When Paying Ahead on Your Mortgage Can be Beneficial

When we started our mortgage, I was shaken up by the number of years and total of payments behind owning our home. It seemed so big, and I could only see it getting bigger with interest. In the first year of owning, we tried to simply get used having our monthly payment. But after researching I wanted to be a little more proactive in paying off our home.

Pre-paying your mortgage is situational. It’s not a one size fits all, but it can save you a lot of money in interest if you are in a financial position to do it. For me, it makes sense to pre-pay an extra fifty dollars a payment to cut time and interest off my total amount owed. Let’s dig in and look at when paying ahead can be beneficial.

If you’ve found your forever home. If you know you plan to stay in this home for a long period of time, then paying it off faster may be worth it. That way you are putting money into something that will benefit you and your family for years to come.

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If you’ve found the place to call home, you’ll feel more at ease in investing in it. 

You’re in a financial situation where you can focus on debt. When you boil it down, the difference between paying off your mortgage sooner or later is when you want/need to have more money. What I mean is that if you are in a tight spot financially now with lots of bills and financial responsibilities you probably would benefit more from paying your regular payment.

On the other hand, if you don’t have a lot of bills or financial responsibilities and you’ve got savings you may want to pay down your mortgage debt now. This may give you less money in the future, but you also will have less debt. It’s always a catch 22. Moral of the story: if it won’t hurt you to add even 10 dollars a month, it may be worth considering. If it’s going to hurt you financially it’s not worth it – this is voluntary, not mandatory.

You want to eliminate as much interest as possible. In light of my own financial philosophy, reducing the amount of interest I pay over the life of the loan is a major motivation. Interest is a quiet debt, and for that reason I like to address it head on. The extra amount you end up paying by letting interest compound is significant. So, whenever I see an avenue to reduce my mortgage debt and the amount of interest I owe on that debt – I’m willing to do it. Even if it means having less money to spend now. I’d rather have less or no debt now than more money, but everyone is different.

You have some savings. It’s important to have some cushion. If you’ve been able to save, then pre-paying may also be appealing to you. That way you’re not spending the only money you’d have for emergencies and you are focusing on prioritizing your funds. Many people recommend having 3 – 6 months of earnings in savings, but this isn’t realistic for everyone. You should know based off your budget how much you might need if an emergency happened, and you needed enough money to last several months without a paycheck.

This is not an exhaustive list, but it does cover some of the main motivations behind pre-paying your mortgage. Remember the amount does not have to be big. You’d be amazed what pre-paying 10 dollars a payment for a year could do to decrease the total interest you will pay on your mortgage loan over time. Would pre-paying be a good option for you?

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How to Build Your Credit

Credit. It’s a six letter word that packs a punch. It helps us buy a home, allows us to learn financial responsibility, and sometimes it gives us a little more freedom than we were ready for. If you’ve had a bad experience with credit before – take a deep breath and relax. Your days of fearing a number are over. You are in control of your credit – not the other way around.

So you’re thinking, “Where do I start?” Whether you have no credit or bad credit – understand that building it doesn’t happen overnight. Just like building anything else, it’s a brick by brick process. Let’s jump in!

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Credit can be intimidating, but there are plenty of tools that can help you!

Get organized This is the key. Without it the cycle continues. Buy a calendar or make one just for your bills. This will help you become aware of your due dates so that you make a habit of paying on time. Set reminders on your phone and/or computer. Do all three – remind yourself however you need to. Keep a wall of post it notes with payment dates.

If you get paper statements—highlight what you owe each pay period. Keep a file folder with “To pay” and “Paid” labels. If you don’t have paper statements—keep up with upcoming payments on a whiteboard. This is the easiest way to tackle debt and stay on track. It’s important. Make a system and stick with it.

Set your max spending (and stay under it) Credit cards and loans are great—they allow us the opportunity to own something we probably couldn’t before. Yet, they sometimes can feel like free money. Where we get in trouble is when we forget we have to pay everything back—with interest. So how do you control that spending?

Discipline. Give yourself a ceiling. For example, a card or company may allow $500. Tell yourself, my max is $100 and stick to it. You will still build credit and you teach yourself how to be responsible. Credit is designed to prove you are financially responsible. Use it to learn money maintenance and focus on necessity spending instead of purchasing luxury items.

Pay your balances in full when you can and maintain only a few accounts.

Keep up When it comes to your credit and payments—you are your own advocate. Know where you stand.

Consider getting a secured credit card or becoming an authorized user (Secured /Authorized user) Not all credit cards are the same. So if you struggled with one variety—don’t feel discouraged. There are more options. One option is a secured card. With a secured card you pay a deposit to hold the card. Your credit limit is the amount of your deposit. Essentially, it’s a safeguard should you fail to fulfill your payments. It’s good discipline because then you understand how much money is behind your card, and you have a strong incentive to make payments because you pay into it.

Another option is to become an authorized user on someone’s credit card. Find someone who is first and foremost financially responsible. The best person to do this with is someone you can learn from. Think of them as a credit mentor who can help you spend well and keep you accountable.

Start Evaluating Your Debt

There are many other ways to build your credit. These are just to get you started. Don’t wait.

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Personal Finance Goal Ideas for 2020

When it comes to financial planning some people want to run the other way, while others make a list that they never apply to their situation. But plans are nothing without specific goals to achieve before that year is out. You’ll find too that even if you’re unable to achieve a goal – you’ll have set yourself up to getting closer to it just by knowing your endpoint and moving towards it. With that in mind, let’s look at some practical ideas that help you move forward.

Raise your credit score __ points. You decide how many points feel feasible. This goal is helpful because instead of just saying better your credit score – you can measure your success. Don’t know how or where to start? We’ve got you covered with some ideas on how to build your credit.

Save a certain amount. Pick a number and set up the guidelines of how to reach it. Base it off of your budget and income – don’t reach for something unrealistic, but don’t make it easy either. Have something in mind for what you’ll save. Think something like: saving to pay off a piece of debt, to pay for a home update, to fix a car, to be generous, or to give a special gift. Starting from scratch? Let’s get that budget figured out!

Pay extra towards the principal of a piece of debt. We all know interest is crippling, right? So, why not try to get ahead of it a little bit? Some loans will allow you to allocate where your money goes. You might try to allocate an extra $50 to your monthly payment directly at your principal. This reduces the overall amount and lessens what you pay interest on. It can also cut time off the life of your loan.

Write down purchases/ balance your checkbook. Tracking what you spend isn’t a blast, I get it. However, with the digital transformation of our money it’s so important to keep track of where it’s going. Not only is this a good habit to combat over-drafting or cutting it close, but also it can help you realize your spending habits. Sometimes we don’t realize what we regularly spend on that isn’t needed. This is a good place to trim the budget.

Spend less in one specific category. If you discover that you overspend in one area or you already know a problem area, give yourself guidelines for how to do better in that certain area. Either cut yourself off completely, make a budget for how much you can spend, or make smarter purchases within that category.

Start with simple investing. Investing can seem hard to get into but there are low-impact things you can do first. Start by researching, asking someone you trust how they invest, or consult a professional. Never make an investment you feel unprepared for.

We hope that these ideas get you inspired and hopeful about reaching accurate and helpful goals. Remember a step is a step and we commend any progress. Take a step by focusing on your financial planning.

Get Some Help With These Strategies!

Why Checking Your Credit Report is the Best First Step

Honestly, I didn’t care about credit until I went to buy a home. Then it mattered – greatly. Unfortunately, I found it to be true “no credit is equal or worse than bad credit”. It’s a good idea to check out your credit score and report before buying a home. After reviewing your credit report and score, you might choose to pursue a home purchase or you might try improve your credit score first.

By law, you are entitled to one free copy of your credit report annually from each of the three nationwide credit reporting companies. Unfortunately, some folks don’t know this and end up paying for what they didn’t have to. Also, some websites claiming to sell credit reports and scores are not legitimate. Be sure to check out this site to be sure you don’t get fooled by an impostor website.

You can visit one website to get your free credit reports from the three major credit reporting companies – AnnualCreditReport.com. You’ll have to input some of your personal info to retrieve your report. This is the same if you call or mail your request. If you create a myEquifax® account, you can get two free credit reports a year.

Credit reports offer you a lot of details – from debts and when you paid them to old addresses. Plus, things like payments, accounts, and actions within them that you may not know about. That’s why credit reports are always good to look at– because they may show information about potential fraud or identity theft and things that you may not be aware of. This may help you protect your credit score and history by letting you see whether all the information and account details are accurate. Then, if they are not, you can freeze your credit, place a fraud alert, or dispute inaccuracies.

What you may be surprised to find out is that credit reports do not list your credit score! Weird, huh? You’d think for sure it would.

According to Equifax®, there are a couple of ways to see your credit score.

  1. You can contact your credit card company or bank as sometimes they may provide your credit score to you as an account feature.
  2. You can purchase your credit score directly from any of the three major credit reporting companies.

Find More About Credit Scores!

5 Actions That Will Help You Start Tackling Your Debt

Don’t wait for a resolution, a life-change, or more money – create the discipline of paying on your debt now. Even if you can’t pay as much as you’d like, doing the smallest amount and setting yourself up in other areas will make an impact.

So, we are looking at five practical actions you can start that will put you on the track to staying on top of your debt and ultimately, paying it off. If you’ve been waiting for a sign to start your game plan – this is your flashing neon light.

Start a passive line of small savings. Whether you’ve been saving or not, always start your seasons of paying with saving. If it’s $5 dollars you save, and $5 dollars you pay – so be it – that’s something, and we aren’t shrugging our shoulders at progress. I favor automation as a way of saving because you can be lazy and benefit from it. Here are some ideas about how to save. You should always be saving. Especially, if you’re spending money. The amount isn’t as important as the discipline.

Pick a piece of debt that you can whittle down. Now that you’ve created a stream of savings that you can pull from, you can decide what debt you’ll diminish. There are tons of strategies, here are a few to get you thinking. Pick what fits you. I personally like hitting the highest interest debt first. That’s what works for me.

Outline how much you want to pay off and how much you’ll pay towards each item. Being specific and honest is the best way to confront your debt. Set a goal or goals for items that you want to pay off/ towards. Then decide how much you’ll allocate to smaller pieces of debt – this will differ based on your strategy. It’s important here to consider your season of life. If it’s in your best interest to make big payments towards something – do it. However, if slow and steady is better for you do it. Movement is movement.

Keep focus. It’s not fun or a good time paying off debt. It can feel easy to cut corners, or stop and wait until another time. However, keep focus and stay consistent. That’s the best thing you can do. It won’t get easy, but you’ll get closer.  You’ll get to a space where you can re-evaluate and focus your goals in more and see what other options you have. That’s one of the best strategies, pay some, zoom in more, and keep repeating until you’re there.

Follow your budget and make long-term decisions. A budget will help you stay on track. Budgeting your debt and how to pay it is vital. Following a plan will help you eliminate being surprised by numbers. When paying off debt you need to think about the future. Obviously, we can only plan with so much understanding of what will happen. Yet, we can we can do the best we can with what we have. Is your budget non-existent or less than stellar? Read up here on how to start budgeting well.

These actions are easy ways to being to chip away at debt and make it approachable. If it seems intimidating break it down and keep doing that until it’s in pieces small enough to assess. You’ve got this.

Set Goals Today!

How Escrow Accounts Work and Why They Rock

If you have a mortgage, then chances are you’ve heard the word escrow thrown around a time or two. But what is it exactly?

An escrow account is a helpful tool built into your mortgage. It allows for funds to be collected monthly to pay for your homeowner’s insurance and/or property taxes. By your mortgage collecting escrow, it ensures that your insurance and property taxes are paid in a timely manner. The benefit to you is you don’t have to worry about fronting hundreds or thousands of dollars all at once for your homeowner’s insurance or property taxes.

The formula is typically simple for finding the amount owed. Let’s say both insurance and taxes are escrowed from each monthly payment. The monthly payment is found by taking the total amount paid to both insurance and taxes for the year and then divided by 12. (The 12 is for 12 months.) That’s it! That would be your monthly payment in addition to your mortgage! Please keep in mind, some lenders may use another calculation that varies slightly and is also permitted by the law. Be sure to contact your lender if you have further questions as to how your escrow is calculated.

Occasionally, your escrow payments may increase or decrease. If that happens, either your insurance or taxes have changed. This will affect what you pay monthly. In most loan types, this is the cause of increase or decrease for monthly payments.

All in all, escrow accounts allow for your insurance and property taxes to be paid on your behalf without much extra work on your end!

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Researched and created by Rachel Mersinger

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5 Ways to Fight Forgetfulness with Your Finances

Having a hard time keeping up with everything? Life is busy. You’re not alone, sometimes it’s quite difficult to keep up with all that’s happening. Yet, when it comes to finances – getting into this pattern can be detrimental to your life. Missing payments can hurt your credit.

So how can you help yourself? How can you remember and make bills the priority, even when your mind can’t? We’re here to help answer that.

  1. Create a bill calendar. Consumer Finance has a great blog post and resources on this topic. Bill calendars can be physical or digital or both. Seeing them mapped out will aid your budget and help you understand where your money is going. Get started with your own bill calendar here.
  2. Organize your due dates (if possible). If you can select your due date, choose a date you’ll remember, stagger, or have them all due at the same time so you know when things are due. This will aid your memory.
  3. Automate. This is hard for some folks. People fear it will draft when there isn’t money in their account. That’s valid. However, keeping an eye on your account and budgeting so you have some room around your bills is a great habit to start practicing. Get more info on automating here.
  4. Make yourself a monthly check in day. Take one day once a month to update your budget and check in on where you’re at. This will keep you accountable and help you act instead of react when it comes to your finances.

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    Planning out your payments is the best way to get ahead!
  5. Pay early when you can. Worried about life getting in the way? Try paying bills that you can early. Once you pay it can stay out of mind for a month. This can also be a great way to cultivate a habit.

Create good habits, help yourself out a little bit, and help support healthy finances. Being prudent with money is a continual work, don’t be hard on yourself. Give yourself some grace by setting up some or all five of these ideas to help you get ahead of it.

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Common Unexpected Costs Of Mobile Homeownership

The cost of buying a home can be deceiving. You have to have a future mindset as much as possible when buying a home. If you’re stretching your budget just to afford a monthly home loan payment – you probably need to save more before buying. You need to consider more than just the monthly payment when buying a home. If you do not budget for home expenses in addition to the monthly payment, you could possibly end up falling behind on payments or not being able to afford the typical expenses associated with homeownership.

So, as is true with most things – planning, budgeting and education is the best way to prevent future issues! Let’s look at some of the hidden costs of homeownership.

Moving and transport. Buying a mobile home is a great choice. Too often people who are moving their home to a piece of land don’t fully consider the expense of moving and installing the home. This is an expensive process and if the home is not moved and installed properly it can lead to damages and additional expense. Be sure to evaluate all your options such as financing your home delivery and installation costs into your loan amount if permitted by the lender you choose, finding a skilled company to handle your move, and hiring a contractor who can prep your land for a home, water, and electrical.

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Be sure a professional preps your home and land. Here footers being filled with concrete.

Utilities. You may be familiar with paying monthly utilities as part of monthly rent. However, as a home owner, the utility accounts will now be in your name. That means you are responsible for paying the entire monthly bill. So before moving in it is always wise to ask the previous owner or a neighbor what they typically pay in the winter and summer for utilities. This will help you to budget for utilities as part of your monthly expenses.

Repairs. Every home requires maintenance and repairs over time even with a new home or a home that is in great shape. It’s good to save each month toward a home repair and maintenance fund knowing that repairs will eventually be needed. The cost of repairs from ordinary wear and tear will add to your expenses, but saving as you go should help keep you covered.

City/ County taxes. As a homeowner you are responsible for paying local property taxes. Property tax payments are something homebuyers often forget to consider because they are usually paid as part of a mortgage escrow payment – which most people never quite understand. Here’s our explanation of escrow to help you out.

Trash/recycling services. Whether you are living in the city or a suburb, you’ll probably have some sort of trash service which you will have to pay for as part of your local property taxes or as a separate bill. Even if you do not have a trash service because you live in a rural area far from a city,  you’d probably rather pay someone and hire a service to come get your trash instead of having to make frequent trips to the dump yourself.

Potential lot rent. If you live in a mobile home park and own your home but not the land it is on,  lot rent is an extra monthly payment that will need to be considered and budgeted for.

Read More About Unexpected Costs!

5 Quick Tips to Transform Your Outlook on Spending Money

If your anything like me, it can feel like your life revolves around spending and saving money. From hundreds of quick saving hacks, to do this not that, and so many other tips that seem to overwhelm me more than help me. In the past year, I have learned to cut back spending on one of the things society idolizes the most – food.

I have found that by cutting back my spending on food and other habits, I am able to enjoy life and live more. Below are five tips that have changed my mind set.

1. Stop Eating Out

I have realized the amount of money I spend on food for personal and social reasons is absurd. Eating at a restaurant should be saved for special occasions to enjoy, not for you to spend $12 on a salad after work with friends. Even picking up your daily coffee before work will put a bigger dent in your wallet than you think. If you change your mentality about restaurants, your mindset will shift, and your wallet will be fuller!

2. Meal Preparation

Have you been gearing about “Meal Prep”? If not, read up! Meal prepping is going to be a big trend in 2019. It has more advantages than disadvantages over all. Not only does it help your wallet, it also can be an easy, affordable way to keep you and your family healthy! For recipes check out Pinterest!

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Cooking saves money and is an easy way to add health and color to your diet.

3. Purchase Your Gasoline Where You Grocery Shop 

Staying loyal to a grocery store has its perks. Check to see if stores in your area loyalty discounts. By saying true, you are able to receive major discounts on gas and your groceries. Who doesn’t love a win- win situation?

4. Stick to your list

Making a grocery list is only useful if you stick to it! When you purchase items not on the list, you are spending more than allotted. Additionally, when you follow step 2, grocery shopping is made easy with simple, affordable meals. Don’t buy it if it’s not on the list!

5. Shop Alone

I have found shopping alone helps me stick to my list. When you invite others to join your trip, they can encourage you or convince you to buy something you didn’t intend to.

Hopefully, you find these five tips easy to follow and applicable to your lifestyle. By saving money on simple things like food, you are able to save up and splurge on something special.

Try Cultivating These Good Spending Habits!