly everywhere you borrow money—they might range from 3.95% for your mortgage, 4.30% for your car loan, 6.80% for your student loans to as much as 15% on your credit cards.  

Lowering rates by refinancing can make a big difference. For example, lowering rates from 6.80% to 4.50% on a $50,000 student loan balance will save you $3,192 in total interest paid over the next five years. (You can play around with your personalized savings with this calculator.) Many loans can be refinanced if you’re qualified, so take a look at where you can lower your rates.

The Federal Reserve has indicated that it may raise rates in the coming year, so acting sooner rather than later can help you lock in the best rate. If you have fixed-rate loans, your existing rates will not change when the Fed changes rates; however, any variable-rate loans will change if rates move. You can read more here about how rate changes affect your loans.

Nudge the Dial for Saving in Your 401(k)

Lastly, let’s talk about saving money in another way. At least one-third of Earnest applicants report having at least a 401(k) or other investment account. If you’re in two-thirds who have not yet opened an investment account, make it a priority this year. While it can be tricky balancing saving for retirement with paying off student loans, many experts recommend finding a way to contribute at least a small amount, as compounding interest works best for those who start investing early in life.

If you already contribute to a 401(k), crank up your personal savings rate a notch in 2017  — moving from an 8% contribution to a 10% slice means an additional $1,600 in savings on an $80,000 income. If you made that move, and with all things remaining constant at a 6% rate of return, this small savings change would net you an additional $184,000 in total earnings in 35 years due to the power of compounded growth.  

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