Finance Xpress

I cheated on my dentist and I will never do it again. This is a story about the importance of trust if you want to build a great business. It is also a story about not taking your business for granted if you’ve been at it for a while. During regular times, I’d see the

The post To Build A Great Business, Trust Is Paramount (A Visit To The Dentist) appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Lawmakers on both sides of the aisle continue to debate how raising the minimum wage to $15 an hour can affect the economy, workers, and small business owners. Is a bill likely to pass, and if it does, how will it affect you?

The post How Raising the Minimum Wage Could Affect You appeared first on The Dough Roller.

via Finance Xpress

These are the best banks with no overdraft fees. They also provide other features like cash back rewards and investment options.

The post Best Banks With No Overdraft Fees appeared first on The Dough Roller.

via Finance Xpress

When is the best time to buy a house? Factors to consider are when you're financially ready and when you can get the best deal.

The post When is the Best Time to Buy a House? appeared first on The Dough Roller.

via Finance Xpress

Is 2021 a good time to jump into the stock market, or should you hold off? Here are indications that 2021 is a good time to invest.

The post What is a Good Time to Invest in the Stock Market? appeared first on The Dough Roller.

via Finance Xpress

This is a comprehensive comparison of three low-cost brokers: Robinhood, E*Trade, and TD Ameritrade. Which one offers the best deal for your needs?

The post Robinhood vs. E*TRADE vs. TD Ameritrade appeared first on The Dough Roller.

via Finance Xpress

If you’re a parent, you might consider starting a 529 plan for generational wealth transfer purposes in addition to paying for your child’s education. Even if you are not a parent yet, you should consider opening up a 529 plan. There’s a decent chance the estate tax threshold will eventually come down from its current

The post Using A 529 Plan For Generational Wealth Transfer Purposes appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Saving for retirement doesn't have to be complicated. Learning how to invest properly into your 401k can save you a lot of headache and hassle in the future.

The post How to Invest Your 401k appeared first on The Dough Roller.

via Finance Xpress

According to Credit Suisse, the global number of millionaires expanded by 5.2 million to reach 56.1 million in 2020. That’s a 9.8% increase in the number of millionaires since the pandemic began. As a result, an adult now needs more than $1 million to belong to the global top 1%. But to be in the

The post The Number Of Millionaires In The World Is Exploding appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Elite credit cards offer not only perks, but premium status. We take a look at some of the most exclusive credit cards available in the world today.

The post Most Exclusive Credit Cards appeared first on The Dough Roller.

via Finance Xpress

Early retirement is an reachable goal with the right tools, and financial planning. Here are some tips and guidelines to help you achieve it.

The post Best Resources to Help You Retire Early appeared first on The Dough Roller.

via Finance Xpress

Get a credit card that looks cool and stands out from the crowd while offering rewards and perks. Here are some of the coolest-looking credit cards.

The post Cool-Looking Credit Cards appeared first on The Dough Roller.

via Finance Xpress

ProPublica published an article highlighting how 25 of the wealthiest Americans paid a tiny fraction of their wealth in taxes. This makes sense because the type of tax that is often discussed is levied on income, not wealth. If you pay yourself a low income and never sell assets, then your tax bill won’t be

The post Never Sell Assets And Pay Less In Taxes Like Billionaires appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Today, any investor can buy or sell stocks easily. But this can prove to be a highly addicting habit causing financial and emotional turmoil.

The post Can You Become Addicted to Investing? appeared first on The Dough Roller.

via Finance Xpress

Have a bit of extra savings to invest? We take a look at what the best options are for investing $2k from stocks to crypto to bonds and more.

The post How to Invest $2k appeared first on The Dough Roller.

via Finance Xpress

You can be turned down for a business checking account because of ChexSystems. If you've been denied, consider these banks instead.

The post Business Checking Accounts That Don’t Use ChexSystems appeared first on The Dough Roller.

via Finance Xpress

Real estate investment opportunities are available in all types of markets. It just so happens we are in one of the strongest real estate bull markets ever. As someone who believes the housing market will continue to stay strong for several more years, I’ve purposefully positioned ~40% of my net worth in real estate. However,

The post Evaluate Real Estate Investment Opportunities Using: Who, What, When appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Before becoming a father in 2017, I dreaded changing diapers. Now that I am a father, I long to win the poop lottery. To see my boy take a gigantic dump is curiously gratifying. Digestion system. Check! Before becoming a father, I wrote a lot about supporting mothers because I couldn’t fathom having to carry

The post Become A Better Father: Time To Man Up Dads! appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Do you what is really hard? Deciding to walk away from a whole lot of money in your prime. If you decide to retire early or take a long sabbatical, you must accept the death of your maximum money potential. At age 34, I was making a base salary of $250,000. Come year-end, my bonus

The post Overcoming The Downer Of No Longer Making Maximum Money appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Your net worth is calculated by taking the value of all the assets you have minus any debt you owe. How much are you worth? How much is enough?

The post How Much Net Worth Should You Have? appeared first on The Dough Roller.

via Finance Xpress

Does your credit score affect your life insurance premiums? What else are insurance companies looking at? Here's what you need to know.

The post Does Your Credit Score Affect Your Life Insurance Premium? appeared first on The Dough Roller.

via Finance Xpress

The options for getting ahead of debt are wide and varying, however small personal loans can be a good alternative over credit cards.

The post Best Small Personal Loans appeared first on The Dough Roller.

via Finance Xpress

People of color are less likely to invest, and therefore have less net worth than their white counterparts. How can you get started investing, and what can you do to catch up?

The post Mind the Gap: How People of Color Invest and Build Wealth appeared first on The Dough Roller.

via Finance Xpress

An overview of the seven best National Banks in the country based on rates, rewards, customer service and accessibility.

The post Best National Banks in the U.S.A appeared first on The Dough Roller.

via Finance Xpress

Cryptocurrencies are now more mainstream than ever. Bitcoin, the king of cryptocurrency, is worth thousands. We show you how to easily invest in Bitcoin.

The post How to Invest in Bitcoin appeared first on The Dough Roller.

via Finance Xpress

One of my biggest regrets while working was not taking a sabbatical. If I had taken a one-to-three-month sabbatical, I probably wouldn’t have left finance at age 34. Instead, I probably could have kept grinding until age 40 and made a lot more money. Alas, I was too afraid to take a sabbatical because nobody

The post Preparing For A Sabbatical: What To Do While On Break From Work appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Insurtech companies are beginning to take advantage of modern technology to streamline the insurance process and save you money. Here are 13 of the best.

The post Best Insurtech Companies appeared first on The Dough Roller.

via Finance Xpress

Are you thinking about buying a home today? Then you need to also envision a scenario where you buy a home at the top of the market. If you do, will you be able to afford the monthly payments? If there is a downturn, can you continue to pay the ongoing insurance and maintenance expenses

The post What If You Buy A Home At The Top Of The Market And A Recession Hits? appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Everything you need to know about how to invest in real estate without buying property and the different types of real estate investment.

The post How to Invest in Real Estate Without Buying Property appeared first on The Dough Roller.

via Finance Xpress

Financial Samurai has technically been making money online since it started in July 2009. I think I made $3 the second month the site was live. Whoo-hoo! Although I didn’t focus on making money online, the site began to generate revenue anyway. This is a classic situation where you do something you love and the

The post Reflections On Making Money Online Since 2009 appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

There’s no rule that you have to have a trading plan to start trading, but without one, you’re as likely to win the lottery as succeed in trading.

The post How to Create a Trading Plan appeared first on The Dough Roller.

via Finance Xpress

When you book a vacation, protect yourself against unforeseen circumstances by getting CFAR (cancel for any reason) travel insurance.

The post Best “Cancel For Any Reason” Travel Insurance appeared first on The Dough Roller.

via Finance Xpress

What are your best options when you are upside down on your car loan? There are a number of choices to consider from selling to taking on a new loan.

The post What to Do If You’re Upside Down on Your Car Loan appeared first on The Dough Roller.

via Finance Xpress

A comparison of meal kits Home Chef, HelloFresh, and Blue Apron. We compare pricing, sustainability, quality of ingredients, ease of prep, and more.

The post Home Chef vs. HelloFresh vs. Blue Apron appeared first on The Dough Roller.

via Finance Xpress

Out of all the mortgages out there, a 15-year mortgage will likely save you the most amount of interest. 15-year mortgage rates are almost always lower than 30-year fixed mortgage rates. Further, because the mortgage fully amortizes across a 15-year duration, you will likely pay off your mortgage sooner than if you had a 30-year

The post A 15-Year Mortgage Is Probably Best, But It Has One Big Disadvantage appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

There are many factors involved in your personal credit score. There are also many ways to boost your credit score - here's some that may surprise you.

The post Raise Your Credit Score: Credit Booster Tips You’ve Never Heard Of appeared first on The Dough Roller.

via Finance Xpress

Retirement planning and tracking apps allow you to manage and analyze all of your accounts in one place. Here's an overview of six of the best.

The post Best Retirement Planning and Tracking Apps appeared first on The Dough Roller.

via Finance Xpress

10 of the best grocery receipt scanning apps that enable you to earn cash and rewards on those necessary trips to the grocery store.

The post 10 Best Grocery Receipt Scanning Apps to Make Money appeared first on The Dough Roller.

via Finance Xpress

Building business credit is a key component of success as a small business. Here's how to build an excellent business credit report.

The post How To Build Business Credit appeared first on The Dough Roller.

via Finance Xpress

A comparison of James Allen and Blue Nile, two online jewelry companies that are changing the way people shop for engagement rings.

The post James Allen vs. Blue Nile appeared first on The Dough Roller.

via Finance Xpress

Bill Gates has taken on many roles over the course of his career: affable tech nerd, aloof billionaire, tennis player, visionary philanthropist. Recently, he and soon-to-be-ex wife Melinda Gates added a new title to that list: largest owners of US farmland. One way to get rich is to observe what rich people do with their

The post Bill Gates Is Buying Up Farmland: 5 Reasons To Invest As Well appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

A lot has been written about good debt vs bad debt. As the names suggest, the idea is to avoid bad debt and embrace, at least to a point, good debt. But what do these terms really mean, and how can they help us make sound financial decisions? Like so many financial rules of thumbs, the distinction between types of debt can help us look at debt differently. There are, however, limits to how much these definitions can help us make financial decisions. As a starting point, we need to make sure we understand the meaning of good and bad debt. Let’s start by looking at how others have defined good debt.

What is good debt?

In a CNN article, good debt was defined as follows: “Good debt includes anything you need but can’t afford to pay for up front without wiping out cash reserves or liquidating all your investments. In cases where debt makes sense, only take loans for which you can afford the monthly payments.” In contrast: “Bad debt includes debt you’ve taken on for things you don’t need and can’t afford (that trip to Bora Bora, for instance). The worst form of debt is credit-card debt, since it usually carries the highest interest rates.” While the definition of bad debt seems on target, the definition of good debt misses the mark. It may be a definition of when you have to go into debt if it’s truly a need. But defining such debt as “good” just because you don’t have other options is questionable. Perhaps the best article I’ve found on the subject is by Sophia Bera, a certified financial planner at Gen Y Planning. Her article, which appeared on Daily Finance, noted that the answer depends not just on the type of debt and the reason you borrowed, but also on how much debt you have: “So could there ever be good debt? There’s no hard-and-fast answer. That’s because how you use debt has a big impact on whether or not you can consider it “good.” And you can have too much of a “good” thing — and that’s when it can turn into bad debt.” Personally, I’m not sure I would ever describe debt as good. Rather, I would classify debt into three kinds: reasonable debt, bad debt, and horrible debt. But because the term “good” debt is so in vogue, I’ll stick with it here.

Good Debt, Bad Debt, and Horrible Debt

Good Debt

Good Debt is used to buy something that either (1) will go up in value, or (2) produce income sufficient to justify the debt. For most of us, examples of good debt include: House – A home’s  value can go down in the short term, but over long periods of time, it goes up in value. It also insulates us from rent inflation and offers excellent tax incentives. Rental Property – It can both go up in value and produce income. Education -A school loan can enable us to get an education that increases our earning potential. Hence, “really good debt” is debt that builds wealth. If used properly, it can help us build wealth over time. However, not all school loans can be considered as “good” debt. A school loan on a computer degree can be considered good debt while many liberal arts degrees would qualify as bead debt. The thing about good debt is that it can just as easily become bad debt.  We’ll come back to this in a minute.

Horrible Debt

Horrible debt is  debt used to finance a lifestyle with no significant assets to show for the money you’ve borrowed. Horrible debt includes debt used to buy clothes, eating out, vacations, or gadgets. These sorts of lifestyle decisions somehow force you to finance usually with very high interest rates and over a very long period of time. Because there are no meaningful assets purchased with horrible debt, you can’t sell what you bought to repay the loan.  You are simply spending today your future earnings.

Bad Debt

Bad debt is where things get interesting.  It’s the grey area.  It includes good debt gone bad and what I like to call avoidable debt. Good Debt Gone Bad Remember the examples of good debt I listed above?  Borrowing to buy a home, for rental property, or an education can all be really bad debt in certain circumstances. For example, borrowing far more than you can reasonably afford for a home is bad debt.  Borrowing to buy a rental property when your own finances are not in order is bad debt.  Spending $200,000 on a liberal arts education is generally bad debt, and I was an English major. There are rules of thumb when it comes to a mortgage or school loan.  Many say to keep your monthly mortgage payment to no more than 20% of your gross income.  Likewise, some say to keep your school loans to no more than your first year’s income after college.  These are worth considering as you make decisions. The point is that we can’t blindly take on debt because some label it as “good” debt. Avoidable Debt  The second type of bad debt is what I call Avoidable Debt.  For most of us, car loans fit into this category.  While the ideal is to pay cash for a car, I’m not a fanatic about avoiding car loans.  I am a fanatic about borrowing to buy more car than you truly need. It’s one thing to finance a $5,000 car so that you get to work and back.  It’s another thing to finance a $45,000 car while other financial goals are not being achieved.

Is the distinction between good debt and bad debt helpful?

The distinction between good and bad debt cannot tell us when we should take on debt.  There are just too many factors to consider beyond a label we add to debt.  But it can help us better evaluate our options. First of all, it helps to understand that not all debt is created equal. Borrowing money on a credit card to go on a vacation and to eat out all the time is totally different than borrowing money for car or to buy a home.  Good vs bad debt helps us understand the difference. Second, just because something falls into a bucket that most people would describe as good debt doesn’t mean it’s good debt for you. While buying a home  represents the American Dream for many, it may not be important to you.  Further, spending too much on a good thing can quickly turn it into really bad debt. Ultimately, this is something you need to figure out based on what’s important to you and what your income will support.Debt is something we all want to avoid, but it is often inevitable. Here we take a look at good debt and bad debt and the difference between each.

The post Good Debt vs. Bad Debt appeared first on The Dough Roller.

via Finance Xpress

Please know that you will always get screwed. If you don’t get screwed now, you will eventually get screwed later. The sooner you accept life isn’t fair, the sooner you can make winning decisions and succeed. Finding happiness is also accepting that fairness is a human construct. If you plan to play someone else’s game,

The post You Will Always Get Screwed: Accept Life Isn’t Fair For Greater Success appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Life insurance for a child: what it is, the pros and cons, whether it's worth the investment and some alternatives to consider.

The post Should You Buy Life Insurance for Your Child? appeared first on The Dough Roller.

via Finance Xpress

As a lifelong saver, it has been hard for me to spend more money and live it up. It didn’t matter whether I got a raise or made a profitable investment, the extra money would almost always get reinvested. The Boot is a concept I came up with to help us spend money more freely.

The post The Boot: A Smart Solution To Spending More Money Guilt-Free appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

So you want to buy a house sometime in the near future? You’re not alone. Thousands of people will become first-time homeowners over the next few years. Even with mortgage rates increasing slightly, it could still be a great time to buy.

But getting ready to buy your first home is a big deal. It involves a lot of preparation, saving, and legwork. So before you start shopping around on Zillow, read through our complete guide to buying your first home. We’ll give you lots of solid advice, and then link you to other articles where you can get a more in-depth explanation of certain concepts.

Run a Personal Cost-Benefit Analysis

Before you buy your first home, you should decide whether that’s what you really want. All too often, buyers assume that purchasing a home is the right choice. After all, that’s how you build equity and wealth right? And you’ll stop “throwing money away” in rent every month? Well, maybe. The fact is that homeownership isn’t for everyone. And you’ll need to look at your personal situation–financial and otherwise–objectively to figure out if it’s the right move for you. For instance, what if you’re building a budding career that’s likely to take you to a new location within the next couple of years? Once you buy a home, you may need to own it for several years before you’ll break even when you sell. That’s because there are plenty of costs involved with both buying and selling. So if you’re highly mobile, right now may not be the best time to buy a home. On the other hand, if you think you’ll be in the same location for a while and are ready to settle in, homeownership may be for you. But even in this case, it’s not always true that buying a home is best. Here’s what you need to consider first:

Don’t Assume You’ll Save Money

If rents are high in your area, it’s easy to assume that a modest mortgage would be cheaper than your monthly rent. And, in fact, your mortgage payment might be cheaper than your rent payment. But that doesn’t mean homeownership is necessarily less expensive than renting. When you rent, someone else is absorbing many of the costs of maintaining and improving the property you live in. That’s why rent is expensive! When you own the home, you’re on the hook for the broken water heater, the leaking roof, or the everyday maintenance of windows and driveways and gutters. With all these additional costs, owning a home could wind up being more expensive than renting. Check out this article for a list of 30 things you’ll need to budget for when you own a home. On the flip side, owning a home lets you build equity in a valuable piece of property. Sure, that $200 you pay to fix the plumbing may not help you build wealth directly. But your $800 a month mortgage payment will go partially towards building equity in your home. And that can be powerful. The bottom line here is that you can’t make assumptions either way. You need to look at what you pay as a renter, what you’re likely to pay as a homeowner, and which option works best for you financially. Related: How House Hacking Works

And Remember Time, Too

For more and more people, renting is becoming something of a lifestyle choice. When you own a home, you’re tied down with weekend chores. Trust me, it takes a lot of time to do even the basics like maintaining the lawn and minor home repairs. When you add in things like keeping the roof in good condition and cleaning the gutters, you can kiss at least half your weekends goodbye. Again, this isn’t a cut-and-dry argument. For some people (like me) the wealth building or emotional aspect of owning a home is enough to counterbalance the time it requires. But if you can’t picture yourself settling into domesticity to maintain your new home, maybe you should stick with renting for a while longer. So before you even start shopping around or looking at mortgage rates, run your own personal cost-benefit analysis. This article gives a detailed explanation of how to do this, including some tools to help you do the math.

Get Your Credit Score in Shape

If you decide buying a home is the right option for you, it’s time to do the preliminary work of getting your credit score in shape. (Honestly, you should do this even if you plan to be a renter forever and ever, amen. Eventually, you’ll probably need some credit, so having a good credit score is a good idea!) This starts with actually knowing what your credit score is. You can go about this in a couple of different ways. One option is to get your credit score for free. Several websites, such as Credit Sesame and Credit Karma, offer a free credit score. These are great tools, since they also help you analyze your score and find ways to improve it. You can also get your credit score from many credit card companies. Some, like Discover, offer the option even to those who aren’t customers. More on those options here. However, as you get closer to applying for a mortgage, it may be a good idea to spring for a copy of your “real” credit score–the one lenders see. In fact, I would go so far as to purchase a copy of your score from each of the three bureaus. Here’s how you can do that.

How to Boost Your Score

We’ve got a ton of in-depth content on how to boost your credit score, so we’re just going to give you a bare bones outline here. Click on the links–or sign up for our Credit Over Coffee email series–to learn even more. Here are the basic steps to take to increase your credit score:

1. Correct mistakes and errors. Many consumers notice errors on their credit reports. This could be as simple as an incorrect mailing address. Or if could be as complex as showing an account you don’t actually own. Either way, you’ll need to correct these errors as soon as you can.
2. Ask for some goodwill. Late payments on your credit report can seriously harm your score. But what if you’ve got a record of a single late payment in an otherwise squeaky clean history? Consider asking the lender for a goodwill adjustment. Here’s how.
3. Make payments on time, every time. Your credit score is really all about one thing–telling lenders how risky you’d be as a customer. And lenders really hate late payments. So consider automating your finances or using a budget tool like Mint.com to track when payments are due so you don’t miss any.
4. Pay down your revolving debts. Lenders don’t like to see that you’re maxing out credit cards or carrying too much revolving debt. Paying down these balances can be one of the quickest ways to improve your score. You can learn more about credit utilization in this article.
5. Use credit wisely. Contrary to popular belief, you don’t actually have to carry a balance on your credit card or otherwise go into debt to build your credit score. If you’re starting from scratch, you just have to use credit wisely. This means only taking out installment loans (like car loans) when you need to, and in modest amounts. And it means using a credit card but paying off your balance each month.
6. Leave older accounts open. It may seem like a good idea to close credit cards you no longer use, but this may actually damage your credit score. Here’s how to cancel those accounts without harming your score.
7. Keep on keeping on. Building your credit score takes time. It’s worth the effort, but you’ll want to start several months–at least–before you plan to apply for a mortgage. Keep using credit wisely, paying down debts, and making payments on time. You’ll see your score increase so you’ll save on that future mortgage.

Why it’s Worthwhile

Before we move on to the next point, let’s hammer home why raising your credit score is so important. A higher credit score means a lower interest rate on your mortgage. A few points in interest may not seem like a big deal. But when you’re talking about a huge loan with a 15- to 30-year life, it can add up quickly. This calculator from FICO can help you see just how much you’d save by increasing your credit score. Here’s an example: Using FICO’s national average on a 30-year fixed mortgage loan, let’s assume you’re going to take out a $150,000 mortgage. Right now, your credit score is in the 620-639 range. Here’s what FICO’s calculation looks like: Raising your score to the next tier up will save you about $17,000 over the life of your loan! Raising it to the middle-of-the-road 680-699 range could save you almost $40,000. These savings come in the form of less interest paid over the life of your loan, as well as smaller monthly payments. Clearly, taking the time to work on your credit score before you apply for a mortgage is worth it!

Start Saving for That Down Payment

While you’re working on improving your credit score, it’s also time to start saving for your down payment. Low down payment mortgages are back after a brief hiatus following the subprime mortgage crisis. But you’ll likely need to have some down payment. And, in reality, saving the traditional 20 percent is a great option.

Why a Bigger Down Payment is Better

If you can access a 3.5 percent down payment mortgage, why would you wait to buy until you’ve saved 20 percent? Well, there are lots of reasons this might be a better option. Here are the top three:

1. You’ll be less likely to go underwater on your mortgage. A mortgage is considered underwater when your home is worth less than what you owe on it. This is what happened to many homeowners during the mortgage crisis. It is not a place you want to be. Starting off with 20 percent equity in your home is a good way to avoid this situation for the most part.
2. You won’t have to pay PMI. Until you have at least 20 percent equity in your home, you’ll have to pay private mortgage insurance. This is a lender requirement so they get their investment back if you are unable to make mortgage payments. When you start off with a very low down payment, you’ll be stuck with this monthly payment for years.
3. You’ll build the discipline of saving. Saving up a big down payment, especially when you’re renting, can be difficult. But aiming for a big down payment gets you into the habit of saving a lot of money every month. This will serve you well as a homeowner when you need to save up for inevitable repairs, upgrades, and more.

But Don’t Despair if You Can’t Get There

With all that said, you don’t have to have a huge down payment to become a homeowner. If you’re in a city where rents outpace mortgage payments by a lot, this may not be possible. Maybe it would take you decades of saving to get a full 20 percent down payment. In this case, or if your income is just too low to save that much money, consider a mortgage with a lower down payment option. You can find a list of potential lenders and mortgage types in this article. Starting out with a low down payment can get you into a home. And then you can figure out ways to pay down the principal more quickly. Paying down the principal can help you get rid of PMI more quickly, and can keep your mortgage from going underwater.

How to Save for a Down Payment

At its core, saving for a down payment is about budgeting and discipline. You’ll need to keep track of your spending so that you can find new ways to save. And you’ll need to save on a regular basis, especially if you want to buy a home soon. You’ll also want to think about where to stash that down payment savings. You’ll need to keep it somewhere safe and without a lot of volatility. This article includes some great options for place to save your own payment. Need some help getting started with budgeting and finding ways to save money? Start here and here.

And Don’t Forget Closing Costs

Too many first-time home buyers don’t know anything about closing costs. These are additional fees and charges you pay at closing when you purchase your home. And they can be quite substantial. Plus, they’re paid on top of your down payment! This article provides a lengthy list of closing costs you can expect to pay when you purchase a home. The bottom line here is that you should expect to pay anywhere from 3 to 7 percent of your home’s purchase price in closing costs. You can roll these costs–at least some of them–into the mortgage, but that means you start off with less equity in your home. The best case scenario is to pay them in cash when you close. Again, though, if you can’t save enough to pay for all the closing costs, you have some options. For one, again, you can roll some of these costs into your mortgage. Another option is to ask the seller to pay some of the costs. Motivated sellers will often do this out of the proceeds of the sale, which can be helpful. The article linked above tells you how to figure out your closing costs and various options for paying them.

Understand Your Mortgage Options

Before you start shopping for a mortgage, you need to understand basic terminology and options. This will help you figure out which mortgage is the best fit for your particular needs and situation. First, we’ll talk about some basic mortgage terms. Then, we’ll discuss a few specific types of mortgages you might consider.

Fixed-Rate vs. ARM

These terms all refer to how the interest works on a mortgage. The first option is the most common. In a fixed-rate mortgage, you pay the same interest rate for the life of the loan. Unless you refinance to another loan or type of loan, the rate doesn’t change. Fixed-rate mortgages are great because they’re dependable. You know what your payments will be each and every month. However, with a fixed-rate mortgage, you can’t take advantage of a falling interest rate environment. If interest rates drop substantially from your current fixed rate, you’ll have to go through the hassle of refinancing to take advantage. An adjustable-rate mortgage (ARM) is one where the interest rate varies depending on some kind of index. So as the index rises or falls, so will your mortgage’s interest rate. This means that you can take advantage of a low-interest environment without any additional work on your part. But it also means that when interest rates increase, your mortgage payment might, as well. Some ARMs are adjustable right from the start of the mortgage. Others are a hybrid option. For instance, a 7/1 ARM has a fixed interest rate for the first seven years of the loan, and then adjusts annually thereafter. ARMs are quite complicated, and you can learn more about their pros and cons in this article. There are other types of mortgage interest, but they’re less common. For instance, you can sometimes get an interest-only mortgage where you pay only the loan’s interest for a set period of time. But, again, these mortgages are a much less common option.

15- vs. 30-Year Terms

Any mortgage that you take out will have a term. This is the length of time that it will take you to pay off your mortgage if you only make the minimum payments. While mortgage terms can vary widely, the most common options are 15 years and 30 years. Because a 15-year mortgage is less risky for the lender, they’ll come with a lower interest rate. This means they can save you a load of money in interest over the life of the loan. But 30-year mortgages come with a lower monthly payment, giving your budget more breathing room. Which option is best for you? It depends. Longer mortgage terms are still more common than 15-year options. But 15-year mortgages can also be a great option if you want to get out of the debt more quickly and benefit from the lower interest rate. It’s important to examine the pros and cons of this choice. Calculators like this one can help show you how your loan will amortize either way, which can be helpful. You should also check out this podcast to get insight into ways to make a 30-year mortgage as financially savvy as a 15-year mortgage.

Government-Insured vs. Conventional

Homeownership is important for consumers and the economy. But mortgage loans are huge and risky for lenders to offer. So the federal government has stepped in to insure certain types of mortgages, especially for riskier borrowers. If you have a lower credit score or lower income, a government-insured loan may be your only option. Government-insured loans often come with more restrictions. For instance, you may not be able to buy a super-expensive house compared to the other homes in the area where you live. But these loans are easier to get if you’ve got a bad or short credit history, or if you can’t save a 20 percent down payment. Check out a full list of government-insured loans in this article. Conventional loans tend to be cheaper, but they’re harder to get. These loans may come with fewer additional fees and a lower interest rate. But you’ll need to have a hefty down payment and a good credit score to qualify for most conventional loans. Since you’ve already been working through our handy checklist, you should have an idea of what your credit score is and how much you plan to save for a down payment. This will let you know whether you should work for a lender that offers government-insured loans or opt for a conventional option.

Make Your “Must Have” List

Now we are finally to the section every homebuyer likes to think about: what you want and need in a home. Well, we’re going to table what you want for now. First, let’s talk about things that you need in a home. Like wants, needs are somewhat subjective. Of course, we all need to buy a home that’s not falling apart around our ears. We need to make a good investment with what is probably the largest financial decision we’ll make in our lives. And we need to be somewhere we feel secure. But what else do you truly need in a home? Here are some questions to consider:

• How long do I plan to stay in this home? (Start here because it will inform your long-term answers to some of the other questions.)
• How many bedrooms and baths do I need?
• What minimum square footage can I live with?
• Do I need central A/C and heat?
• Do I have to have a garage?
• Do I require a single story home, or will multiple stories work?
• How much storage space do I need, at a minimum?
• How important are the local schools for my needs?
• Do I need additional amenities like a laundry room or finished basement?
• Must the home be handicap accessible?
• Do I need the home to be move-in ready, or can I deal with a fixer-upper?
• Do my pets or children require a fenced-in yard?
• What additional features or benefits do I consider a requirement?

Here’s a hint: the shorter you keep your list of “needs,” the more options you’ll have to check out. You might just walk into an amazing house you’d never have considered with a list of 32 “needs.” Once you get through your needs, consider your wants. You can use a similar list of questions to figure this out. Wants might include things like particular finishes or layouts, extra rooms like a play area or den, a waterfront property, a great view, or a wood-burning fireplace. These are not things you have to have to live a good life. But they’d be nice. You can prioritize homes that meet both your wants and your needs. But be sure to think outside the box when you’re looking at homes, too.

Get a Feel For Local Real Estate

Once you have your wants and needs list, check out what’s available in your area. It’s fun to browse home sale websites and listings well before you plan to actually buy. And this can give you a feel for the areas of town that are most popular, where housing is more expensive, and what you can expect from homes in your area. Go to open houses. Track home listings and sales. See what features you can get for what price in your area. Home prices are uniquely local. In my hometown of Indianapolis, two homes situated a few blocks apart could be $10,000+ different in sale price, even if they’re similar in size and amenities. If you’ve never shopped for homes in your area, you may have absolutely no idea what the going rate is. Looking around can also help you refine that list of wants and needs. Maybe you thought you needed a three-bedroom home. But you find that most of these are well outside your budget for now. So you can decide to scale back to a two-bedroom with a bit less space so that you can afford to buy sooner. Remember: Your first home isn’t likely to be your last. Don’t be afraid to move into a starter home for now, live in it for a few years, and then shop for something bigger.

Figure Out Your Budget

You’d think we’d have talked about budget earlier in this article. But I left it until now for a reason. Until you know what your credit score is, how much down payment you can save, and what real estate prices are like in your area, it’s hard to pin down a budget. Sure, you may have a ballpark idea of what you can afford to spend. But you could bump your credit score or save a bigger down payment to afford a more expensive house. To figure out your budget, we’re going to reverse engineer things a bit. We’ll start by figuring out what you can afford monthly, and then run some calculations to see what you can afford for a total mortgage.

What Can You Afford Monthly?

My number one piece of advice here is this: Don’t listen to the mortgage lender! Even after they got burned in the housing meltdown, most lenders will give you a bigger monthly payment than you can truly afford comfortably. For instance, lenders will look at your debt-to-income ratio to determine how much monthly payment you can handle. This is your monthly minimum debt payments compared with your monthly gross income. So if you pay a total of $500 towards debt each month and bring home $2,000 per month, your debt-to-income ratio is 25 percent. Lenders generally prefer that you keep your debt-to-income ratio, including your new mortgage payments, at or below about 36 percent of your income. Even though a lender considers a 36 percent ratio to be acceptable, that can be an uncomfortable squeeze for many consumers. When you’re putting more than a third of your monthly income towards debt, that doesn’t leave a lot of wiggle room for emergencies. So don’t take out a mortgage with a payment this large just because the lender will let you. Instead, look at your budget and decide what you can comfortably pay each month. Consider things like putting money into savings, paying down higher-interest debts, and having some leeway for the unexpected.

Then Decide What You Can Afford Overall

Let’s say you’re comfortable paying a $800 per month for your mortgage. This leaves you with a 27 percent debt-to-income ratio, so you’ve got some room to breathe. We’ll use this calculator to show you how this works out. Let’s say you’ve saved a $10,000 down payment, and you plan to take out a 30-year mortgage at 3.5 percent APR. Your annual taxes will be $1,500, and your annual insurance will be $520. You can afford a home worth about $150,000. Now that you see how it works, you can use this calculator with your ideal mortgage payment, mortgage term, and interest rate. Check out your current potential interest rate here before you run the numbers. Since you already know a bit about real estate in your area, you can now decide if you’re actually ready to buy a home. If this calculation leaves you without any good housing options, you may need to save more money or pay down more debt before you’re ready to buy.

Get Pre-Approved for a Mortgage

Now you know you’ve got a good credit score. You have a good down payment. And you have a solid idea of what you can afford to pay for a home. (And you’re not going to let a mortgage lender talk you into a significantly larger mortgage just because you qualify!) It’s time to get pre-approved for a mortgage. This is really just a process by which you first shop for mortgage lenders and then get preapproval paperwork in hand. This process helps you know, first off, that you’ll qualify for the mortgage you want. And being preapproved can put you in a stronger position when making an offer in a sellers’ market. Sellers are more likely to take you seriously when you can prove that you have the financing you need.

Shopping Around for Lenders

You may not have thought about shopping for lenders, but you should. Different lenders will offer you different rates and terms. And this can make a big difference in your overall mortgage payment. When you apply for a mortgage, a lender is required to give you a Good Faith Estimate. This is an estimate of the total costs of your potential loan. It will include estimates of any closing costs, as well as your APR and monthly payment. Remember that this is just an estimate, but it can still help you shop for the right lender. Closing costs, especially, can vary dramatically from one lender to the next. So you’ll want to compare the Good Faith Estimates to see where a particular lender might save you money. We think LendingTree is a great place to get multiple mortgage rate quotes. You can also check out one of the lenders below:

A Note About Mortgage Shopping and Your Credit Score

Shopping around for a mortgage is a good idea. But don’t drag it out too long. Inquiring for new credit–which happens every time you ask a lender to loan you money–can drag down your credit score. With that said, scorers like FICO know that smart consumers shop around for large loans like their mortgages. So they’ll ignore any inquiries made in the previous 30 days when calculating your score. And they’ll combine applications for the same type of credit from a 14- to 45-day period (depending on the scoring model used) into a single inquiry. You can learn more about that here. The bottom line is that your best bet is to apply for mortgage preapproval with all your potential lenders within a two-week period. This makes the process less likely to negatively affect your credit score.

Start Shopping Around

Once you have a preapproval offer in hand, it’s time to start shopping for your first home. You’ll likely want to have a realtor help with this process. Realtors can help you meet that list of wants and needs while sticking to your budget. A good realtor should act as your ally in the home search. This person needs to be on your side, listen to what you want, and be willing to work to help you find it. Once you find a good realtor (ask for recommendations from locals!), stick with that person through the home shopping and buying process. As you’re shopping around, remember to keep in mind how well a home suits your needs. And get a feel for how quickly homes are going in your area. If it’s a sellers’ market with homes getting snatched up as soon as they hit the listings, you’ll need to be prepared to make a good offer as soon as you find a home you love. But if it’s a buyers’ market where real estate is moving slowly, you may have more time to deliberate. And you can often talk a seller down on price, especially if the home has been on the market for several months.

Make a Smart Offer

There’s a bit of an art form to making an offer on a home. Offer too much off the bat, and you lose some power of negotiation. Offer too little, and you risk getting outbid. During the offering process, your realtor should do all the back-and-forth with the seller’s realtor. So be open with your realtor about your limits and expectations. For instance, maybe you want to mess with absolutely no maintenance or renovations in the first year that you own your home. You find a great little bungalow with a roof that needs replacing and some touching-up that needs done in the kitchen. Consider making a higher offer, but asking the seller to fix the home’s issues before you close. On the flip side, maybe you’re on a tight budget but don’t mind DIYing it a bit in your new home. In this case, ask your realtor to negotiate for a lower price on a fixer-upper. Then you can use some of the money you’ll save on renovations and repairs in your first year in the home.

How Making an Offer Works

The process of making an offer on a home is actually pretty complicated. That’s why I recommend using a realtor when you’re buying your first home. When you want to make an offer, you put it into writing, and your realtor will deliver your offer. It can include not only your price, but also additional terms. For instance, you might ask the seller to pay closing costs or take care of certain renovations before closing. The seller can then either accept, decline, or make a counteroffer. The counteroffer may include a higher purchase price or fewer terms. This back and forth can happen for quite some time until you decide to back out of the process or the seller accepts an offer. One thing to note is that the offer you make on a house is legally binding for both you and the seller. State and local laws often govern the offer and counteroffer process, and you need to make sure all you’re following all of the rules. If you make an offer and the seller accepts, getting out of that arrangement can be difficult, to say the least. So think carefully, and don’t make any offer you’re not willing to accept, even if you think you can later negotiate a better offer. The offer can include contingencies. For instance, you might make an offer pending an official inspection on the home. If the inspection turns up major issues, this type of contingency will let you back out, penalty-free. Contingencies can be helpful. But they can also keep the deal from going through, so be careful about them. The seller’s information in the offer will include disclosures about the house. This can include things like structural issues with the home or hazards in the area. Be sure you read these thoroughly before you sign on the dotted line! Finally, when you make an offer, know that you’ll have to put some money on the line, most likely. This deposit, which is called earnest money, basically shows the seller that you’re serious. The seller holds this money in escrow until closing. Your offer letter will detail the circumstances under which you could forfeit the money, or when the seller has to return it.

Steps After the Offer

You’d think that after you make an offer and the seller accepts, you’ll be closing on your home in no time. But hold your horses. There are actually a few steps you’ll need to follow between the accepted offer and the closing date. First, you’ll need to double-check that your financing is ready to go. Even if you’re pre-approved, you’ll have to fill out additional paperwork to actually get the mortgage. As part of the process of securing the mortgage, you’ll likely need to have the home inspected. Some lenders require an inspection, though not all do. Still, bringing in a professional who can point out any potential issues with the home is a really good idea. Your lender may also require that you have a separate appraisal, even if the home seller has already had one done. Often times, you’ll pay for the appraisal and inspection fees as part of your closing costs. Again, because this process is so complicated and multi-layered, it’s a good idea to work with a licensed realtor who can walk you through all the necessary steps. Finally, you’ll also need to find homeowners insurance before you’ll be able to close on your home. Lenders want to know what you’re insured from day one, so you’ll need to have insurance before closing. You’ll pay part of your annual insurance fees, along with property taxes, at closing. From then on, part of your monthly payment will go into an escrow account, out of which the lender will pay your insurance and taxes annually.

Come to Closing Prepared

We already talked some about closing costs. And once you have your lender’s Good Faith Estimate, you’ll have a clearer idea of what your closing costs will actually be. Most of what happens just before closing isn’t your job, other than possibly signing even more paperwork. During this time, the lender may do a title search on the home. This ensures that there are no liens out on the home that someone forgot to pay. The lawyer for the lender will go through the paperwork, and you might ask your lawyer to look it over, as well. You’ll want to hold off on taking out additional debt during this period. The lender may pull your credit again just before closing. And new debts–or higher revolving debt balances–can mess up your credit and ruin your chances at securing the mortgage. When you come to closing, your realtor will let you know what you need. But, for the most part, this will be a series of signing a whole bunch of paperwork and writing a fat check for your down payment and closing costs. Once you get through closing, the home is yours. You’ll usually get the keys at the closing meeting. Then, you’ll want to walk through the property once more within a couple of days of closing, just to ensure that everything is as it should be. If you notice any damage or that changes specified in the contract aren’t complete, your realtor will want to deal with that right away.

Don’t Forget the New Homeowner’s Budget

Finally you’re ready to move into your new home! But in your excitement, make sure that you don’t forget to change your budget for your new lifestyle of “homeowner.” Now, you’ll need to make sure to budget for ongoing home repairs, especially the expected sort. For instance, you’ll want to budget for any annual or monthly maintenance you need to complete on your home. This includes big jobs like cleaning your gutters as well as small jobs like replacing furnace filters and light bulbs. You’ll also need to budget for new furniture and decor, especially if you’re upgrading to a larger space. But the necessities come first, so keep living out of boxes and with your old furniture while you bulk up your savings! Need a reminder as to what you should budget for now? Check out this comprehensive list. Home ownership can be one of the most rewarding experiences in your life. Read our MASSIVE guide on how to buy your first home right here.

The post How to Buy Your First Home appeared first on The Dough Roller.

via Finance Xpress

Bonds and CDs are two popular alternatives to investing in the stock market. They're less risky and less volatile than stocks but provide lower returns.

The post Bonds vs. CDs appeared first on The Dough Roller.

via Finance Xpress

Before you can get to $1 million, you must first get to $100,000. Even though $100,000 doesn’t purchase the same amount of stuff as it did back then, $100,000 is still a nice chunk of change. With $100,000, you can pay for four years of tuition at public university. You could also buy one Patek

The post How I’d Invest $100,000 Today For Reasonable Returns And Some Joy appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

Managing debt can be an overwhelming task. Fortunately, there are a number of tools and apps which can help you organize your debt.

The post Best Debt Repayment Tools and Apps appeared first on The Dough Roller.

via Finance Xpress