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Saving for a big purchase can be a big challenge, whether it’s a brand-new car, a hot tub — or even a 1959 Gibson Les Paul. But you can tackle your elephant-sized purchase with a similar strategy: Just take it one step at a time. Here are a few big-ticket budgeting tips that you won’t need a memory like an elephant to remember to use.
1. Set a reasonable budget … then pad it. It’s always wise to allow extra room in your budget for contingencies. There can be unexpected surprises, especially with larger purchases. And unfortunately, things often have a way of costing more than you expected. Consider allowing a minimum 10% overrun on your big-ticket budget.
2. Find discounts and take advantage of them. If you’re traveling, for example, consider AAA or AARP discounts. Off-season travel can score you some savings, too. Many items and experiences cost more depending on when you buy or book them. Always look for coupons and other saving options when paying for routine purchases such as oil changes for your car, grocery shopping, dining out and ordering pizza.
3. Comparison shop. Scour the web and Google Shopping for other retailers who offer the product or service you’re interested in. If you’re looking for a car, for example, don’t assume that the price at your local dealer is “the” price. Edmunds.com, cars.com and other online resources can provide options in your area that you can filter based on your needs and preferences. And be sure to check national franchises that can ship inventory from across the country to find the best deal.
4. Ask a “friend.” Crowdsourcing consumer opinions has never been easier. Most products and services are reviewed, rated and compared — and the results can be easily searched for online. Search the comments for keywords like “discount,” “savings” or “cost less” to see how others saved on their purchases.
4. Set up a dedicated account. A great way to help organize your savings for a large purchase is to earmark the money intended for it by keeping the funds in a separate account. That way, you can more easily track your progress — and you won’t be tempted to spend the money on anything else.
5. Boost your savings with offsets. Take a look in your garage, the back of your closets and the attic. See if there are things of value that you no longer use or want. Sell them on eBay, Craigslist, OfferUp or at a yard sale. On the flip side, a penny saved is a penny earned. Can you decrease nonessential spending until you reach your savings goal?
6. Put time on your side. Start saving as early as possible. If you wait until the last minute, you may be faced with having to do some pretty extreme saving. The sooner you start, the less you’ll feel the impact on your day-to-day budget.
Seek out Advice — and Save
Family members, friends and co-workers might have their own experiences with the purchase you’re about to make and can share how they saved money on it. Ask for their advice — but also consider bringing in an expert by speaking with a financial professional who can help you make a realistic, feasible plan for your purchase.
How to Afford a House With Rising Prices and Interest Rates
How to Afford a House With Rising Prices and Interest Rates
In the third quarter of 2022, the median home price in the U.S. was around $400,000. That means the average homebuyer required a six-figure income to afford their purchase — and the $2,682/month payment that accompanied it. If that seems steep, don’t lose hope. Here are six strategies to help you afford that new home you’ve been dreaming of when prices and mortgage rates are high.
1. Choosing a property. There’s an old real estate saying: “Location, location, location.” And that’s because location is such an important driver of price and value. While picking a prime location can drive price up, moving a little further from a city or choosing a less sought-after neighborhood can help control costs. You can also consider an older home — taking into account the cost of potential repairs — or one with a smaller footprint. These moves may also lower your property taxes.
2. Adjustable-rate mortgages (ARMs). Unlike a fixed-rate mortgage, the interest rate of an ARM can vary over the loan term. The “start rate,” also called an intro or teaser rate, is fixed for a predetermined period (such as five years for a 5/1 ARM), but then can fluctuate according to an index — typically the secured overnight financing rate, or SOFR, plus a margin. The 1 in a 5/1 ARM means that the interest rate can subsequently adjust every (one) year. ARMs typically carry a lower rate than fixed-rate mortgages but carry the risk of going higher over time. An ARM may make more sense if you’re confident you will sell the home within the period of your start rate; otherwise you risk not being able to afford your payments in the future.
3. Higher down payment. If you can scrape together a higher down payment, it can lower your monthly payment significantly. And by exceeding the 20% threshold, you can save even more by dropping private mortgage insurance, or PMI.
4. Put time on your side. Real estate deals may be few and far between in a competitive real estate environment, but you have a better chance of scoring one if you’re not in a hurry. Allow plenty of time to shop around so you can take advantage of any lulls in the market.
5. Negotiate and lowball. It may be a tougher sell in a hot market, but you still may get lucky by putting in low offers. Consult with an experienced real estate professional for advice on getting your best chance of having a seller accept a lowball offer, knowing you may need to make a bunch of them before someone bites.
6. Get preapproved. Do what you can to make your offer more attractive by getting your financing preapproved by your lender. If a seller needs more time to get out of their home, you may be able to contract to let them stay and rent it out from you. Waiving contingencies comes with risks, so don’t do this without careful consideration.
Buying a home is one of the biggest purchasing decisions anyone ever makes. A consultation with a qualified financial professional can help you weigh your options.
How to Save for a House?
How to Save for a House?
It's the biggest purchase most people ever make, and with good planning and some preparation, it can be a solid financial move.
If you don't already own a home, the idea of affording one can seem daunting. And with the national median house price expected to top $270,000 in 2020, just saving for the down payment can be a challenge(1). But it's one you can meet with a good plan and some discipline.
While there are various ways to buy a home with less than 20% down payment, many experts don't recommend doing so. You may be required by your lender to take out Private Mortgage Insurance (PMI) to ensure that they get paid back if you default on your loan(2). On an average home loan, that 20% down payment equals $54,000. Since the average household has about $8,800 in savings, that's a big gap to bridge(3).
Begin planning before you buy - several years before, if possible. Start by researching neighborhoods to find ones you like that are in your price range. Check statistics that can indicate greater stability: Crime rates, turnover, school performance and activity of religious and charitable organizations. Educate yourself about the home buying process. Real estate agents are generally anxious to sell you a house immediately, but find one who's willing to share what they know about neighborhoods, values and trends. Don't let them talk you into buying a "bargain" fixer-upper either unless you have some serious DIY expertise. Getting trapped in a broken house with problems you didn't anticipate - after spending your savings on a down payment - can be a nightmare.
This is also the time to start saving. You're probably not going to scrounge up $54,000 in a year, but look at your budget and see how much you can save each month. Some financial experts recommend the 50/30/20 rule:(4) Spend half your take-home pay on essentials such as housing, transportation and food. Allocate 30% on things you "want" but don't need - an occasional night out or vacation. Then save 20%. If your take-home pay is $3,000 a month, that would put $600 a month into savings. Not considering any interest earned, you'd have your down payment in seven and a half years. Reverse the rule - save 30% and spend 20% - and you'd cut that to five years.
Here are some ways to reach that 30%, or more:
- Earmark yearly income tax refunds for the down payment fund. The average refund is about $3,000.(5) Do that four years in a row in conjunction with your $900 monthly savings, and you'll be close to your goal.
- Cut expenses. Do you really need that supermax cable TV package? Can you delay buying new cars? Do you have to have a Hazelnut Mocha Coconut Milk Macchiato each and every morning? That alone could save $100 a month.(6)
- Re-evaluate all of the recurring online purchases in your household. You may be surprised by the number of "vampire" charges - such as $3 for cloud storage or $10 for a streaming service - lurking on your credit cards.
Make a point to talk about your plans with your financial advisor. They can help you with tips, savings advice and maybe some ideas you haven't already thought of to reach your goal - and you just might be having that housewarming party sooner than you think!
#save #largepurchase #home #house #buying #wellcents
ACR# 342327 02/20
Family Finances: Saving to Have Children
Family Finances: Saving to Have Children
What do you do when your heart demands something, but your bank account says no? That's the dilemma that many, especially Millennials, find themselves in when they think about having a family.
Even if your idea of a happy family isn't necessarily 2.5 kids, a dog and a house with a picket fence, financial realities are making it hard for many Americans to envision having any kind of family at all. When a New York Times/Morning Consult survey asked men and women aged 20-to-45 about their plans for having children, 64% said they were not planning to have children soon because childcare is too expensive, 43% said financial instability was holding them back, and 44% said children were just too expensive.(1)
According to the U.S. Department of Agriculture, the average cost of raising a child to age 17 has ballooned to over $230,000.(2) For a generation saddled with student debt,
job insecurity and slow growth of real wages, waiting to start a family is a pragmatic - if unsatisfying - response. But like other financial goals, having a family is achievable if you have a plan and stick to it.
If having a happy - and financially secure - family is in your future, here are some ways you can start planning and saving now:
- Start a savings account earmarked for family expenses and, if possible, have money from each paycheck diverted into that account automatically. If you receive your income by direct deposit, your bank should be able to do this.
- When picking a house, a smaller-than-ideal house in a better school district may be a better choice than a sprawling ranch in an area where public schools are weaker. If you're in an underperforming district, you may feel the need to send your kids to private school, which can be an additional major expense.
- Start accumulating baby gear now. Tell your family and friends what you're doing and start a baby registry at Target or an online source like Amazon or babylist.com. This can significantly cut into the first-year budget hit.
- Plan for the unexpected. Think through how you'd handle it financially if one of your children is born with a disability. Even a relatively mild disability can impact the parents' earning ability. And does either parent have a family history of twins? While having two doesn't double all of the costs (a two-seat stroller isn't much more than a single-seater), it definitely increases the workload for both parents. And until there's a two-for-one college plan, that cost will be significantly higher.
- Maybe pick up a side hustle to help boost savings before you have additional parenting responsibilities. As you're thinking that through, look for one that could produce more than supplemental income if one parent needs - or wants - to stay home with a child for an extended period of time.
- Start a 529 college savings plan early. Under current law, the regulations are far less restrictive than what they used to be. Perhaps ask if the children's future grandparents would consider starting a 529 for their benefit(3).
- Talk with your financial advisor about your family plans and how they may impact your short- and long-term goals.
It's tough to think dispassionately about such a deep-rooted emotional issue. But if you do - and take steps to prepare - you'll be in a better position to have the financial resources necessary to raise the happy family of your dreams.Sources:
ACR# 342328 02/20