The Money IDEA
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The Money IDEA
Ideas on How to Save and Ideas for What to Do with Your Savings!
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Here are 5 financial wellness moves you need to master this year!
(BPT) - If you had to grade your financial literacy, what would it be? Are you an A+ saver, investor and planner, or do you think you could do better? If you grade yourself average at best, you’re not alone.
When asked to grade their own financial literacy, more than half of Americans say they’d earn a “C” or lower, according to new data from Prudential Financial. This isn’t surprising, considering data from Prudential’s Financial Wellness Census shows less than half of Americans are on track to meet their financial goals, including planning for retirement. “Regardless of where you are on your family’s financial wellness journey, the best way forward is through financial literacy,” says Prudential Advisors President Brad Hearn. “Researching, educating yourself and getting advice from a financial professional can help you make the best decisions based on your life stage, risk tolerance and goals.” Hearn says each family’s situation and goals are unique, and things like life stage and personal preference will impact how they choose to prepare for their financial future. To get started, here are five financial wellness basics every family should master: Set up an emergency fund Life is a series of experiences, and sometimes the unexpected can hit your finances hard. Whether it’s a car breaking down, your AC unit on the fritz or even losing a job, it’s important to be prepared for emergencies. If you don’t already have an emergency fund, start saving a little each month until you reach your goal. A good rule of thumb is to have three months’ worth of expenses saved in an emergency fund. So, if your monthly expenses are $2,500, you should have $7,500 saved. Create a budget Saving for college? A new car? How about starting that emergency fund? Whatever your family’s financial goals are, it’s important to have a plan in place that helps you achieve those goals. Budget to manage day-to-day expenses, and include in that budget a commitment to save for bigger milestones. For tips on getting started, do some research. There’s no shortage of advice, whether you decide to go it alone or consider using the help of a professional financial advisor. Plan for the unimaginable If you have people who count on you for financial support or caregiving, you should have life insurance. A life insurance policy can help give your family financial peace of mind should the worst happen. There is no rule as to how much life insurance you need, but important things to consider are your annual income, mortgage debt, potential college costs for kids and other future financial obligations. Save for retirement According to Prudential data, of Americans who have retirement savings and debt, nearly one-quarter have more in total debt than in retirement savings (23%), while 15% of Americans say that they have no debt, but also have nothing saved for retirement. Planning for retirement is something that should start as soon as possible. If your work offers any type of matching program, make sure to take advantage. If you don’t, you’re essentially leaving free money on the table. Seek professional advice Retirement, life insurance and savings can be confusing. Information overload is partly to blame. According to Prudential data, two-thirds of Americans agree that the list of things they need to learn to successfully manage their finances keeps growing, not shrinking. That’s where financial literacy programs and professional financial advice can play a key role. Nearly two-thirds of Americans don’t have a financial advisor. They say they cannot afford one (42%) or don’t believe their financial situation warrants needing an advisor’s help (26%). The reality is that advice is more within reach than ever before — and it’s not just for the wealthy. A financial professional can help at various stages in life and work with you to create a strategy based on your timeline, risk tolerance and goals. “Financial wellness isn’t always a matter of having more money,” says Hearn. “Instead, it’s a journey that takes a combination of proactive effort, dedication and professional guidance.” Prudential Advisors is a brand name of The Prudential Insurance Company of America and its subsidiaries. Life insurance is issued by The Prudential Insurance Company of America, Newark, NJ and its affiliates.
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Could mortgage insurance be the key to unlock buying your first home?
(BPT) - The homebuying process is exciting, but can also seem fraught with added costs, like a home inspection, title insurance and closing costs. And if you can’t afford a full 20 percent down payment on a conventional home loan, then you will most likely pay for private mortgage insurance (MI). Some people consider private MI yet another added cost, but it helps creditworthy middle-income homebuyers qualify for home financing sooner with a low down payment. Is it really an added cost if it saves time and money in the long run?
For most people, low down payment home loan options include conventional loans with private MI and government-backed loans like those offered by the Federal Housing Administration (FHA). While comparable, each of these options has important differences. For example, the minimum down payment for an FHA mortgage is 3.5 percent while it’s only 3 percent on a conventional, privately insured mortgage. Another key feature of private MI is that it can be canceled when a borrower reaches 20 percent equity in his or her home. Borrowers who purchase a home with private MI can typically cancel it within 5 to 7 years, resulting in their monthly bill going down. Private MI’s cancelability makes it a more affordable option over FHA-backed mortgages, which typically require mortgage insurance premiums for the entirety of the loan term. Both are offered by most mortgage lenders, so it’s smart to ask a loan officer for both options so you can compare and do the math. The myth that a homebuyer needs 20 percent down to obtain a mortgage is simply not true. Low down payment mortgages are widely available and used every day across the country. In 2018, the National Association of Realtors found that first-time homebuyers typically put down 7 percent, while repeat buyers put down an average of 16 percent. Many homebuyers choose a lower down payment option to preserve some savings for home improvements or save for other goals. The time it could take to save up a 20 percent down payment is significant. On average, it could take up to 20 years to save a full 20 percent, plus closing costs, for a $257,700 house — the national median sales price. With home prices on the rise, the amount of time it takes to save up could only increase. Private MI can mean the difference between getting into the home of your dreams sooner or waiting for years. For over 60 years, more than 30 million homeowners of all backgrounds have used private MI to successfully buy their homes. In the past year alone, private MI helped more than one million borrowers nationwide purchase or refinance a mortgage. According to a study by U.S. Mortgage Insurers, 56 percent of purchase borrowers were first-time homebuyers and more than 40 percent had incomes below $75,000. For decades, millions of homeowners and prospective homebuyers have relied on private MI to help them affordably and responsibly purchase their homes — in turn helping them build personal wealth. Today’s historically low mortgage interest rates are a good reason to buy a home now. It is estimated that in 2019, the average rate for a 30-year fixed-rate mortgage will be around 5 percent. Borrowers should take advantage of these historically low mortgage interest rates because experts forecast that primary mortgage rates are on the rise. Getting a mortgage with private MI and keeping more of your hard-earned money in the bank can be a very smart way to invest in your future. Check out lowdownpaymentfacts.org to learn more.
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Do you know what you need to know about life insurance?
(BPT) - If you haven't made solid financial plans, now would be a good time to consider a life insurance policy to protect you and your family in your time of need - or protect your loved ones in your absence.
Given the importance of life insurance, it's surprising that 37.5 million American households lack such a policy, according to the 2016 Facts About Life study by the industry group LIMRA. That may be because many people misunderstand how such policies work and how much they cost. For example, recent Insurance Barometer studies by LIMRA and Life Happens found 63 percent of Americans cite expense as the reason they don't carry term insurance, yet 80 percent overestimate the cost - millennials by 213 percent and Gen Xers by 119 percent. While some Americans hope to rely on other sources to protect their families, they may not realize all the benefits life insurance offers. Every family has different needs, and some life insurance products are flexible enough to offer customizable options to provide a measure of financial security to your spouse and children - the people that matter most. Consider these other common myths about life insurance: Myth: Life insurance is only available through financial advisors. In fact, quality policies for your entire family are often available through your employer or your spouse's employer. For example, Boston MutualLife Insurance Company offers a range of workplace solutions paid for by employers, employees or both, including permanent life, term life, critical illness, accident and disability insurance. Talk to your company's HR department about the process involved in securing comprehensive coverage for your family. Myth: Workplace policies can't offer enough options for your needs. You'll find that well-established life insurance companies understand the market well enough to offer a range of flexible products, including policies that are payroll deductible, stable in cost regardless of your age, portable when you're changing jobs and available with add-on riders or other insurance types through the same carrier. Myth: Young, healthy people don't need life insurance. The truth is, your health can change at any time and it's best to expect the unexpected. Uninsured people can easily leave behind personal, medical or mortgage debts and/or funeral expenses that end up burdening family members or executors when they die. Myth: Your life insurance policy only covers you, not your family. Not true. Some products protect you, your spouse, your dependent children and even your grandchildren, often at one affordable cost. That's why marriage and becoming a parent can be excellent reasons for buying new policies. Investing in life insurance is a crucial step to take to protect yourself and your family from unexpected losses. But it doesn't have to be confusing or complicated. Find more detailed information about life insurance options for you and your family at www.BostonMutual.com. KEYWORDS
 4 habits for fit finances Here are four steps to take today to spruce up your money management process and get yourself on the path to financial health. (BPT) - Are you feeling good about your finances? Or do phrases like “account balance,” “credit score” and “retirement savings” give you a twinge of anxiety? Don’t worry, you’re in good company. Only 24 percent of millennials have basic financial literacy, according to the National Endowment for Financial Education. When it comes to getting their financial house in order, most millennials would prefer not to set foot in that proverbial house in the first place. Getting yourself out of debt and building enough savings to cover your expenses in an emergency is a marathon, not a sprint. Small, incremental changes in your financial habits today can make a big difference in your financial health months or even years from now. Take these steps today to spruce up your money management process and get yourself on the path to financial health. * Check your credit score. Before you start the work of realigning your finances, you should check your credit score and review your credit report. It helps to know where you stand financially, and the good news is, even if your credit score is not as high as you’d like it to be, you can take steps to improve it. Establishing a history of on-time payments and maintaining a healthy credit utilization ratio are two things that could improve your credit score quickly. One way to access your credit score without any cost is to find out if your bank or lender offers your VantageScore through their website. * Knock down your debt. Track down all your accounts — checking, savings, investment, credit cards and other loans — and do the math to find out your net worth. That’s your benchmark to help you track your progress. In the beginning, the truth can hurt, however, knowing how much you have in savings and knowing how much you owe gives you a valuable blueprint for where you need to direct your energy. From there, put together a household budget, and figure out where you can trim expenses, so you can pay ahead on your debts, one account at a time. * Automate your savings. You’re much more likely to accumulate savings when you make the decision once and let the rest happen automatically. Log onto your bank account and set up an automatic transfer from checking to savings, starting with a small amount, preferably timed with your regular pay day. If you can manage to set aside $85 a month, in a year’s time, you’ll have set aside a full $1,000. That’s a decent emergency fund for things like car repairs and doctor bills. * Open a retirement account. Here’s another way to automate savings. If you haven’t done so already, start contributing to a retirement plan. Even better, if your employer makes a plan and a match available to employees, sign up as soon as you can. If you can’t afford to contribute the full amount to get the full match, start with a small percentage, and slowly add on. Taking the first steps to gain control of your finances isn’t easy. Setting up good financial habits today can leave you in a better place tomorrow. Test your credit score knowledge at CreditScoreQuiz.org, and be sure to visit VantageScore Solutions to learn what things influence your score, and what you can do to improve it. KEYWORDS
 Why would manufactured homes require a title? State laws determine the process for surrendering the manufactured home title when the home is permanently affixed to the land, becomes part of the real estate, and is no longer considered personal property separate from the land. Like manufactured homes, modular homes are also constructed indoors, sheltered from the elements. But unlike manufactured homes, modular homes do not require a title. Since they are built to International Residential Code standards and not the HUD Code, ownership of modular homes is treated the same as site-built homes. (BPT) - On June 15, 1976, the U.S. Department of Housing and Urban Development (HUD) instituted the Federal Manufactured Home Construction and Safety Standards — more commonly referred to as the “HUD Code.” With these regulations, HUD defined the safety and quality standards required for construction of a manufactured home. This was a pivotal moment for the manufactured home industry. Prior to the HUD Code, these homes were built with portability as a primary focus and were commonly referred to as “mobile homes” — hence the difference in terms. You will often see the terms “mobile” and “manufactured” used interchangeably. But, according to the Manufactured Housing Institute, the HUD code draws a line of distinction between the two. A mobile home refers to a home manufactured prior to the standards set by the HUD Code. Back then, the homes were built to voluntary industry standards enforced at the state level in 45 out of the 48 states in the continental U.S. With the birth of the HUD Code, manufactured home now refers to a factory-built home constructed to those federal standards. The HUD Code regulates, among other things, energy-efficiency standards, durability, transportability and quality. It also sets standards for the performance of HVAC, plumbing and electrical systems. While the difference in quality between today’s manufactured homes and pre-HUD Code mobile homes is evident, you may be wondering how the terms “mobile” and “manufactured” are so often confused. One similarity that may be the biggest contributor to the confusion is titling. Like the mobile homes built prior to HUD Code, modern manufactured homes also require a title. So what does that mean? Requirements for titling vary by state, but generally a manufactured home requires a title much like an automobile. This is because a manufactured home is considered personal property. As personal property, a manufactured home is typically taxed separately from the land on which it sits. Visit https://drivinglaws.aaa.com/ for more general information on state-specific laws regarding the titling of manufactured homes. State laws determine the process for surrendering the manufactured home title when the home is permanently affixed to the land, becomes part of the real estate, and is no longer considered personal property separate from the land. Like manufactured homes, modular homes are also constructed indoors, sheltered from the elements. But unlike manufactured homes, modular homes do not require a title. Since they are built to International Residential Code standards and not the HUD Code, ownership of modular homes is treated the same as site-built homes. For more information from Vanderbilt Mortgage and Finance Inc. about manufactured or modular homes, visit www.vmfhomeloan.com/first-time-buyers/. Vanderbilt Mortgage and Finance, Inc., 500 Alcoa Trail, Maryville, TN 37804, 865-380-3000, NMLS #1561, (http://www.nmlsconsumeraccess.org/), AZ Lic. #BK-0902616, Loans made or arranged pursuant to a California Finance Lenders Law license, GA Residential Mortgage (Lic. #6911), Illinois Residential Mortgage Licensee, Licensed by the NH Banking Department, MT Lic. #1561, Licensed by PA Dept. of Banking. KEYWORDS
 (BPT) - Across the nation, thousands of seniors have used a Home Equity Conversion Mortgage (HECM), commonly called a reverse mortgage loan, as a savvy way to access the equity in their homes as part of their retirement strategy. Those who are interested in a reverse mortgage loan should know that there are six main phases to the process: 1) educating and qualifying, 2) counseling, 3) approval, 4) funding, 5) using and 6) settling. 1. Educating and qualifying The HECM process begins by contacting an FHA-approved lender who will review the borrower’s situation, educate them on the HECM program, and determine if they would likely qualify for a reverse mortgage loan. “Once the lender has determined that the borrower is eligible, they work closely with them to shape the loan so it fits their needs,” says Paul Fiore, Chief Sales Officer for American Advisors Group, the leading reverse mortgage lender in the nation. “At AAG, this is a highly personalized process designed to give the borrower the best outcome for their financial situation.” 2. Counseling Once qualified, borrowers are referred to reverse mortgage counseling, an important consumer safeguard mandated by the government. During counseling, a HUD-approved HECM counselor reviews the borrower’s needs and circumstances. They consider how the funds might best be distributed, the financial and tax implications, and whether a HECM is right for them. If so, an application is submitted to the lender. 3. Approval Next, the property will be appraised, and after that the approval process will begin. Before closing on the loan, borrowers will choose between several loan disbursement options, from taking it all out in a lump sum, receiving fixed monthly payments, opening a line of credit or any combination. 4. Funding After the closing papers are signed, the homeowner has three business days to change their mind and cancel the loan (except if the loan is being used to purchase a new home). After the rescission period has passed, the funds are ready to be paid out through the payment option selected, subject to an initial disbursement limit that is determined by HUD. 5. Using your loan The loan servicer will generally disburse funds via direct deposit or mail on the first business day of the month, following the funding of the loan. The borrower can live in the home as long as they like without making monthly mortgage payments, as long as they continue to pay property taxes and insurance on the home, maintain it in good condition and comply with any other loan terms. 6. Settling your loan If the last surviving borrower sells or transfers the property, passes away, or does not use the property as a principal residence for more than 12 months, the loan has reached a “maturity event,” meaning that the loan comes due and no further funds can be disbursed. Borrowers also have the option of paying off their loan in full at any time without penalty. Following a maturity event, an appraisal will be ordered by the loan servicer to determine the property’s current market value. The heirs can sell the property to repay the loan, or purchase the property for 95 percent of its appraised value. Since HECMs are non-recourse loans, the proceeds from the sale of the home are the only asset that can be taken to pay the loan’s balance, even if the loan amount exceeds the value of the home. A home equity conversion mortgage can be shaped to fit an individual’s needs. With new consumer safeguards in place, many seniors are discovering that it is an important part of their retirement strategy. KEYWORDS
 (BPT) - A recent study by the Center for Retirement Research (CRR) at Boston College suggests an alarming state of awareness about retirement readiness: Of surveyed households, 33 percent realize they are not well prepared, 19 percent are not well prepared but don't know it, and 24 percent are well prepared but don't know it. For the Americans at risk of not being able to maintain an adequate retirement lifestyle, it's critical to take action. For the households that are well prepared and don't know it, they risk sacrificing a comfortable retirement. Understanding the behaviors associated with good retirement planning, in turn, can help you get a better sense of where you stand. Consider the following behaviors, which are more likely to be modeled by those who are well prepared for retirement. Asset accumulation A high-level approach to ensuring adequate retirement assets is to save a minimum of 10 percent of your gross income each year. You may need to save even more depending on your asset accumulation goals and how many years you have left to save before retirement. If you would rather have a dollar goal, multiply your annual income goal by 25 to arrive at the amount you should try to save. For example, if after considering Social Security and any pension payment, you want $30,000 more of annual income in retirement, you will need to save $750,000. Lower goals mean you need to withdraw at a faster rate and increase the risk you will deplete your assets too soon. Budgeting Not all budgets need to detail specific spending items. Rather, you can consider yourself working within a budget if you know that each year you are saving and not creating new debt (and paying off legacy debt for your education or home). If you want to squeeze out more savings, a line-by-line review of spending may well be fruitful. Personal debt Many of us are saddled with personal debt from college and graduate school. This debt has become so burdensome that the customary progression to home ownership has been delayed for many. The debt has also had a domino effect on the ability to save for retirement. Paying down personal debt should be job one. Other personal debt, such as for a car purchase, should be avoided, minimized or paid down as quickly as possible. Credit card debt, which carries high interest rates, should be avoided entirely. Remember, each dollar of debt limits your ability to save for the future. Mortgage debt It used to be commonly accepted that you pay off your mortgage before retirement, but more and more retirees are entering retirement with mortgage debt. The old rule remains the best approach, since any indebtedness in retirement will limit your ability to react and adjust to poor investment return on your assets. Social Security With traditional pension plans less commonly offered by employers, Social Security has become an even more important source of guaranteed lifetime retirement income. By waiting to age 70, you can increase the benefit payment significantly, which is also the base for annual Social Security cost-of-living increases for the rest of your life. That increased Social Security benefit may also increase the benefit that a surviving spouse will receive after you die. Unless you have a health care issue that could reduce your life expectancy and no spouse who might need a spousal benefit based on your earnings record, claiming Social Security early is the greatest retirement planning mistake made. Health care Health care is the single greatest cost in retirement, and various studies estimate the cost to be $250,000 or more for a healthy 65-year-old couple. The cost of health care will be even greater to the extent one retires before age 65 and Medicare eligibility. Moreover, health care costs can vary and may come sooner than expected. The best plan, then, is to work until at least age 65 and understand that health care is a unique challenge in retirement. To the extent possible, utilize Health Savings Accounts and bank any unused amounts annually to build up a tax-free health care fund for retirement. Income planning No later than 10 years before your planned retirement, you should be translating your retirement assets into an annual or monthly retirement income stream. Start with your Social Security and any pension plan payments as your income base, and then consider how much income your other assets can safely generate. Depending on this analysis, you may want to consider purchasing an annuity to make more of your retirement income guaranteed and avoid the twin risks of poor investment return and living longer than expected. Consider also that many of your retirement assets have an embedded tax liability. You will need to look through your retirement assets to determine after-tax income, since your food, rent and cable bills are paid with after-tax money. Only by seeing your after-tax income can you decide if you have enough to live on. Annual financial wellness check-ups During your early working years, you are likely to be focused on debt reduction and asset accumulation. As you get closer to retirement, you will need to focus on the strategies associated with Social Security, health care and income generation. At all times you should annually revisit your goals and make adjustments, as needed, to how much and where you are saving, how much you are spending, how aggressively you are investing, and when your target retirement date is. Modeling such behaviors will make it more likely you will be well prepared for retirement. By doing so you will also make it more likely that you are properly assessing the state of your retirement readiness and not over- or underestimating your financial health.  (BPT) - Sponsored Content from Vanderbilt Mortgage and Finance, Inc. The world that millennials have grown up in is a lot different than the world the Gen Xers and Baby Boomers knew. The digital revolution, widespread use of smartphones and adoption of disruptive technologies such as ride sharing and vacation rental apps are just a few of the factors that have altered the social landscape. Unfortunately, rising student debt, rising home prices and other economic factors have hit many millennials and left them to believe that they cannot afford a home. Many feel as though they have been priced out of the American dream and they will never be able to buy a home. But no matter what your age, there are plenty of ways to become a homeowner, you just have to think a little more creatively. The rise of the rental Looking at current trends, a recent research study found that more U.S. households are now renting than at any time in the last 50 years. With a rising number of renters, many have worried that we are becoming a nation of renters rather than a nation of homeowners. This is most evident with the younger generation, people under 30, who the National Multifamily Housing Council have found now account for 50 percent of all renters in the U.S. They aren’t renting because it’s a more affordable option, either. As many residents know throughout the country, rents are going up and up. Between 2012 and 2015, the median gross rent has gone up 8.24 percent, rising to $959. When you combine that with the utilities, a deposit and first and last month’s rent, it’s a lot of money to spend on something you will never own. So why do people choose to rent? One reason is that many don’t realize that just like phones, cars and countless other things we use on a daily basis, homes have changed. New priorities mean a new solution As demand for housing increases, and prices on new and existing homes continue to rise, manufactured housing has adapted to the standards of today’s first-time homebuyers and provides a solution for a market in short supply of quality, affordable options. In 2016, the average sales price for a manufactured home without land was around $70,600 — that’s an average of $48.82 per square foot — making them an affordable solution to renters looking to become homeowners. “We believe manufactured homes offer a great solution for many households seeking affordable housing,” says Vanderbilt Mortgage and Finance Inc. President Eric Hamilton. “We work with our customers to help find financing options that fit their needs and circumstances.” Renters don’t have to continue doling out a monthly check for something they’ll never own. The housing market has changed and with this change, manufactured homes have brought forth new opportunities to become a homeowner. NMLS Disclosure Vanderbilt Mortgage and Finance, Inc., 500 Alcoa Trail, Maryville, TN 37804, 865-380-3000, NMLS #1561, (http://www.nmlsconsumeraccess.org/), AZ Lic. #BK-0902616, Loans made or arranged pursuant to a California Finance Lenders Law license, GA Residential Mortgage (Lic. #6911), Illinois Residential Mortgage Licensee, Licensed by the NH Banking Department, MT Lic. #1561, Licensed by PA Dept. of Banking. |
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