A Brief History of Stock Exchanges

February 19, 2020

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Luis Puente

Luis Puente

Financial Education

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Farmers Branch, TX 75234

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February 5, 2020

Student Loans: avoid them or use them the smart way?

Student Loans: avoid them or use them the smart way?

Going to college can be a great way to invest in your future and get the training and education you need to thrive in the modern job market.

But we’ve all heard the horror stories of students saddled with thousands in loans that they struggle to pay back, sometimes for years. Student loan debt is often the most pressing financial issue for college students and recent grads.

So how do you take advantage of the benefits of a college education without burdening your future with years of debt? Here are some tips to help you avoid high student loan payments and pay your student debt off more quickly after graduation.

Work through school
The days of working a minimum wage job to put yourself through school seem to be over. However, working enough to cover at least some of your books and living expenses may make a huge dent in the amount of money you’ll have to borrow to graduate.

Work-study programs on campus are often good options, as they are willing to work around your class schedules. Off-campus part-time jobs can be a good option as well, and may offer better pay.

Live as cheaply as possible
Everyone knows the cliché of the broke college student existing on nothing but ramen noodles. While not many people would recommend trying to live on nutritionless soup every day, you should be able to find ways to cut your cost of living to reduce the amount of money you need to borrow to sustain your lifestyle.

Try living off campus with family or roommates and packing sandwiches instead of paying expensive meal tickets and dorm fees. Bike, walk, or take public transportation to avoid parking. Take advantage of free on-campus healthcare, counseling, free food events, free entertainment, and more so you can spend as little as possible on living campus life.

It’s okay to go out and have fun sometimes, but don’t borrow from your future in order to live beyond your means now.

Try to avoid unsubsidized loans
Subsidized loans are offered by the Department of Education at lower interest than many private bank loans, and they do not begin accruing interest until after you graduate. Take advantage of these loans first and try to avoid the unsubsidized private loans which begin accruing interest immediately and often have a higher rate. (1)

Be mindful of your future payments
It can be tempting to expect that you’ll have a great job earning plenty of money and time to pay back the student loans you’ve accumulated. But each time you take out a loan, you make your future payments higher and your payback time longer. Be sure to look at the numbers of how much your payment will be every time you up your loan amounts. Can you realistically envision yourself being able to pay that amount every month in just a few years? If not, it may be time to rethink the student loans you’re racking up, and possibly even reconsider your degree or career plan.

Go to trade school, earn an apprenticeship, or work in your chosen field before you commit to a college degree in that field
It’s not a popular topic with many high school guidance counselors, but learning a trade and finding a well-paying job without a degree is not only possible but a great option. Try finding an internship or trade school where you could get training for much less money than a university.

Consider community colleges and state schools
It’s a common misconception that private, ivy league, “big name” colleges are far superior to state schools and automatically the better option. However, state schools can often have great programs for far less money. Also, if you choose a local school, you can live close to your family support system while working through college. It’s possible to have a very successful career with a college degree from a state school, and be more financially stable in your future than someone struggling to pay off loans from an expensive private college.

Likewise, an associate’s degree from a community college can save money toward your bachelor’s degree, allowing you to pay far less than you would even to a state school. Just make sure your degree and credits will transfer to the university of your choice.

Find a graduate program that pays YOU
If you choose to pursue a Masters or Doctorate degree, try to find a program with a teaching assistant position, fellowship, or some other option for getting reduced tuition or getting paid to get the work experience you need.

Resist the urge to move up in lifestyle when you graduate
When you scrimp your way through school, it’s tempting when you get your first degree-related job to celebrate by loosening the reins on your frugal ways and start living it up as a young professional.

It’s great to reward yourself, and you need to adapt to your new financial situation (you may need a new wardrobe or a better car), but resist going too crazy with all the “extra” money a new job in your field can make you feel like you have. You should still live on a budget and manage your money carefully to pay off your student loans as soon as possible so you’re better prepared to move into the next phase of life unencumbered by a mountain of debt. Make paying back debt a priority, and pay extra when you’re able.

Education can be expensive and in some cases impossible to get without loans. But with frugality and an eye toward the future, you’ll be better prepared to get the education you need to succeed in life without being encumbered by debt for years. The high cost of education combined with the high cost of living can make a college education more of a financial burden for today’s students than ever before. By thinking outside the box and carefully prioritizing your educational goals—balanced with your finances—you can pursue your dream degree and have a better chance at a stable financial future.

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  1. https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized#subsidized-vs-unsubsidized

January 22, 2020

Why Financial Literacy is Important

Why Financial Literacy is Important

There’s a good chance that you’re facing a financial obstacle right now.

Maybe you’re trying to pay down some credit card debt, facing a meager retirement fund, or just struggling day-to-day to make ends meet.

It’s easy to feel overwhelmed and helpless in those situations, so much so that you might think learning a little more about how to manage your money wouldn’t make much difference right now.

But adopting a few key financial tips is often the best and simplest step towards taking control of your paycheck and finding some peace of mind. Here are some reasons why financial literacy is an essential skill for everyone to master, and a few tips to help you get started!

It helps you overcome fear
Let’s face it; money can seem scary. Mounting loans, debt, interest, investing—it can all be confusing and overwhelming. It may feel easier to ignore your finances and live paycheck to paycheck, never owning up to not-so-great decisions. But financial literacy gets right to the root of that fear by making things clear and simple. It empowers you to identify your mistakes and shows options to fix them.

Facing a problem is much easier once you understand it and know how to beat it. That’s why learning about money is so important if you want to start healing your financial woes.

It lets you take control of your finances
Financial literacy does more than just help you address problems or overcome obstacles. It gives you the power to stop being a victim and take control. You can start investing in your future with confidence instead of reacting to emergencies or going into deeper debt. That means building wealth and living life on your terms instead of someone else’s. In other words…

It helps you realize your dreams
Managing money isn’t about immediately seeing a bigger number in your bank account. It’s about having the resources and freedom to do the things you care about. Maybe that means taking your significant other on a dream vacation, giving more to a cause you care about, or providing your kids with a debt-free education.

Where to start
Acknowledging that you need to learn more can be the hardest step. That’s why meeting with a financial advisor is something you may consider. Calculate how much you spend versus how much you make and write down some financial goals. Then find a time to discuss your next steps. You may also want to sign up for a personal finance class that will cover things like budgeting and saving.

Financial literacy is one of the most important skills you can develop. Improving your financial education takes some time but it doesn’t have to be difficult. Give me a call. I’d love to sit down and help you learn more about ways you can take control of your future!

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January 15, 2020

7 Tips for Talking to Your Partner About Money

7 Tips for Talking to Your Partner About Money

Dealing with finances is a big part of any committed relationship and one that can affect many aspects of your life together.

The good news is, you don’t need a perfect relationship or perfect finances to have productive conversations with your partner about money, so here are some tips for handling those tricky conversations like a pro!

Be respectful
Respect should be the basis for any conversation with your significant other, but especially when dealing with potentially touchy issues like money. Be mindful to keep your tone neutral and try not to heap blame on your partner for any issues. Remember that you’re here to solve problems together.

Take responsibility
It’s perfectly normal if one person in a couple handles the finances more than the other. Just be sure to take responsibility for the decisions that you make and remember that it affects both people. You might want to establish a monthly money meeting to make sure you’re both on the same page and in the loop. Hint: Make it fun! Maybe order in, or enjoy a steak dinner while you chat.

Take a team approach
Instead of saying to your partner, “you need to do this or that,” try to frame things in a way that lets your partner know you see yourself on the same team as they are. Saying “we need to take a look at our combined spending habits” will probably be better received than “you need to stop spending so much money.”

Be positive
It can be tempting to feel defeated and hopeless that things will never get better if you’re trying to move a mountain. But this kind of thinking can be contagious and negativity may further poison your finances and your relationship. Try to focus on what you can both do to make things better and what small steps to take to get where you want to be, rather than focusing on past mistakes and problems.

Don’t ignore the negative
It’s important to stay positive, but it’s also important to face and conquer the specific problems. It gives you and your partner focused issues to work on and will help you make a game plan. Speaking of which…

Set common goals and work toward them together
Whether it’s saving for a big vacation, your child’s college fund, getting out of debt, or making a big purchase like a car, money management and budgeting may be easier if you are both working toward a common purpose with a shared reward. Figure out your shared goals and then make a plan to accomplish them!

Accept that your partner may have a different background and approach to money
We all have our strengths, weaknesses, and different perspectives. Just because yours differs from your partner’s doesn’t mean either of you are wrong. Chances are you make allowances and balance each other out in other areas of your relationship, and you can do the same with money if you try to see things from your partner’s point of view.

Discussing and managing your finances together can be a great opportunity for growth in a relationship. Go into it with a positive attitude, respect for your partner, and a sense of your common values and priorities. Having an open, honest, and trust-based approach to money in a relationship may be challenging, but it is definitely worth it.

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January 13, 2020

How To Talk To Your Spouse About Money

How To Talk To Your Spouse About Money

Family finances isn’t always a fun topic.

But getting in the habit of discussing money early on in your relationship may help pave the way for a smoother future. Whether or not you see eye to eye, learning each other’s spending habits and budgeting styles can help avoid any financial obstacles in the future. Below are some tips on getting started!

Talk about money regularly
One of the best ways to approach a conversation about money is to decide in advance when you’re going to have it, rather than springing it on your spouse out of the blue. Family budgeting means making the time to talk upfront and staying transparent about it on a consistent basis. If you and your spouse choose to set a monthly or annual budget, commit to sitting down and reviewing family expenses at the end of each month to see what worked and what didn’t.

Start a budget
It’s easy to feel overwhelmed if you don’t have a family budget and don’t know where to start. However, with the development of mobile applications and online banking, you can now more easily track your spending habits to find ways to cut unnecessary expenses. For example, if you see that you’re going out to dinner most nights, you can try replacing one or two of those evenings out with a home cooked meal. Small changes to your routine can make saving easier than you might have thought!

Remember your budgeting goals
Budgeting comes down to a simple question—how will these money decisions affect the happiness of my family? For example, you might need to ask yourself if taking an awesome vacation to your favorite theme park will give your family more happiness than fixing your minivan from 2005. Can’t do both? You aren’t necessarily forgoing the vacation to fix your car; instead, you might need to invest in your car now rather than potentially letting a problem worsen. You might then decide to rework your budget to set aside more money every month to take the trip next year.

The key is that talking to your spouse about money may actually become more about talking to them about your goals and family. When you put it that way, it may be a much more productive and rewarding conversation!

Even if you haven’t discussed these things before you walked down the aisle, it’s never too late to sit down with your spouse. This topic will continue over time, so talking about your financials with your partner as you approach new milestones and experience different life events as a family can help you financially prepare for the future.

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December 16, 2019

How to Make Better Financial Decisions

How to Make Better Financial Decisions

Numbers never lie, and when it comes to statistics on financial literacy, the results are staggering.

Recent studies indicate that 76% of Millennials don’t have a basic understanding of financial literacy. Combine that with having little in savings and mountains of debt, and you have the ingredients for a potential financial crisis.

It’s not only Millennials that lack a sound financial education. The majority of American adults are unable to pass: “To be financially literate is to have the knowledge, skills, and confidence to make responsible financial decisions that suit our own financial situations.”

Making responsible financial decisions based on knowledge and research are the foundation of understanding your finances and how to manage them. When it comes to financial literacy, you can’t afford not to be knowledgeable.

So whether you’re a master of your money or your money masters you, anyone can benefit from becoming more financially literate. Here are a few ways you can do just that.

Consider How You Think About Money
Everyone has ideas about financial management. Though we may not realize it, we often learn and absorb financial habits and mentalities about money before we’re even aware of what money is. Our ideas about money are shaped by how we grow up, where we grow up, and how our parents or guardians manage their finances. Regardless of whether you grew up rich, poor, or somewhere in between, checking in with yourself about how you think about money is the first step to becoming financially literate.

Here are a few questions to ask yourself:

  • Am I saving anything for the future?
  • Is all debt bad?
  • Do I use credit cards to pay for most, if not all, of my purchases?

Pay Some Attention to Your Spending Habits
This part of the process can be painful if you’re not used to tracking where your money goes. There can be a certain level of shame associated with spending habits, especially if you’ve collected some debt. But it’s important to understand that money is an intensely personal subject, and that if you’re working to improve your financial literacy, there is no reason to feel ashamed!

Taking a long, hard look at your spending habits is a vital step toward controlling your finances. Becoming aware of how you spend, how much you spend, and what you spend your money on will help you understand your weaknesses, your strengths, and what you need to change. Categorizing your budget into things you need, things you want, and things you have to save up for is a great place to start.

Commit to a Lifestyle of Learning
Becoming financially literate doesn’t happen overnight, so don’t feel overwhelmed if you’re just starting to make some changes. There isn’t one book, one website, or one seminar you can attend that will give you all the keys to financial literacy. Instead, think of it as a lifestyle change. Similar to transforming unhealthy eating habits into healthy ones, becoming financially literate happens over time. As you learn more, tweak parts of your financial routine that aren’t working for you, and gain more experience managing your money, you’ll improve your financial literacy. Commit to learning how to handle your finances, and continuously look for ways you can educate yourself and grow. It’s a lifelong process!

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December 4, 2019

Why It's a Good Idea to Track Your Budget

Why It's a Good Idea to Track Your Budget

So you’re finally on board with this whole budget thing.

You’ve set up your plan. Now you’ve got a budget complete with average historical spending by category. You’ve discussed it with family members, roommates, and anyone else to whom the budget applies. You’ve checked off all the boxes. Yet somehow – at the end of the month, the math isn’t working out. The budget is busted.

What went wrong? Life is full of mysteries, like who left an empty box of cereal in the cupboard? Where are my glasses? Why won’t the baby go to sleep? And, where did all my money disappear to?

For a budget to work well, you’ll need to track it regularly and often. Many times, the reason you made a budget in the first place is that there’s very little room for error with saving and spending your money. A budget’s got to be loved and nurtured, kind of like a garden. Sometimes you have to get out there and pull some weeds or dig up a few rocks to keep it thriving.

Making Your Budget
To make your budget (if you haven’t already), there are several methods you can use. Good old pencil and paper never goes out of style. And it might help you see where you stand a little faster than potentially losing your initial momentum by learning a new “app”. Specialized software or online budgeting tools can be great – but they can also be fiddly if you’re not used to them. Rather than trying to figure out complicated menus and search for hidden buttons from the get-go, you might want to try it on paper first to work through your budget and establish a limit for each category of spending. Writing out your expenditures by hand has the added benefit of helping you face reality. It hurts a little more than automated solutions if you have to write the numbers down in black and white. If you’re good with spreadsheets, Microsoft Excel or Google Sheets can also be used to quickly build a budget without a frustrating learning curve.

Tracking Your Budget
Technology can be friend or foe in the home budget process. Even though you may have started out on paper, when it comes to tracking your spending for the long haul and in real time, technology is definitely a friend.

Mobile apps come in two forms: free and not free. We’ll focus on free apps for now because it’s consistent with the goal of keeping your spending under control.

Mint.com is owned by Intuit, famous for Quicken and Quickbooks software, and makes budget tracking very simple. Mint links to your bank account and other accounts you’d like to track, so you can see a complete view of your finances at a glance either on your mobile device or on your computer. Budgets are set automatically for each category but can be changed easily. Spending and income are also automatically tracked and categorized so you can view your progress – including budget amounts remaining for the month. Cash purchases can be added from the home screen.

Another good option is Clarity Money, which tracks spending by category but also provides an easy way to cancel subscriptions and access your free VantageScore Credit Score (by Experian). Clarity Money was featured by Google Play as a “Best of 2017” and is also available for iOS.

Paper or spreadsheet methods help to make the budgeting process more tangible. Automated tracking makes it easy to monitor your progress against your budget – and to maybe think twice about spending on impulse.

The important thing is to think of your budget like a garden – once you have it planned and laid out, it’s going to take regular maintenance to ensure it stays beautiful.

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November 27, 2019

Allowance for Kids: Is It Still a Good Idea?

Allowance for Kids: Is It Still a Good Idea?

Perusing the search engine results for “allowance for kids” reveals something telling: The top results can’t seem to agree with each other.

Some finance articles quote experts or outspoken parents hailing an allowance, stating it teaches kids financial responsibility. Others argue that simply awarding an allowance (whether in exchange for doing chores around the house or not) instills nothing in children about managing money. They say that having an honest conversation about money and finances with your kids is a better solution.

According to a recent poll, the average allowance for kids age 4 to 14 is just under $9 per week, about $450 per year. By age 14, the average allowance is over $12 per week. Some studies indicate that, in most cases, very little of a child’s allowance is saved. As parents, we may not have needed a study to figure that one out – but if your child is consistently out of money by Wednesday, how do you help them learn the lesson of saving so they don’t always end up “broke” (and potentially asking you for more money at the end of the week)?

There’s an app for that.
Part of the modern challenge in teaching kids about money is that cash isn’t king anymore. Today, we use credit and debit cards for the majority of our spending – and there is an ever-increasing movement toward online shopping and making payments with your phone using apps like Apple Pay, Android Pay, or Samsung Pay.

This is great for the way we live our modern, fast-paced lives, but what if technology could help us teach more complex financial concepts than a simple allowance can – concepts like how compound interest on savings works or what interest costs for debt look like? As it happens, a new breed of personal finance apps for families promises this kind of functionality.

FamZoo is popular, offering prepaid cards with a matching family finance app for iOS and Android. Prepaid cards are a dime a dozen but FamZoo’s card and app do much more than just limit spending to the prepaid amount. Kids can earn interest on their savings (funded by parents), set budgets according to categories, monitor their account activity with useful charts, and even borrow money – complete with an interest charge. Sounds a bit like the real world, doesn’t it? FamZoo can be as simple or as feature-packed as you’d like, making it a good match for kids of any age.

Money habits are formed as early as age 7. If an allowance can teach kids about saving, compound interest, loan interest, and budgeting – with a little help from technology – perhaps the future holds a digital world where the two sides of the allowance debate can finally agree. As to whether your kids’ allowance should be paid upon completion of chores or not… Well, that’s up to you and how long your Saturday to-do list is!

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October 16, 2019

Tips on Managing Money for Couples

Tips on Managing Money for Couples

Couplehood can be a wonderful blessing, but – as you may know – it can have its challenges as well.

In fact, money matters are the leading cause of stress in modern relationships. The age-old adage that love trumps riches may be true, but if money is tight or if a couple isn’t meeting their financial goals, there could be some unpleasant conversations (er, arguments) on the bumpy road to bliss with your partner or spouse.

These tips may help make the road to happiness a little easier.

1. Set a goal for debt-free living. Certain types of debt can be difficult to avoid, such as mortgages or car payments, but other types of debt, like credit cards in particular, can grow like the proverbial snowball rolling down a hill. Credit card debt often comes about because of overspending or because insufficient savings forced the use of credit for an unexpected situation. Either way, you’ll have to get to the root of the cause or the snowball might get bigger. Starting an emergency fund or reigning in unnecessary spending – or both – can help get credit card balances under control so you can get them paid off.

2. Talk about money matters. Having a conversation with your partner about money is probably not at the top of your list of fun-things-I-look-forward-to. This might cause many couples to put it off until the “right time”. If something is less than ideal in the way your finances are structured, not talking about it won’t make the problem go away. Instead, frustrations over money can fester, possibly turning a small issue into a larger problem. Discussing your thoughts and concerns about money with your partner regularly (and respectfully) is key to reaching an understanding of each other’s goals and priorities, and then melding them together for your goals as a couple.

3. Consider separate accounts with one joint account. As a couple, most of your financial obligations will be faced together, including housing costs, monthly utilities and food expenses, and often auto expenses. In most households, these items ideally should be paid out of a joint account. But let’s face it, it’s no fun to have to ask permission or worry about what your partner thinks every time you buy a specialty coffee or want that new pair of shoes you’ve been eyeing. In addition to your main joint account, having separate accounts for each of you may help you maintain some independence and autonomy in regard to personal spending.

With these tips in mind, here’s to a little less stress so you can put your attention on other “couplehood” concerns… Like where you two are heading for dinner tonight – the usual hangout (which is always good), or that brand new place that just opened downtown? (Hint: This is a little bit of a trick question. The answer is – whichever place fits into the budget that you two have already decided on, together!)

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September 9, 2019

The Cost of Goodbye

The Cost of Goodbye

The emotional cost of losing a loved one can’t be quantified, and knowing how to say goodbye can’t be taught so much as learned. It can be a long and difficult road for many.

Offsetting the financial aspect of that struggle can be done. Not through gimmicks or escapism, but through a real, tangible solution: Final expense plans.

A traditional funeral can cost up to $10,000. If that number seems a bit outrageous, look at how quickly some of the basic items and services can add up:

  • Cost of the grave site: $1,000
  • Cost to dig the grave: $600
  • Cost of a casket: $2,300
  • Cost of a grave liner/outer burial container: $1,000
  • Cost of a headstone: $1,500

That’s already $6,400… and says nothing of payment of mortician’s services, use of the funeral home, the fee for the funeral director, the cost of flowers, and more details that one never thinks about until they’re in a position where they need to think about it. These costs will vary by geographic location, but one thing you can count on is that the emotional cost you or your loved ones experience later could be compounded with financial cost that could be avoided with a bit of careful preparation now.

In the face of losing someone you love, finances might be the last thing on your mind. With a solid final expense plan, you can keep it that way.

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August 12, 2019

The Black Hole of Checking (Part 2)

The Black Hole of Checking (Part 2)

Previously on “The Black Hole of Checking”…

In Part 1, we learned that any object pulled into a black hole will be stretched into the shape of spaghetti through a process called – wait for it – spaghettification. If you threw your shoe into it, the black hole’s gravity would stretch and compress your footwear into an unimaginably thin leather noodle as it was pulled deeper and deeper into the hole. Your shoe would be unrecognizable by the time gravity had its way.

The same thing can happen to the money in your checking account. Having a child, replacing an old automobile with something newer and more reliable, or taking a last-minute trip to see the grandparents in Florida over the holidays, can put a strain on your finances and stretch your reserves farther than you might have anticipated. As new bills create a bigger and bigger hole in your budget, your financial strategy may become something you don’t recognize.

Here in Part 2, let’s talk about how assigning an identity to your money can keep your financial goals on track, and help reduce the stretching of finite resources.

For example, say you keep all of your money in your checking account. Simple is better, right? If you want to go on a family vacation, you’ll just withdraw the funds from your account. Paying in cash to secure a “great” package deal up front? You’re all over that. But what happens if you pick up some souvenirs for Uncle Bob and Aunt Alice? Hmmm…if you get something for them you’ll have to get something for Greg and Susan too. (You’ll never make that mistake again.) And you just have to try that chic little cafe that you read about – you may never pass this way again. (But how can they get away with charging that much for a mimosa?!) Buy One, Get One all day pass at “The Biggest Miniature Museum in the World”? Let’s do it!

When you’re on vacation – having fun and enjoying yourself – it might be hard to resist taking advantage of unique experiences or grabbing those unusual gifts you didn’t account for. On the other hand, you may have no problem being thrifty when travelling, but what if someone gets sick or injured and needs hospital care on the road, or the car breaks down, or there is unexpected bad weather and you have to stay an extra day or two at the hotel?

After it’s all said and done, when you return home from your fun-filled trip, you may find a gaping hole where you had a pile of cash at the beginning of the month. If you had given your money a specific role before you planned your vacation, you may not have had such a shock when you got home – and you can enjoy your memories knowing you stayed on track with your financial goals.

Give your money identity, purpose, and the potential to grow by separating it into designated accounts. Try these 3 for starters:

1. Emergency Fund. Leaky roof? Flat tire? Trip to the emergency room? Maybe you’re great at resisting impulse buys (like those fabulous shoes you spied the other day), but sometimes things happen that are out of your control. Your emergency fund is for situations like these. Unexpected, unplanned-for expenses can derail a financial strategy very quickly if you’re not prepared.

The most important thing to keep in mind about this account? Do. Not. Touch. It. Unless there’s an emergency, of course. Then replace the money in the account as quickly as possible until it’s fully funded again.

How much should you keep in your emergency fund? A good rule of thumb is to shoot for at least $1,000, then build it to 3-6 months of your annual income. However much you decide suits your financial goals, just make sure you aren’t dipping into it when you don’t have an emergency. (Note: Grabbing a great pair of heels on sale is not an emergency.)

2. Retirement Fund. If you want to retire at some point (and most of us do), this one is a no-brainer. Odds are you’ve already begun to set aside a little something for the day you can trade in your suit and tie for a Hawaiian shirt and a pair of flip-flops, but is your retirement fund in the right place now? Unlike a day-to-day checking account with a very low or non-existent interest rate, your retirement fund should be in a separate account that has some power behind it. You’re taking the initiative to put away money for your future – get it working for you! Your goal should be to grow your retirement fund in an account with as high of an interest rate as you can find.

3. Fun Fund. This category may seem frivolous if you’re trying to stick to a well-structured financial plan, but it’s actually an important piece that can help make your budget “work”! Depending on your priorities, you might contribute a little or a lot to this account, but making some room for fun might make it more palatable to save long-term.

You might try setting aside 10% of your paycheck for fun and entertainment and see how that works – is that too much or not enough? Bonus: this is easy to calculate each month. If you’re bringing in $2,000 per month, put no more than $200 in your Fun Fund.

What you do with your Fun Fund is your choice. Will it be more of a vacation fund or a concert fund? A wardrobe fund or a theme park fund? It’s all up to you. And when the rest of your money has a purpose and is growing for your future, you might feel less guilty about snagging those hot shoes you’ve had your eye on when they finally do get marked down.

Don’t let your goals and your money get lost in a black hole of coulda, woulda, shoulda. What kind of purpose do you want to give your money? I can help!

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August 5, 2019

Worry Once. Suffer Twice.

Worry Once. Suffer Twice.

If you Google “how to be financially independent,” over 4 million search results come back.

And for a good reason: People are really worried about their finances. Last year, 76% of Americans experienced some kind of financial worry.

Do any of these top 5 concerns feel true for you?

1. Health Care Expenses/Bills – 35%
2. Lack of Emergency Savings – 35%
3. Lack of Retirement Savings – 28%
4. Credit Card Debt – 27%
5. Mortgage/Rent Payments – 19%

If worrying means that you suffer twice, millions of people are suffering twice over their finances.

What kind of double-suffering are you experiencing – and are you ready for a way out?

The best way to learn and achieve financial independence is with someone who already knows – an ally to walk the road with you. Someone who has been where you are. Someone with the tools to help you. Contact me today, and together we can get you moving towards financial independence – and some peace of mind.

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July 8, 2019

How to Avoid Financial Infidelity

How to Avoid Financial Infidelity

If you or your partner have ever spent (a lot of) money without telling the other, you’re not alone.

This has become such a widespread problem for couples that there’s even a term for it: Financial Infidelity.

Calling it infidelity might seem a bit dramatic, but it makes sense when you consider that finances are the leading cause of relationship stress. Each couple has their own definition of “a lot of money,” but as you can imagine, or may have even experienced yourself, making assumptions or hiding purchases from your partner can be damaging to both your finances AND your relationship.

Here’s a strategy to help avoid financial infidelity, and hopefully lessen some stress in your household:

Set up “Fun Funds” accounts.

A “Fun Fund” is a personal bank account for each partner which is separate from your main savings or checking account (which may be shared).

Here’s how it works: Each time you pay your bills or review your whole budget together, set aside an equal amount of any leftover money for each partner. That goes in your Fun Fund.

The agreement is that the money in this account can be spent on anything without having to consult your significant other. For instance, you may immediately take some of your Fun Funds and buy that low-budget, made-for-tv movie that you love but your partner hates. And they can’t be upset that you spent the money! It was yours to spend! (They might be a little upset when you suggest watching that movie they hate on a quiet night at home, but you’re on your own for that one!)

Your partner on the other hand may wait and save up the money in their Fun Fund to buy $1,000 worth of those “Add water and watch them grow to 400x their size!” dinosaurs. You may see it as a total waste, but it was their money to spend! Plus, this isn’t $1,000 taken away from paying your bills, buying food, or putting your kids through school. (And it’ll give them something to do while you’re watching your movie.)

It might be a little easier to set up Fun Funds for the both of you when you have a strategy for financial independence. Contact me today, and we can work together to get you and your loved one closer to those beloved B movies and magic growing dinosaurs.

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May 8, 2019

What is your #1 financial asset?

What is your #1 financial asset?

What is your #1 financial asset? It’s not your house, your retirement fund, or your rare baseball card collection gathering dust.

Your most valuable financial asset is YOU!
Today – Labor Day, the unofficial last day of summer – let’s look at ways you can develop your skills and outlook in the workforce as we move from summertime vacation mode into finishing 2018 strong.

You might be savvy at home improvement, you might be a whiz with your finances, or you might have the eye to spot a hidden treasure at a yard sale, but how do you increase your value as a laborer in the workforce? One of the top traits of successful people is that they come up with a plan and they execute. Waiting for things to happen or taking the crumbs life tosses their way isn’t on their to-do list. Whether you’re dreaming of a secure future for yourself and your family, or if you want to build a career that enables you to help others down the road (or both!), the path to your goal and how fast you get there is up to you.

Increase your value as an employee
Working for someone else doesn’t have to feel like a prison sentence. In a recent study, nearly 60% of entrepreneurs worked full time as an employee for someone else while planning and building their own business on the side. Being employed is a chance to learn alongside experienced mentors, and prime time to experiment with how you can best add value. In many cases, successful entrepreneurs spent their time in the workforce amassing a wealth of information on how businesses are run, making mental notes on what doesn’t work, and practicing what can be done better.

View your time as an employee as an opportunity to hone your problem solving skills. It’s a mindset – one that can make you a more valuable employee and prepare you for great things later. Being seen as a problem solver can grant you more opportunity for promotions, pay increases, greater responsibility, and perhaps most importantly, open up more chances for life-enriching experiences.

Build your financial strategy
While you’re working to increase your value as a laborer, you’ll benefit from steady footing before taking your next big step. This is where building a solid financial strategy comes into play. Nearly everyone has the potential to be financially secure. Where most find trouble is often due to not having a plan or not sticking to the plan. A few simple principles can guide your finances, setting you up for a future where you have freedom to choose the life you envision.

  • Pay yourself first. Starting early and continuing as your earnings grow, begin the habit of paying yourself first. Simply, this means putting away some money every month or every paycheck that can help you reach your financial goals over time. Ideally, this money will be invested where it can grow. The goal is to get the money out of harm’s way, where you would have to think twice before dipping into your savings before you spend.
  • Develop a budget and consider expenses carefully. Think about expenditures before opening your wallet and swiping that credit card. Avoid debt wherever possible. Most people are able to have more money left over at the end of the month than they might realize. Don’t be afraid to tell yourself “no” so you can reach a bigger goal.
  • Plan for loved ones with life insurance. Here is where the value you provide your family through your hard work comes into sharp focus. Life insurance is essentially income replacement, should the worst happen. Meet with your financial professional and put a tailored-to-you life insurance policy in place that assures your family or dependents are taken care of.

Put your skills to work as a leader
Once you’ve established a level of financial security, now is the time to think about giving back by providing opportunities and helping others to realize their goals. There’s an old saying: “You’ll never get rich working for someone else.” While that’s not always true, trying to realize your long-term financial goals in an entry-level position might be an uphill climb. Moving up into a leadership position can teach you new skills and can increase your earning power. The average salary for managers approaches six figures!

You might even be ready to branch out on your own, investing the knowledge and leadership skills you’ve gained over the years in your own venture. Consider becoming an entrepreneur with your own financial services business – this can allow you to help others while building on your continuing success as a financial professional.

Whether you choose to strike out on your own, start a new part-time business, or grow within the organization or industry you’re in now, there are key traits that will help you succeed. Having a future-driven, forward-thinking mindset will guide your decisions. Your sense of commitment and the leadership skills you’ve honed on your journey will define your career – and perhaps even your legacy – as others learn from your example and use the same principles to guide their own success.

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April 10, 2019

When should you see a financial professional?

When should you see a financial professional?

Just about anyone may benefit from seeing a financial professional, but how do you know when it’s time to get some professional guidance?

Many people work through much of their financial life without needing to talk to a financial professional, but then something may change. Maybe you are approaching retirement and want to make sure you have your bases covered. Perhaps you just received an inheritance and aren’t quite sure what to do with it, or maybe you received a big promotion with a substantial raise and want a little help with your existing financial strategy.

Whatever the case may be, here are a few signposts that indicate it may be time to see a financial professional.

You are unsure about your financial future
If when thinking about your financial future, and you keep coming up with a blank slate, a financial professional may help you formulate a solid savings strategy. If you’re feeling overwhelmed by differing financial responsibilities, a conversation with a financial professional may help you sort it all out and develop a roadmap. If you’re juggling a lot of financial balls, such as student loan debt, retirement savings, credit card debt, building an emergency fund, trying to buy a house, etc., you may benefit from some professional financial input.

You have inherited a large sum of money
Coming in to an inheritance is a key signal to seek out a financial professional. A financial professional may be able to help you determine the options you have to manage the money that you may not be aware of. The important thing with an inheritance is to take your time when making decisions and consider any long term implications for your family.

You want a professional opinion
Say you like managing your own money, and you’ve been doing a pretty good job of it. You read the financial news and keep up with the latest from Wall Street. You may feel you’re doing just fine without the help of a financial professional, and that’s great. But, getting a second opinion on your finances from a qualified financial professional may go a long way.

Sometimes with our finances we may have a blind spot – a risk we may not see, or an opportunity to do something better that we haven’t noticed. A financial professional may help you find those opportunities and help eliminate those risks. Even if your finance game is on a roll, a little professional guidance may help make it even better.

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March 13, 2019

Dollar Cost Averaging Explained

Dollar Cost Averaging Explained

Most of us understand the meanings of “dollar” and “cost”, and we know what averages are…

But when you put those three words together – dollar cost averaging – the meaning may not be quite as clear.

Dollar cost averaging refers to the concept of investing on a fixed schedule and with a fixed amount of money. For example, after a careful budget review, you might determine you can afford $200 per month to invest. With dollar cost averaging, you would invest that $200 without regard to what the market is doing, without regard to price, and without regard to news that might impact the market temporarily. You become the investment equivalent of the tortoise from the fable of the tortoise and the hare. You just keep going steadily.

When the market goes up, you buy. When the market goes down, you can buy more.

The gist of dollar cost averaging is that you don’t need to be a stock-picking prodigy to potentially succeed at investing. Over time, as your investment grows, the goal is to profit from all the shares you purchased, both low and high, because your average cost for shares would be below the market price.

Hypothetically, let’s say you invest your first $200 in an index fund that’s trading at $10 per share. You can buy 20 shares. But the next month, the market drops because of some news that said the sky was falling somewhere else in the world. The price of your shares goes down to $9.

You might be thinking that doesn’t seem so great. But pause for a moment. You’re not selling yet because you’re employing dollar cost averaging. Now, with the next month’s $200, you can buy 22 shares. That’s 2 extra shares compared to your earlier buy. Now your average cost for all 42 shares is approximately $9.52. If your index fund reaches $10 again, you’ll be profitable on all those shares. If it reaches $12, or $15, or $20, now we’re talking. To sum up, if your average cost goes up, it means your investment is doing well. If the price dips, you can buy more shares.

Using dollar cost averaging means that you don’t have to know everything (no one does) and that you don’t know for certain what the market will do in the next day, week, or month (no one does). But over the long term, we have faith that the market will go up. Because dollar cost averaging removes the guesswork involved with deciding when to buy, you’re always putting money to work, money that may provide a solid return in time.

You may use dollar cost averaging with funds, ETFs, or individual stocks, but diversified investments are potentially best. An individual stock may go down to zero, while the broad stock market may continue to climb over time.

Dollar cost averaging is an important concept to understand. It may save you time and it may prevent costly investment mistakes. You don’t have to try to be an expert. Once you understand the basics of dollar cost averaging, you may start to feel like an investment genius!

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Market performance is based on many factors and cannot be predicted. This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.

March 6, 2019

Back to the basics

Back to the basics

It seems many of us can over-complicate how to achieve good financial health and can make the entire subject much harder than it needs to be.

Despite what you might read in books, hear on television, or see on blogs and websites, good financial health can be simple and sustainable.

Some of the following basic principles may require a paradigm shift depending on how you’ve thought about finances and money in the past, or if you have current not-so-great habits you want to change. Hang in there!

Let’s start with frugality.

Retail therapy may not always be good therapy
One of the biggest financial pitfalls we may get into is believing that money will make us happy. To some degree, this may be true. Stress over finances can rob us of peace of mind, and not having enough money to make ends meet is a challenging – sometimes even difficult – way to live. Still, thinking that more money will alleviate the stress and bring us more happiness is a common enough trap, but it doesn’t seem to usually pan out that way.

Get yourself out of the trap by reminding yourself that if you don’t have a money problem, then don’t use money to solve it. The next time you’re tempted to do some indiscriminate “retail” therapy, think about why you’re doing what you’re doing. Do you truly need three new shopping bags of clothes and accessories or are you trying to fill some other void? Give yourself some space to slow down and think it over.

Build a love for do-it-yourself projects
Any time you can do something yourself instead of paying someone to do it for you should be a win. A foundation of frugality is to keep as much of your income in your pocket as possible. Learning to perform certain tasks yourself instead of paying someone to do them for you may save more money.

Do-it-yourself tasks can include changing the oil in your car, mowing your grass, even doing your taxes. The next time you’re about to shell out $50 (or more) to trim the lawn, consider doing it yourself and saving the money.

Curb your impulse buying habit
An impulse buying habit can rob us of good financial health. The problem is that impulse purchases seem to be mostly extraneous, and they can add up over time because we probably don’t give them much thought. A foundational principle is to try to refrain from any impulse buying. Get in the habit of putting a little pause between yourself and the item. Ask yourself if this is something you actually need or just want. Another great strategy to combat impulse buying is to practice the routine of making a shopping list and sticking to it.

It may take some time and effort to retrain yourself not to impulse buy, but as a frugal foundational principle, it’s worth it.

Build your financial health with simple principles
Achieving an excellent financial life doesn’t have to be complicated or fancy. Mastering a few foundational principles will help ensure your financial health is built on a good, solid foundation. Remember that money isn’t always the solution, aim to keep as much of your income as possible and stay away from impulse buying. Simple habits will get you on the road to financial health.

A fresh perspective, a little commitment, and some discipline can go a long way toward building a solid financial foundation.

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March 4, 2019

Tackling long term financial goals

Tackling long term financial goals

Many of us have probably had some trouble meeting a long-term goal from time to time.

Health, career, and personal enrichment goals are often abandoned or relegated to some other time after the initial excitement wears away. So how can you keep yourself committed to important long term goals – especially financial ones? Let’s look at a few strategies to help you stay committed and hang in there for the long haul.

Start small when building the big financial picture
Most financial goals require sustained commitment over time. Whether you’re working on paying off credit card debt, knocking out your student loans, or saving for retirement, financial heavyweight goals can make even the most determined among us feel like Sisyphus – doomed for eternity to push a rock up a mountain only to have it roll back down.

The good news is that there is a strategy to put down the rock and reach those big financial goals. To achieve a big financial goal, it must be broken down into small pieces. For example, let’s say you want to get your student loan debt paid off once and for all, but when you look at the balance you think, “This is never going to happen. Where do I even start?” Cue despair.

But let’s say you took a different approach and focused on what you can do – something small. You’ve scoured your budget and decided you can cut back on some incidentals. This gives you an extra $75 a month to add to your regular student loan payment. So now each month you can make a principal-only payment of $75. This feels great. You’re starting to get somewhere. You took the huge financial objective – paying off your student loan – and broke it down into a manageable, sustainable goal – making an extra payment every month. That’s what it takes.

Use the power of automation
It seems there has been a lot of talk lately in pop psychology circles about the force of habit. The theory is if you create a practice of something, you are more likely to do it consistently.

The power of habit can work wonders for financial health, and with most financial goals, we can use automation tools to help build our habits. For example, let’s say you want to save for retirement – a great financial goal – but it may seem abstract, far away, and overwhelming.

Instead of quitting before you even begin, or succumbing to confusion about how to start, harness the power of automation. Start with your 401(k) plan – an automated savings tool by nature. Money comes out of your paycheck directly into the account. But did you know you can set your plan to increase every year by a certain percentage? So if this year you’re putting in three percent, next year you might try five percent, and so on. In this way, you’re steadily increasing your retirement savings every year – automatically without even having to think about it.

Find support when working on financial goals
Long term goals are more comfortable to meet with the proper support – it’s also a lot more fun. Help yourself get to your goals by making sure you have friends and allies to help you along the way. Don’t be afraid to talk about your financial goals and challenges.

Finding support for financial goals has never been easier – there are social media groups as well as many other blogs and websites devoted to personal financial health. Join in and begin sharing. Another benefit of having a support network is that it seems like when we announce our goals to the world (or even just our corner of it), we’re more likely to stick to them.

Reaching large financial goals
Big, dreamy financial goals are great – we should have those – but to help make them attainable, we must recast them into smaller manageable actions. Focus on small goals, find support, and harness the power of habit and automation.

Remember, it’s a marathon – you finish the race by running one mile at a time.

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February 27, 2019

Why do banks pay interest?

Why do banks pay interest?

When you deposit money into certain bank accounts, they’ll pay you interest.

Have you ever wondered why they do this? Banks perform lots of services. They’re holding your money for you, making it accessible at tens of thousands of points across the globe, facilitating purchases from e-commerce sites, processing automatic payments, etc. Oftentimes this is done for free or for a small fee. So why would they pay interest on top of all this?

Let’s find out.

Banks play both sides
We need a place to store our money. Some people might not like the idea of handing over their hard-earned cash to a financial institution, but storing their savings under the mattress might make it difficult to perform many transactions, especially online. Banks perform the essential service of giving much of the population a place to store their money while simultaneously facilitating payments between different participants.

Modern economies function on debt (so not all debt is necessarily bad). Corporate debt owed to a bank might be used to grow a business quickly by taking advantage of a great business opportunity.

People don’t always have the entire amount of money all at once to buy something very costly like a house, so banks can help out by lending them the money. To collect the money to lend out, banks receive deposits from other customers.

Thus banks play a fundamental role in the economy, but why do they pay interest? They obviously receive interest on loans, but on the other side, they already offer several free services, like facilitating payments and helping to safeguard cash. Why would they pay people to give them money?

Banks need depositors
Similar to other industries, the banking industry needs customers. This is not only true on the lending side, though. Banks also need customers on the depositing side, because they need to get their money for lending from somewhere. The more customers they have, the more money they can lend out, in turn generating more income.

Since banks compete with each other just like members of any industry, they need a way to attract customers. Sometimes they may offer more features for an account or more free services, but the most enticing incentive is usually the interest rate. And that is the simple idea behind why banks pay interest: zero interest in theory would attract zero customers.

Why more interest for longer deposit periods?
It seems like savings accounts usually pay better interest rates than checking accounts. Why is that? A person probably opens a savings account with the intention of storing their money over a relatively long period of time. The expectation is that the money wouldn’t frequently be removed from that account.

So why do banks generally pay more interest if they believe you’ll leave money untouched for longer? Here’s why. The money you deposit with a bank doesn’t sit idle. It’s lent out to other individuals and businesses in the form of loans. But every bank must abide by minimum reserve requirements[i], and if they fall below the threshold, they can face serious consequences. Thus they are motivated to have their customers park their money for longer periods of time, and savings accounts are intended for just that purpose. The longer a customer intends to leave their money untouched at a bank, the more the bank might be willing to pay in interest.

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[i] https://www.investopedia.com/terms/r/requiredreserves.asp

February 20, 2019

Your health and your finances

Your health and your finances

Staying healthy has obvious physical benefits, like the chance for a longer and higher quality of life.

There is also the increased opportunity to partake in physical activities like team sports, or hiking and skydiving.

But there are also potential financial benefits to staying healthy. These may manifest in lower insurance premiums, lower medical care costs, and other less obvious ways.

The Immediate Benefits
Some benefits may be immediately observable, like a potential drop in insurance premiums for those who quit smoking or who allow an insurance company to track their daily exercise goals and accomplishments.[i] Of course, a healthier body may translate to fewer doctor visits and medication expenses, which may mean lower costs for anyone with high deductibles and copays.

For family members, a longer, healthier, higher quality life may also mean fewer expenses in your twilight years, when senior citizens may continue to live in their own homes without assistance. Of course, genetics play a role in the development and progress of health, but many leading causes of death may be entirely or partially preventable.[ii] Actively pursuing a healthy lifestyle may lead to lower risk of disease and debilitation.

Health and life insurance companies want to attract these kinds of clients (who are long-lived, make fewer claims, and pay premiums for a greater amount of time), so these companies may offer benefits in return. Family members and friends may potentially have less to pay for end-of-life care and even benefit from being able to spend more time with loved ones. This may produce positive financial results, like fewer sick days from stress-related illness and better mental health.

The Less Obvious Benefits
Lower insurance premiums, lower medical costs, and more time to live in a meaningful way are obvious potential benefits of good health. But many latent financial benefits are also derived from maintaining good health. One example is being able to perform certain daily activities that may save you money.

Those with health problems often simply cannot perform tasks that may be taken for granted by healthy individuals, like packing and moving house, walking to the grocery store 15 minutes away, or living in a more affordable walk up building on a non-ground floor. Those who are unhealthy may need to hire people to help them move, to shop for them, or be required to pay a premium for access to a building with an elevator (or potentially even more costly, have a chair lift installed in their home).

A possible benefit of healthier eating is an appreciation for more subtle tastes that are not overpowered by sugar and salt. Those who regularly eat low salt or low sugar foods may create a positive feedback cycle wherein they remain healthy because they start to truly enjoy healthier food. This can lead to a wider range of options of enjoyable food and may help lower food costs.[iii]

Saving on transportation costs can be a benefit of health as well if you’re able to bike or walk to work. Living too far from your place of employment may make this impossible, but for those who live nearby, commuting by bicycle or walking on days with suitable weather may cut down costs on transportation while simultaneously providing the benefit of exercise.

One of the less evident but easily identifiable benefits of maintaining good health may be stronger cognitive abilities and better mood balancing. Eating healthy[iv] may contribute to brain health, while regular exercise[v] may help stimulate improved memory function and thinking skills. Better health may lead to more opportunities. Improved mood may also help navigate society more adeptly, possibly leading to even further opportunity, both economically and in personal fulfillment.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. As with any health-related change you may wish to make, seek the advice of a professional nutritionist, medical doctor, or health practitioner.

[i] https://qz.com/1396035/life-insurance-giant-john-hancock-is-asking-customers-to-wear-health-trackers/
[ii] https://www.healio.com/cardiology/chd-prevention/news/online/%7b3fa64285-7e6e-4068-833e-eb85182aa285%7d/cdc-heart-disease-cancer-leading-causes-of-death-in-2017
[iii] https://www.consumerreports.org/healthy-eating/healthy-food-does-not-have-to-cost-more/
[iv] https://www.health.harvard.edu/blog/nutritional-psychiatry-your-brain-on-food-201511168626
[v] https://www.health.harvard.edu/blog/regular-exercise-changes-brain-improve-memory-thinking-skills-201404097110

January 21, 2019

Preparing to buy your first home

Preparing to buy your first home

Home buying can be both very exciting and very stressful.

Picking out your dream home is thrilling, but credit scores, applications, and mortgage underwriting requirements? Well, not so much. Don’t let yourself be deterred. Here are a few moves to make before you amp up your home buying search that will help increase the fun and decrease the stress.

Know what you can afford
One of the first steps to home buying is knowing how much you can afford. Some experts advise that a monthly mortgage payment should be no more than 30% of your monthly take-home pay. Some say no more than 25%. If you stretch past that you could become “mortgage poor”. Consider this carefully. You might not want to be in your dream house and struggling to pay the utility bills, grocery bills, etc., or find yourself in a financial jam if an emergency comes up.

Get your finances ready for home buying
If you’re scouring listings, hunting for your dream home, but you’re not sure what your credit score is – stop. There are few things more disappointing than finally finding your dream home and then not having the financial chops to purchase it. You’ll need to get your finances in order and then start shopping. Focus on these areas:

Credit score: Your credit score is something you should know regardless of whether you’re home shopping. Usually, to get the best mortgage rates, you’ll want a score in the good to excellent range. If you’re not quite there, don’t despair. If you make payments toward your other obligations on time and pay off any debt you’re carrying, your credit score should respond accordingly.

Down payment: A conventional mortgage usually requires a 20 percent down payment. That may seem like a lot of money to come up with, but in turn, you may get the best interest rates, which can save you a significant amount over the life of the mortgage. Also, anything less than 20 percent down and you may have to purchase Private Mortgage Insurance – it’s a type of insurance that protects the lender if you default. Try to avoid it if you can.

Get pre-qualified before you shop for a home
Once you have your credit score and down payment in order, it’s time to get pre-qualified for a mortgage. A prequalification presents you as a serious buyer when you make offers on houses. Mortgage pre-approval doesn’t cost you anything, and it doesn’t make you obligated to any one house or mortgage. It’s just a piece of paper that says a bank trusts you to pay back the loan.

If you go shopping without a pre-approval, expect to get overlooked if there are other bidders. A seller will likely go with the buyer who has been pre-approved for a mortgage.

Prepare your paperwork
Getting approved for a mortgage is going to require you to do a little legwork. The bank will want to see documentation to substantiate your income and lifestyle expenses. Be prepared to cough up income tax documents such as W-2’s, paystubs, and bank statements. The sooner you get the paperwork together, the easier it will be to complete the mortgage application.

Shop for the best mortgage
Mortgage rates differ slightly depending on the lender, so shop for the lowest possible rate you can get. You may wish to use a mortgage broker to help. Also, get familiar with mortgage terms. The most common household mortgages are a 30-year term with a fixed rate, but there are 15-year terms, and mortgages with variable interest rates too.

Do your pre-home-buying homework
With a little legwork early on, home buying can be fun and exciting. Get your finances in order and educate yourself about mortgage options and you’ll be decorating your dream home in no time.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

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