One of the best things you can do for your finances is to save up for the things you want. You can avoid many of the pitfalls of debt with the help of saving up, keeping more of your money and paying less in interest, and retaining your financial freedom. However, in some cases it seems as though borrowing is your only option. Do you really have the cash to buy a car outright, or purchases a home?

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Living completely without debt is a pipe dream for many. Even if you decide that it’s ok to go into debt for some of the bigger purchases, there are some strategies you can follow to reduce the amount of money that you borrow — and the interest that you pay over time. Here are four things to keep in mind as you buy the big things:

Borrow Only What You Need

The biggest mistake I made in college was to borrow more than I needed. In fact, for my undergraduate education, I really didn’t need to borrow at all. But I did. It’s easy to borrow more than you need, and use that money for other things. Whether you are borrowing for a car that is more than you need, or a home that is too big for your family, borrowing more than you need can result in higher costs, and more paid in interest over the life of your loan. If you’re going borrow for something big, carefully evaluate your needs, and then do your best to stick to them, borrowing only what you require and trying to live modestly.

Save Up for a Sizable Down Payment

One of the best things you can do is to save up for a sizable down payment. You can usually get better terms, and you will be borrowing less, if you put more money down. When it comes to a care, you can usually save up quite a large chunk of change if you plan ahead, and keep making car “payments” to a high yield savings account, you can save up a large amount — maybe even enough to buy a car with cash rather than just having a down payment.

The same principle applies for saving up for a down payment on a mortgage, as well as for saving up for a college education. Plan out how much you can set aside each month, and create a time frame for the savings. The more you pay up front, the less you will borrow.

Get a Short-Term Loan, or Plan to Pay it Off Early

You can choose a shorter loan term to save money. The shorter the term, the lower the interest rate — and the less time you are paying it. This can work for mortgages and car loans. You can also plan to pay off your loans early. If getting a shorter term (with its higher payment) worries you, you can get a longer loan term, but still make the higher payments. You’ll pay down your debt faster, and you will have some wiggle room if circumstances lead to having less money for a time.

Keep Your Credit Clean

One of the best ways to save when it comes to interest is to keep your credit clean. A good credit score will result in better interest rates. You will pay less over the life of the loan, saving on interest costs, if you have good credit.

Photo by Tony Crider.