Category Archives: Personal Finance

Six Finance Tips for Every New College Student

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Financial stress is a part of life, and college life is no different. Whether a student has parents who pay for many expenses or parents who encourage economic independence, every student should learn and practice some basic financial principles to keep them afloat during school and prepare them for the future.

Learn the difference between wants and needs.

Setting priorities is crucial for financial success. Think about the most basic needs you have: food, clothing, housing, safety, etc. Create a list of must-haves on which you’re unwilling to compromise but be willing to make some sacrifices. Continue reading

Common Financial Emergencies That Can Appear Without Warning

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From the mundane to the catastrophic, there’s never a good time for a financial emergency. The funny thing about these emergencies, though, is the fact that they’re never surprising at the core; they’re all inevitable at some time or another, but few are prepared when it happens to them. Continue reading

How You’re Shooting Yourself In The Foot Financially

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PHOTO: SeniorLiving.Org

Making consecutively poor spending decisions can leave you drowning in a sea of debt. The following article explains the most common ways you could end up shooting yourself in the foot financially.

Making Too Many Small Purchases and ATM Foreign Withdrawals

You may be good at keeping up with big expenditures but not so good at monitoring your spending habits when making small purchases. Small purchases can quickly add up, especially when they’re made on impulse or done by habit. Continue reading

Five Tips For Resisting The Urge To Spend Frivolously

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In this day and age, spending money like water often seems like part of the American way. Unfortunately, it’s this kind of frivolous spending that gets so many people deep in debt and cripples their ability to save money for their future security.

In order to combat the problem, it’s necessary to rethink the way you spend money. Here are some tips that can help you achieve this. Continue reading

Keeping The Debt Hounds At Bay

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Maybe you’re a new graduate embarking on your first full-time job. Or, after much effort, you’ve managed to pay off all your credit card charges. Or you’ve just gotten a big raise, so that your income comfortably exceeds your expenses.

Isn’t it great not having to worry either about having to pay interest or whether you’ll have the money to meet next month’s bills? If you want to keep yourself in your happy state, follow these tips for staying debt-free: Continue reading

Personal Finance Goals For Every Stage Of Life

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Whether you are a teenager or about to retire, it is important that you are able to manage your money effectively. Although your financial goals may be different as you get older, it is never too early or too late to learn and master sound fiscal habits.

Let’s take a look at some common financial goals and how you can achieve them. Continue reading

Three Horrible Financial Decisions to Avoid This Summer

One of the most shocking pieces of information that most people eventually discover is that their spending habits can literally control their lives.

While most people want to believe that they have full power over what they spend, habits are what truly set the pace for what ends up being spent or saved. Realizing that habits have a dramatic impact on how much money we have is the first step in taking control, but after that, critical decisions must be made in order to create a life of wealth and freedom.

This summer, avoid making terrible financial decisions by understanding how to get rid of the worst of the offenders. The following three bad decisions are some of the worst that can be made, and anyone would be wise to eliminate them from their day-to-day habits. Continue reading

Financial Tips For Recent Grads

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Great financial advice is like a golden egg, you need to treasure it. For recent graduates, this concept rings even more true.

Many financial analysts point out that recent graduates tend to be extremely reckless with their finances after they graduate. Most find themselves the victims of lifestyle inflation, poor money habits, and burdensome debt.

Rather than suffocate yourself with the same financial woes as your peers, the advisable thing to do is to read excellent financial advice and to simply follow it. By taking the initiative, you’ll find yourself less stressed and ahead of the game.

Live Within Your Means

First and foremost, you should always live within your means.

Landing that $50,000 a year position does not mean that purchasing a new car, a condo, and new furniture is a sound financial decision.

To determine how much you should spend on your rent, your needs, your wants, and on your savings, financial professionals employ what is known as the 50-30-20 rule.

The rule indicates that you should regulate 50% of your take home pay to your needs, 30% to your wants, and 20% to your savings. Your “needs” is the category that includes rent, so you should take that factor into account.

Build an Emergency Fund

There is nothing wrong with living in an optimistic world, but it is also important to recognize that reality tends to come with unexpected surprises.

Your emergency fund will come in handy when you’re faced with a sudden car repair bill, a medical expense, or even that unanticipated job loss.

When building your emergency fund, your goal should be to save up at least a few thousand dollars and using your fund when you need it will prevent you from needing to rely on credit cards of financial assistance until you get back on your feet.

Credit Cards Aren’t Always the Answer

These days, the average American household has a credit card debt of nearly $16,000. This debt is the result of a financial philosophy that sets no limit upon spending.

The debt itself is also not fixed but is subject to hefty interest payments that only grow over time.

Instead of putting yourself in the unfortunate situation of credit card debt and growing interest payments, the best thing to do is to understand how credit cards work and to use your credit card to make purchases that you’ll be able to pay off.

At the end of the day, if you cannot afford something, it is best to not buy it.

Student Loan Debt is Secured Debt

Many graduates and seasoned graduates have the misconception that federal student loans are unsecured loans. An unsecured loan is a loan where there is no collateral put up, which means that if you default on your loan, there is no way for the financial institution to secure its loss.

The truth is that while you may not have put anything up as collateral for your federal student loans, the government can take steps to guarantee that it gets its money back.

If you do not pay your student loans off, you could find yourself subject to a lien on your possessions or even government deductions from your monthly paycheck.

Therefore, you should take steps to make steady and regular payments on your student loans so that you will be debt free before age 35.

Financial security is something that many Americans would trade anything for. As a recent graduate, you have the opportunity to truly start your finances on steady ground by taking the above steps.

In the long term, you’ll find that starting to work on your finances is one of the best steps you’ll ever make.

Photo: Mighty Travels / CC 2.0

Reverse Mortgages: Are You Missing Out On Free Money?

 

Investment risk and uncertainty in the real estate housing market

For many people living month to month on Social Security Income or who had once robust retirement accounts ravaged by the not-so-great recession, the reverse mortgage seems like an attractive choice. But, before you dive in there are a few things you need to know in order to make an informed decision about whether or not this is the right choice for your circumstances.

What is a Reverse Mortgage?

You may hear about other types of reverse mortgages in the marketplace today, but there is only one that is federally insured. It is called the Home Equity Conversion Mortgage, or HECM. This loan is only available through FHA approved lenders.

A reverse mortgage differs from a traditional home equity loan in that you are not required to make monthly principle or interest payments on the loan. Maturity is reached, and the loan must be repaid, when the home owner no longer lives in the home as his or her primary residence or certain other conditions, in accordance with the loan agreement, are met.

Reverse Mortgage Requirements

In order to qualify for a reverse mortgage, the home itself, along with the homeowner, must meet certain conditions.

Homeowner Requirements

  • Homeowner must be 62 years of age or older.
  • The home must be owned outright or carry a low enough balance that it can be paid off at closing with the proceeds from the reverse mortgage.
  • Homeowner must have the financial means with which to pay property taxes and insurance on the home.

Requirements for the Home

There is a little bit of flexibility when it comes to the homes themselves. Properties eligible for reverse mortgages include:

  • Single family homes
  • Two to four unit properties in which the owner occupies one unit
  • HUD-approved condominiums
  • Manufactured homes built after 1976
  • Town homes

Pros of Reverse Mortgages

There are quite a few benefits to consider when it comes to reverse mortgages, not the least of which is the easy approval for these loans. In some instances, when credit or income seems insufficient to meet the terms of the loan long-term, borrowers may be required to set aside funds in an escrow account to cover the costs of yearly taxes and insurance premiums for the home. Otherwise, approval is fairly straightforward.

Another big benefit for most seniors is the option to receive a lump sum payment or to spread the payments out over time in order to generate a steady stream of income. For those on fixed incomes, this can be extremely beneficial, just as it can benefit people who need one large payment for something like medical treatments or to make their home wheelchair or walker accessible.

No repayments necessary while the homeowners maintain the home as a primary residence.

Cons of Reverse Mortgages

While the attractiveness of a reverse mortgage is certainly attractive, there are a few considerations to keep in mind. The first consideration is a big one, or it can be. That is the cost of the reverse mortgage itself. There are many fees associated with mortgages in general include:

  • Mortgage insurance fee
  • Appraisal fee
  • Title insurance fee
  • Closing costs (which are substantially higher than with traditional mortgages)
  • Interest

The other consideration that weighs heavily upon the minds of many seniors considering reverse mortgages, as it should, is the requirement to pay back the loan, in full, if you are no longer a permanent occupant of the home. In other words, if you are required to move into an assisted care facility, then the full force of your loan will become due.

Finally, the reverse mortgage impacts how much money you leave to your heirs. While that isn’t the primary consideration for everyone considering reverse mortgages, it is important to many, and worth taking into account.

Alternatives to Reverse Mortgages

Seniors are motivated for many different reasons to consider reverse mortgages in the first place. Whether it involves tight funds for retirement, a one-time expense that is too large to easily accommodate on a fixed income, or retirement dreams gone up in smoke during the market meltdown of previous years, there are alternatives to the reverse mortgage to consider.

  • Cashing out life insurance policies.
  • Part-time employment.
  • Consulting with a financial advisor for ways to stretch your retirement.
  • Selling your home and moving into a smaller home.
  • Downsizing to one automobile rather than two.
  • Reducing expenses and creating a budget.

This isn’t to say that reverse mortgages are never a good idea. You can’t take it with you, after all. It’s simply not a decision to be taken lightly either. Keeping these things in mind will help you make the best choice for you and your family.