Category Archives: Financial Health

Simplify Your Life

Simplify — Eliminate clutter in your life

Look around your home…is there anything you can truly get along without?  Start there and keep going.  If you haven’t used an item in a year, chances are, you won’t use in the next.  So, give it to someone who can use it, sell it, donate it, or toss it.  Now move on to the next item you don’t use…. and keep going.  Do one room at a time, but if you notice something in another, then don’t hesitate, get rid of it.

There is a satisfaction that comes when you look around and see a cleared out room.  Even if you’re re-arranging a closet or drawers, when things are airy and clear of clutter, you can find things easily, because you can actually see what is there.

We have all been guilty of purchasing things that we ‘needed’, yet never used, or used once.  Now is the time to stop doing that.  Use the 14 day rule…. if you see something you desperately ‘need’/’want’, wait 14 days and see if that still holds true.  Guaranteed you’ll not purchase it every time.

This will help in stopping the unnecessary spending.  Put the money you didn’t spend on it, into your savings.

Each week, take 15 minutes to go over your budget.  Any excess money should immediately be set aside to put towards paying down your outstanding debt, or of you’re all paid off there, then immediately deposit the excess in your budget into your savings.

Consistently keep up with doing this and in no time, you’ll be living clutter free and have either your bills paid down/off or your savings growing.

Clutter free means stress free living.

 

 

 

Setting Up The Bi-weekly Mortgage

Easy To Get It Going…..

Having a separate direct withdrawal mortgage is best.  It shows you exactly what is set aside for your payments, without getting any other money/payments mixed in.

Open the account and round up your mortgage payment, depositing that figure. This amount will be your ‘cushion’ in the account (never to be touched).  Just pretend it’s not there.

Now call your lender and tell them you want the bi-weekly option.  They’ll let you know when the 1/2 payments will begin.  Every 14 days 1/2 your mortgage will be automatically withdrawn.

Just make sure that when you deposit money to cover your mortgage, you deposit the full month payment (as though you were paying once a month). This assures that the second 1/2 payment for that month is there.  It is best to round up some when you deposit (adding to the cushion).

Twice a year, usually in Spring and Fall, a third 1/2 payment is withdrawn.  These 2 one half payments go directly, in full, towards reducing your principal.  It is imperative that you keep tabs on what the balance is in your mortgage bank account so that you don’t run short for those 2 extra payments….. it’s why rounding up is a good idea.  You can also add to your account over the year to make sure.  Always watch your bottom line.

If you use an amortization schedule (ask your lender for one), you can follow how those 2 extra 1/2 payments each year go to the principal (your equity), and how it also saves you paying interest on them.

All it takes is a phone call and some discipline, and you’ll shave length of time off your loan, and save thousands of dollars at the same time.  A smart move.

Renting vs Buying

Think ahead….

There are many valid reasons why people choose to either rent or buy a home.  But the financial reason(s) may tip the scale in your decision. Neither is ‘right’ for everyone.

Renting is when you pay a landlord to stay in their property.  When you move out, you take your belongings.  The money you spent for rent is gone…. it went to pay the mortgage of the landlord.  During your stay, the upkeep of the outside of the property, as well as if there is a problem with plumbing, appliance replacement etc, is the landlord’s responsibility.

Buying is more long term… All upkeep of the property inside and out is your responsibility. By paying your mortgage, a part of it goes toward equity, and when you move out (sell), you get to keep the equity accrued, plus any money over the cost of your purchase, minus what you still owe the mortgage lender. You almost always will walk away with money in your pocket.

You have to factor in several things when making this decision….but financially, you’d need 20% plus for a down payment. Less than 20% means you’d have to pay a monthly mortgage insurance premium in addition to your mortgage.  This is in case you default on payments, the lender is covered.  So, until you have 20% to put down, it is best to rent and keep saving.

You may have to set your sights on a smaller home to start with, and in 7-10 years, sell it and if you still want that larger home, you’d have some equity in the smaller one, plus the difference between what you purchased the home for, and what you sold it for.  This may be enough to put a 20% down payment on the larger one now.  Then again, maybe you’ve learned to simplify, and are very happy in the smaller one.

When you rent, you pay the figure the landlord says.  Sometimes, if you shovel or mow or help with upkeep in some way, you can dicker the figure some.

When you buy, you pay PITI (principal, interest, taxes, insurance) to the lender, the figure is dependent on your down payment, interest rate, city taxes, and homeowners insurance.  However, you do have some options to help you out there……  Insurance and city taxes are set by those affiliates, and can change slightly over time. The interest rate is figured by your down payment, your credit score, and amount of the loan. The principal and interest figure stay the same unless your refinance. This can be done, but there are charges, and should be discussed with your lender.

The principal can most definitely be helped ….. by you.  The principal is the figure you borrowed to pay for the remaining cost of the home.  You want this figure to lessen, and it will …. a little each month is taken from your mortgage payment.  As time goes on, that figure will be more each month…. this goes towards your equity. The easiest and free way to do this is …….

When you get a 30 year mortgage, there are 12 (full) monthly payments each year for 30 years.  But if you call and have the lender change it to a bi-weekly payment schedule, the payments are spread over the same 52 weeks, but 1/2 the mortgage payment is made every 14 days (every 2 weeks)….  52 divided by 2 is 26.  There will be 26 (half) payments in each year…. 2 of those payments, usually one in the Spring and the other in the Fall, will go directly, and in full, towards lowering you principal (into your equity account).

If you start this at the beginning of your loan term, you will knock off 2 1/2 years off the length of your loan, and….. you will save thousands of dollars on the cost of interest at the same time.  It only takes a phone call to set it up.  Set it up any time during the loan, every bit helps.

And, of course, you can…. always…. pay extra towards your principal.  Just remember to tell the lender that it goes only to the principal. Doing this also lessens the balance of your loan, as well as saving the interest paid by you for that amount.  A good thing!

So make a list of pros and cons for each before deciding.

 

 

 

 

2021 A New Year ~~ A New Mindset

2021 Financial Inventory

I’m sure you’ve come out of 2020 with new thoughts, and realizations of your life, possibly different types of expectations and goals.  Some may stay as is, while others change some, and others still, change completely.  Last year was an eye opener for all of us.  We never planned or thought we could do some of the things we were mandated to do, by our state laws.  These things were done, of course, to keep us all safe from getting a deadly virus.  In doing so, we learned that we can, in fact, work from home, children can learn remotely, and we can live with less because we don’t make numerous stops to pick up groceries or browse through stores.

We learned to simplify…. meaning we spent less!

So, while the year is new, make an inventory list of things you want to accomplish financially. Make realistic goals so you don’t get overwhelmed and then give up.

Set up a Budget. Make a list or spreadsheet of your income and recurring monthly expenses, add in occasional incidentals, and the annual bills… Whatever amount is remaining, save.

Save. Save something from each paycheck. Choose a reasonable and workable amount that fits into your budget. Make it be the first ‘deduction’ out of each paycheck.

Gather bills for any outstanding debt, and work as diligently as possible to paying off one bill at a time.  Pick the bill with the highest interest rate, and work on that one first until it has a zero balance. Do not neglect any other bills….pay at least the minimum on any other bills, and when the first balance is paid off, continue in the same manner on the second and so forth.

Audit your checking accounts monthly.  Make sure your balance agrees with the bank.  And if not, reach out to them and go over your figures with theirs.  Balance the account(s) to the penny.

Scrutinize your bills. Whether you get a paper bill in the mail, or do your banking online, go over your accounts line by line to make sure you, and not someone else, purchased an item listed on the bill.  If there is a discrepancy, call Customer Service  and immediately resolve it.

Begin (or continue to add to) your Liquid Emergency Savings,  and the 9-12 month Cash Reserve Account.  And don’t neglect putting all you possibly can into your Retirement Account(s).  If your budget is already extremely tight, start saving for the Emergency Savings first, as it is the smallest.  Then work on the 9-12 month Cash Reserve.  Once you make it to 6 months of reserve, continue on, but make part of the savings figure go towards a Retirement Account. This will at least get one started.  The earlier you start, the better.

It may seem an ominous goal at first, but with consistent and as diligent savings, as much as you possibly can do, you will begin, then continue to see small results, then as time moves on, you’ll see zero balances on what was outstanding debt, and you’ll see savings accounts grow.

All this does take time, but with discipline on your part, it will pay off for you in the long run.

You can do this!!

 

 

Keeping Your Documents Safe

Bank Safety Deposit Boxes vs. Home Fire Resistant Safe

There are some important documents/papers which need to be kept by you.  They are your proof that something has occurred and you have it paid in full, or papers notarized in case you can’t take care of your own affairs.  They should all be kept in a safe place.

Bank safety deposit boxes are loaned out at a fee to you.  As size of the box increases, so does the annual price….choose what works for you.  You fill out the information, so they have your signature, and you should add a person you trust to also sign. You are then given two keys. If you lose the key(s), it’s quite a costly hassle to get another. You don’t have to give the second key to the other person signed on as they will only need access to the box in the event of your serious illness or death.

A fire retardant home safe in many sizes is available with a one time reasonable lay out of cash for keeping documents safe and handy. They are fire retardant up to a very high degree of heat should there be a fire.  ***An important note:  Should there be a fire, DO NOT open the safe.  Allow the safe to cool down for at least 1 week.  If you open it, it will introduce oxygen, and it will flare up.  Let it completely cool down for a week or more.

You’ve chosen the type that’s best for you.  The papers/documents to put inside are originals of your will, trust, health care proxy, living will, power of attorney, mortgage discharge, birth certificates, military service discharge papers, marriage ctf., divorce NISI, ., important numbers (bank account(s), passwords, court docket numbers), life insurance policies, vehicle title, social security card(s), Retirement and bank account information, etc.  In other words, anything that would be difficult for you or your power of attorney or beneficiaries to acquire or replace in case of your inability to care for yourself, or your death. You may have, or can think of more.

Let your power of attorney know where your documents are kept.

College Costs

Looking At And Choosing A College That…Fits.

Your child is looking at materials on where to go for college.  If not all along, but at least for the past four years have you been having conversations with him/her about cost of colleges, at home or dorm living, career paths, etc?  If not, it’s a bit late, but better late than never.  Do you have a College Savings Account with your name and theirs on it?  Have they been working and putting money aside for this too?….. or spending it?  Are their grades high enough, and have they been filling out applications for every scholarship out there, with the hopes of getting any. And don’t forget to apply for financial aid. And work study programs mean you work at the college and your wages go toward your tuition bill.  Don’t think you don’t qualify, check everything.

Something else to consider is that the world, and work force, is rapidly changing.  Many careers that have been around for decades, are no longer useful with the ever changing technology.  Some jobs are extinct, or will be by the time, or soon after your child is graduating with a degree in hand.  If the field he/she has been studying for is now extinct, or soon will be, all that time…..and money is for naught.  Discuss with your child newer – and available – options, careers that are and will continue to be there as your child goes through decades of working at it.  You don’t want to put $100,000 – $250,000.. into an education that will be a waste of money, because your child insisted on a soon to be extinct career path.

That said…. now you….the parents, decide where your child will attend.

Reason?   He/she is 18 – and not money savvy. The cost of college costs upwards of $50,000. or more a year.  Most students will change their major by the end of their freshman year.  Choose a college that fits in the amount of money saved, and have the student work off the rest.

Student loans can help but impress upon him/her that the loan is theirs to pay.  It is a binding, legal document, and they are completely responsible for it.  Impress upon them to pay on time and more than the minimum due each month, and it will get paid off quicker.  Doing so, will increase their Credit Score.

There are companies they can work for, part time, who will in turn pay for, or towards, college tuition.  Check around.  Also, for the freshman year, choose a state college, your own or nearby, or a local community college, where it is not only cheaper to attend, but the student can take this opportunity to see if the choices they’ve made career wise – course wise, still fits in their thoughts for the future.  There are many who attend a state or community college until their senior year, then transfer to another, getting their degree from there.  Saving $$$$.

And although a Degree in hand can open doors, there are many in the workforce who don’t, for one reason or another, have that.  They, instead, have a specific talent that is both useful and sought after in the up and coming world of A.I.  They work hard to skillfully hone it and have the experience of working at it, which is a bonus for many companies. And many of these individuals are making more money than those with a Degree which has, or will, lose their usefulness because the recipient no longer wants to work in their ‘chosen’ field, or those fields are no longer used in the workforce.  And, they don’t have a huge financial loan to pay off.

Remember, college isn’t for everyone.  Think wisely.

 

 

Buying a home….Get a Pre Approval Letter

Pre qualified vs pre approved, which is better?

You’ve decided to buy a home…. there’s a lot to know first.

  • You’ve checked and rechecked your budget, and have decided on a price point you can pay
  • You’ve got 20% plus set aside for the down-payment and closing costs
  • You’ve compared interest rates and lenders and have decided on a reputable one
  • You’ve given the lender all necessary data and are waiting….They check your Credit Score and plug in all the data and on an income to debt ratio decide if you’re a risk or not.
  • They call you — Yes, you are Pre-Qualified.  More data, more checking, more, more, more.
  • Back and forth phone calls, and then they call to let you know how much they will allow you to borrow, and approximately how much your monthly payment will be using their ‘borrowed figure’. There will be an interest rate based on the figures.
  • Their figure may be more…or less than yours.  If it’s more, you don’t need to purchase a home that high.  Keep within your  budget comfort zone.  If their figure is lower, you’ll have to think less… smaller, different neighborhood etc.  Not such a bad thing, really.
  • You are now ‘Pre Approved’….meaning you are approved to get a loan for ‘X’ amount.  Once you are pre approved, ask the lender for a letter verifying that.  Have it with you when looking at homes, and should you decide to make an offer on one, show…but don’t give… the seller/realtor your Pre Approval letter.  It shows them you are a serious buyer, and have already done your due diligence in securing the mortgage loan for the amount shown in the letter.
  • Sometimes, if another buyer is interested in the same home, and offers a close figure to yours, the seller is apt to choose you, because you’ve gone that next step done – the pre approval.
  • Again, know it is better to get a smaller home, with a smaller mortgage – one you can comfortably handle within your budget, leaving some wiggle room in the budget for incidentals and ‘what-ifs’.  Where as if you buy too much home, finding too late you can’t handle the payments – you end up being house poor – or worse, losing it completely.
  • Remember:  Staying within your own set limits for mortgage payments, maybe by buying a smaller home, allows you to set aside money each month for not only everything else in your budget, but also those extras…… painting, redecorating, new roof etc.
  • Don’t end up “House Poor”.  Think ahead.

 

Aim For a 7 Figure Retirement Account

7 figures…….Yes, it’s doable….with discipline

  • Start saving early…..be disciplined about it
  • Stick to a budget which leaves more to save.
  • Educate yourself with a Fiduciary to understand what your options are
  • Contribute as much as possible….on a constant basis
  • Contribute the maximum allowable limit annually
  • Diversify your accounts….don’t put all your eggs in one basket
  • Reallocate your accounts on a frequent but as needed basis
  • Continue contributing, and when you retire….reap your rewards

Saving for Retirement…choices

Saving for Retirement…..Choices to be made

The key to Retirement Savings is to start saving early….then continue.  If you have it taken out of your paycheck as direct withdrawal, you won’t see it, you won’t miss it.

It’s a matter of preference which retirement ‘vehicle’ you open and contribute to…. there are various ones:  Roth, IRA’s, each have their own rules.  Contribute the full amount you’re allowed, or if not, as much as you possibly can.

Whatever you choose, know that the money cannot be touched until you turn 59 1/2 years old.  Then, and only then, can you begin to withdraw from the account…without penalty….however, you will owe taxes on the amount withdrawn.  Should you ‘need’ the money ahead of 59 1/2, you will incur huge penalties from the account itself, as well as huge tax penalties  Taking monies out before this age, is strongly…. not suggested.

The age most retire, is mid sixties, and even then, some still don’t touch their retirement accounts, instead they allow them to continue to grow.  These retirees may have Social Security, along with liquid savings they’ve been adding to all their working years.  Kudos to them.

At age 72, you are required to withdraw from any IRA’s you have.  Uncle Sam determines how much money will be taken from your account and sent to you.  This amount is mandatory, set by government tables.  It it called “Required Minimum Distribution” … otherwise known as ‘RMD’.  It’s been accruing interest over the years, so you will owe taxes on the amount withdrawn the following April 15th.  This mandatory ‘RMD’ amount will vary some each year, still be set by Uncle Same, and once begun, will continue until either the account is depleted, or you pass away.

It is why beneficiaries are important to have in place.  When you open your Retirement Account(s), it is wise to put beneficiaries in place then.  Over the years, as life changes, these beneficiaries can and should be updated, if necessary.

Shave Over 2 Years Off Your 30 Year Mortgage

Save thousands of dollars…. and it’s free to do

This can be done at any time during your mortgage loan….but the earlier, the better.

Open a checking account, specifically for your mortgage.  Have a beginning balance of 2 months equal to your mortgage payment.  Then call your mortgage lender and tell them you want to change from a monthly payment plan to a bi-weekly payment plan.

Grab a pen and paper, now divide the amount of your mortgage by 12 and round up the figure. Each month, continue depositing your mortgage payment into the checking account, plus the rounded up figure and as the bi-weekly payments are withdrawn, you’ll notice that each 14 days the lender will withdraw 1/2 of the mortgage payment.  In 1 month, a full payment is made, but in 2 half payments.

Twice each year, usually Spring and Fall, an extra half payment is made (in those 2 months, a third 1/2 payment is withdrawn)…this makes payment numbers 25 and 26.  These 2 half payments go directly to your principle. This is why it is imperative to have that extra cushion of 2 months to start the process, as well as the extra ’rounded up’ figure each month in the account, making sure you’re not short of the extra payment amount in your account.

Example: You have a 30 year mortgage.  Each year (12) months, there are 12 payments.

There are 52 weeks in a year.

But, with a bi-weekly payment plan (every 14 days), in those same 12 months there are 26 payments (52 weeks divided by 2 equals 26).  That extra 1/2 payment and 1/2 payment going directly to the principle, over a 30 year mortgage, saves 2 1/2 years of payments making that same mortgage loan a 27 1/2 year mortgage.

But the real savings is the interest you save over the years…… Thousands of dollars saved!  And all it takes is a phone call to set it up.

The important thing is to have that cushion in the beginning, as well as the ’rounded up’ figure in the account.  It insures the money is in the account when the lender withdraws it. A good idea is to have a year at a glance calendar….. once the by-weekly is set up, circle the first bi-weekly payment on the calendar, and follow through the year circling each date at 2 week intervals.  You will see the two months where that third 1/2 payment comes up.  It’s easy.