refinance: skipping a payment….

Greg and I are in the process of refinancing our home loan to take advantage of the lowest interest rate possible so that we can pay as much as possible towards principal and not towards interest-you know, to help us pay it off faster . We thought we had a pretty low rate 3 years ago when we purchased our house but they have dropped to historical lows so we wanted to take advantage of that. It’s part of the next step for us to get even more in tune with our finances. So we have the home inspector coming later this week. I was chatting with a friend about the whole process of refinancing and the topic of when the first payment was due came up. She mentioned that her loan officer at the bank she deals with told her that she’d have a months grace period after closing before her first payment was due and that she was excited she didn’t have to make that payment because with the holidays coming up the extra cash would be nice. A huge red flag went off inside my head as she was talking……….seriously? I thought.

Ironically, this morning I wake up and start reading thru the news and I came across and article that is talking about the same thing and confirmed my initial reaction of why skipping a loan payment is BAD BAD BAD…and could cost you thousands of dollars.

Any of you who have gone thru the process of purchasing a home or refinancing a home in the past may know a little of what I’m talking about. When it comes time to discussing when your first payment is due on the new loan, sometimes things can be very wishy washy…..and they may tell you, “oh, you get to skip this month.

Real estate transactions are confusing enough-when to make your last payment on the old loan, when is the payment due for the first loan? Skipping a payment of just $500 on a $100,000  30 year loan is like  can cost you MANY of thousands of dollars later. Besides a possible late fee if the loan officer was wrong about your posting date. So even if you are told to skip a payment and there’s no way possible to apply your payment to your loan, save the money and then when you make your first payment….add in what you have saved.

Don’t be tempted to skip a payment….If you’re spending all the time researching to find the best deal, the best interest rate, why would you cost yourself thousands of dollars by skipping a payment.

trimming your budget..

I get asked the question all the time: how do I stick to my budget? And I think that some people want to me come up with some space age new theory on how money will come out of the sky to bulk up the money you have to spend. The truth is…..if you need more money in your budget, you have to spend less. Yes, that’s right…I know it’s not what you wanted to hear, but it’s the truth. You’re going to have to cut spending SOMEWHERE.

If you aren’t willing/able to go out and find more employment ( a second job ) then you must spend less. It sounds so harsh and is obviously easier said than done because if it was so easy, no one would be in debt. There are small ways to trim your budget…..but some of them you might not like to hear. It really just depends on how bad you want it. Trust me, I’m no saint, hell, if loosing weight was easier said that done, I’d be skinny already-so I know it’s hard, I do…….but the honest truth is no one can do it but you…just like no one can exercise FOR me-I have to get off my butt myself!

Ways To Trim Your Budget:

  •  Housing: downsize or more to a smaller more affordable home. I know this sucks to hear but it may be the only way.
  •  Homeowners Insurance: trim the fat from your policy by contacting three different companies and asking them to give you the best rates for your insurance coverage and then ask to raise your deductibles which will help cut some of the costs. The difference in deductible costs you would pay if you ever had to file a claim would more than likely be offset by the amount you have saved from paying the lower premiums year after year.

    Take another look at your utilities:

  • Telephone bill-shop around for the best rates.
  • Electricity bill-keep your thermostat at 68-70 degrees, close all the vents in the unused rooms, change out the light bulbs to energy efficient bulbs and last longer
  • Water bill- don’t do half loads of laundry, turn off the water when you’re brushing your teeth or washing your hands
  • Food bill- use coupons, watch the store sales and special offers, price match when possible of the bigger ticket prices, plan your meals in advance without a plan you’ll wing it and end up spending more money, never trust the electric scanner, don’t go to the store when you’re hungry, bring a calculator to keep track of your total, cut back on the paper products you use, avoid prepared foods, buy generic or store brands, buy your food in the bulk when possible, stay out of convenience stores, leave your children at home when you shop. (just so you know…I suck at this part like WHOAH!)
  • Auto: do NOT buy a new car, the cheapest car to drive is the one your already driving, pay cash for your car when possible, when negotiating the price of the car, don’t include your old car as a trade it, sell it out right you’ll make more money. Know what price you want to pay BEFORE you go to the dealer and be willing to walk away if you don’t get it. Keeping the car you currently have in good condition is a great way to cut your budget on future repairs. Maintain your own vehicle.
  • Debt: cut up the cards, burn them, bury them. Force yourself to use checks or cash.
  • Entertainment: plan vacations on off peak seasons.
  • Clothing: buy items that are on sale, don’t get caught up with the “name brands”, buy seasonal clothing during off season, don’t buy dry cleaning fabrics, shop at factory outlets when possible, shop at consignment shops.
  • Medical: make preventative maintenance an priority, try generic drugs.

Those are just a few thing you could do…I’m sure you’re hamster wheels are already spinning and you’re just so pumped to get started <insert sarcasm>!! We’ll discuss what percentage should go into what category within your budget tomorrow! 🙂

you’re trapped..

Do you realize that as American citizens, we are among the “freest” people in the world. People have fought and died for us to have that very freedom. So what would you say if I told you………..it doesn’t matter because you’re trapped. *gasp* I know what you’re thinking…what is she talking about?

Let this sink in….we are taught how to be taught. We go thru school with the goal of graduating with good grades. THEN….we GET THE PRIVILEGE to go into student loan debt to obtain our college career.  Then when you’ve used your privilege to go to college, racked up a bunch of student loan debt (and credit card debt) you are given a piece of paper which in some ways represents security. A promise for job security…..and we all know how this pans out!

Your life is a script. In some ways it’s already written for us. We are the American Dream right?!  We are supposed to work really hard so that you can buy lots of stuff. It’s the normal script. Go to college, come out with debt, buy a house, go into debt, want that expensive purse or boots (why not yo’re’ going to get a good job so that you can afford it-someday)…you get the idea. It’s the American Dream…to own expensive STUFF so that we can show our friends and family-or people we don’t even know how well we’re doing.

Sure debt has been around for hundreds if not thousands of years-but we have perfected it. Don’t have the money-no problem, put it on your credit card, take out a loan, you can just work harder to pay for the stuff.  That would work of course if we all LOVED our jobs, we wouldn’t mind working HARDER to pay for the stuff…but the sad fact is that a very large majority of the population hates their job. So they’re working harder, longer in a job they hate so that they can pay for debts…have you ever wandered why we’re over worked and stressed?

It’s exactly why the storage companies have made so much money. We buy storage space so that we can put our stuff there so that we have room to go purchase more stuff!  So in a sense…we aren’t really FREE. We’re trapped…… by the script….and stuff.

Write your own script……..

central checking account…..

Do you still keep a check book register?  I do……I’m old school yo! Actually, it’s part of my personality to be organized about this kind of thing. I STILLLLLL carry my check book register with the neat and tidy lines in my purse. I save ALLL my receipts and when I get back to the house (or sometimes in the car) I get it out and record my purchases…using the rounding up method I described in an early post.

That register is the central account in our house. Both Greg and I have debit cards for that account and when ever we make a purchase we save the receipt and write it in the book. You’ll often hear me ask Greg, “are you caught up in the book?” We spend what we want (with in reason) but we record it in there so that we can balance it out and ALWAYS know where we stand.

It helps to “keep it real” YO! We always know where we stand it and it keeps us on budget. PLUS, I’m a small business owner, so I’m already in the habit of saving my receipts for business purposes….I guess it just leaked into our personal life!

The weird thing is, I’m usually pretty “digital” about most things..but not this. It works for me. Yes I check my online account thru my bank to monitor that there aren no funky charges or that someone didn’t steal my identity, but the bank always shows a higher number than what my register shows. Just because the bank says my checking account has X amount of dollars doesn’t mean that it’s what I ACTUALLY have available. A check might not of cleared or a transaction might not have gone thru just yet, so by having a total in my register, I realistically know where I stand.

balancing a checkbook

The act of writing it down, really makes you be intentional about your cash flow. Plus by using my checking account as the central system, I don’t spend money out of my savings accounts unless I think twice about it. We have several other savings accounts designated for travel, home improvements, etc but we don’t withdrawal or spend money out of those accounts unless it’s written in the checking register……I have to transfer the amount I want to spend into the checking account prior to the purchase (yes I do this digitally, I don’t live under a rock). I do the same with my credit card purchases. I also write those in the register so that at the end of the month, the purchases have been accounted for and I can pay them in full. I earn cash back rewards without paying interest….but that’s for a whole other post!

Although it seems complicated and that it may take a lot of time, in reality, I spend maybe 10 minutes each week on it…..and I always know where I stand! 🙂

rounding up……

So I know some people might cringe when I say this….but I’ve been doing it since I was in college and it’s worked for me. If you’re the type of person who needs everything to equal out to the exact penny-then this will not be for you. Hell, you’d have to be the type of person who likes to keep track of their check book ….are you ready for this….by ACTUALLY writing down each purchase just like in the old’en days! haha!!

I round up! What do I mean? Well, yes I’m one of THOSE people who actually write down every purchase in the check book-it’s not a dying art, I tell ya! And when I do, I round up. For example, if I went to the grocery store and purchased an item for $3.99, I’ll write $5 in the check book. If I spend $40 in gas at the gas station, when I record it in my check book, I might write $42 instead. Why? Well, it’s my way of knowing that I always have extra in my account. It’s kind of like the modern day saving change in a jar and then at the end of the year, your astonished at how much you’ve collected in the jar. All of those pennies, nickel, dimes, quarters-or in my case dollars, add up.

I originally did this in college because I wanted to be sure I wouldn’t overdraft my account. After doing it once and having to fork out $30 plus dollars, I didn’t want it to happen again. So…I figured if I rounded everything up then the total I had in my check book after balancing it out would always be MORE than what I actually thought I had. We’ve been doing it ever since. 10 years later….we have a lot of spare change in our jar!!

 

habit of saving money for kids….

It’s been a rule at our house since Mallory was born. She knows its expected and doesn’t even argue with us. For every “cash” gift she gets, whether it’s for her birthday, Christmas, or any other event……the rule is: She has to put 50% into her bank account and she gets to spend the other 50% on whatever she wants.

Grandma usually sends her a card in the mail for each holiday and inside is usually a few dollars…sometimes $5 if she’s lucky-and it’s ALWAYS in dollar bills..haha. Without hesitating, Mallory will divide up the money, hand it over and say, “This goes in the bank”. I’ve had friends and relatives tell us we are so mean, that a kid should be able to spend any money they receive as a gift…..but I beg to differ. I believe we are teaching her early budgeting and money skills but more importantly, we are creating the habit of “saving”. She’s 8 and has more money in the bank than some adults I know….all because it’s become a habit…that I hope she carries into her adult life!

Here we are taking her money to the bank. She gets excited because our bank has a rewards system for each milestone you reach, you get a small prize.

s & t bank mula account for kids
s & t bank mula account for kidsDo you have any lessons you’re teaching your children? I’d love to hear them in the comments below!

my first car…

I can’t help but to laugh (REALLY HARD) when I think back about it. Imagine this…an off white 1982 Renault with blue interior and fuzzy snow leopard seat covers.  YEAHHH BABY!!

1982 Renault

My friends can tell you all kinds of hilarious stories about this car. My mom forked out a whopping $175 (which I paid her back for in payments) for it from a man that worked with my Grandfather. He apparently used it as a “beater car” to get back and forth to work. And trust me, it stood up to it’s nick name. It was the kind of car that you parked a few blocks away and then walked to where you were going so that no one would see you. As a matter of fact, I remember one time specifically my senior year of high school that our graduating class was working on the homecoming float and I parked (what seemed like) miles away and then walked the rest of the way. To put it bluntly…..I was so embarrassed by that car, but out of the group of friends, I was the only one with a car so it got us around to the mall, to work and to hang out with friends…well almost got us there-b/c you know we had to walk some of the way!!! haha!!

The car finally died about a year later IN MY FRIEND MARIA’S DRIVEWAY! No literally, bolts falling out as we were trying to back out. It was one of those moments where the car started jerking, smoking and then you could hear the motor falling out…..dead silence…..then….insane laughter. I remember calling my Dad that day and saying “you’ll have to come pick me up, my car fell apart!”.  I  honestly can’t remember how we got to work that day.

So even though it wasn’t a brand new car with shiny rims and a state of the art radio……we had so many memories…but most importantly…no car payment. I paid the difference on my mom’s insurance policy after I had been added but I had no monthly payments on a depreciating car. THIS is when I realized, “hey, this is kinda nice” and I could work my job and pay myself money in my savings account instead of paying the bank money. I made the decision that I would NEVER have a car payment, which meant, I would never buy a brand new vehicle, never lease and that if I didn’t have the money to pay cash for a car, I wouldn’t buy it. I realized I never wanted to be servant to the bank. Seriously consider how much extra cash flow you’d have to invest somewhere else in your budget-like retirement or saving for your home, etc. if you weren’t a servant to the bank!

From that point forward, I started a “car fund” with in my budget and would save a little here and a little there until I had a few thousand dollars saved up to purchase a “new to me” car. Until this past year, none of my cars cost more than $2,500. I paid $2,500 cash for my car, had no car payment, owned it free and clear and drove them for 2-3 years……I’d say I got my money worth. If I had been paying $200 a month for 3 years, that’s roughly $7,200. I saved over $4,000 by buying a “new to me” car. I know what you’re thinking….well it wasn’t under warranty. Sure I may have had to purchase new tires, maybe new brakes, or whatever other tune up kind of things and one year I even put in a new transmission. But if you do the math if I had been making payments I would have paid $7,200. I’ll spend a few thousand dollars making the fixes without the warranty to save a few thousand. 🙂 And let’s be honest, if you can’t afford the payments on a car for a 3 year period of a loan…..you can’t afford the car you want to buy. You should never take out a loan for a car for more than 3 years.

Now, don’t get me wrong, I’m not suggesting you go out and purchase an unreliable $175 car, but think about this….purchasing a “previously owned” vehicle. WHY?   Let’s say you purchased a modest $15,000 car. The minute you drive it off the lot, you’d be throwing $3,750 out the window- the very minute minute your tires hit the road- AND you’re still expected to pay that back over the life time of the loan you took out (which a whole other topic). Your car depreciated 25% the minute you drove it off the lot…yep, sounds like a GREAT deal to me! <insert sarcasm> BUT you’re thinking….they are offering me zero percent financing for X amount of years and I’ll have that paid off before then. Don’t be fooled, you’re still paying the interest, they have just factored it into the total price they sold it to you for. It’s the same with the “Buy Here Pay Here” lots. By the time you paid all of your payments, you’ll have paid two to four times the retail cost. WHAT AN AWESOME DEAL!!!

You know that feeling of driving a brand new car off the lot, anxious to show your friends and family-or better yet, looking for somewhere to go just to be able to drive it. It’s shinny and with lots of gadgets and it smells so clean. Well, I promise THAT feeling wears off after you spill a few coffees, don’t have the money for the payment or someone scratches it with their shopping cart.

I made a promise to myself back in my senior year of high school…I will NEVER buy a brand new vehicle EVER! Even if I’ve won the lottery and have millions of dollars to spend, I don’t need the status symbol of a new car to prove anything to anyone. Besides, we’re more into the classic vintage cars anyways! tee he he!

Here’s some food for thought: 80% of Millionaires drive “previously owned” vehicles. Millionaires got to where they are today partly because they know where they can save a dollar without having to sacrifice anything. Granted, the second-hand cars of millionaires might cost more than your home, but saving money is saving money. There’s nothing wrong with driving a second-hand car.