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June 23, 2021

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Mortgage Protection: One Less Thing To Worry About

June 9, 2021

Mortgage Protection: One Less Thing To Worry About

How many things do you worry – er, think – about, each day? 25? 50? 99?

Here’s an opportunity to check at least one of those off your list. Read on…

Think back to when you were involved in the loan process for your home. Chances are good that at some point during those meetings, a smiling salesperson mentioned “mortgage protection”.

With so many other terms flying around during the conversation, like “PMI” and “APRs”, and so much money already committed to the mortgage itself – and the home insurance, and the new furniture you would need – you might have passed on mortgage protection.

You had (and hopefully still have) a steady job and a life insurance policy in place, so why would you need additional protection? What could go wrong?

Before we answer that, let’s clear up some confusion.

Mortgage Protection Insurance is not PMI. <br> These two terms are often used interchangeably, but they are not the same thing.

Both Private Mortgage Insurance (PMI) and Mortgage Protection are insurance, but they do different things. PMI is a requirement for certain loans because it protects the lender if your home is lost to foreclosure.

Essentially, with PMI you’re buying insurance for your lender if they determine your loan is more risky than average (for example, if you put less than 20% down on your home and your credit score is low).

Mortgage protection, on the other hand, is insurance for you and your family – not your lender.

There are several types of mortgage protection, but generally you can count on it to protect you in the following ways:

  • Pay your mortgage if you lose your job
  • Pay your mortgage if you become disabled
  • Pay off your mortgage if you die

Say, That Sounds Like Life Insurance. <br> Not exactly. Mortgage protection actually can cover more situations than a life policy would cover. Life insurance won’t help if you lose your job and it won’t help if you become disabled. Mortgage protection bundles all these protections into one policy – so you don’t need multiple policies to cover all the problems that could make it difficult to pay your mortgage each month. (Hint: A life insurance policy would be a different part of your overall financial plan and often has its own separate goals.)

How Does Mortgage Protection Work? <br> A mortgage protection policy is usually a “guaranteed issue” policy, meaning that many of the roadblocks to purchasing a life insurance policy, such as health considerations and exams, wouldn’t be there.

If you lose your job or become disabled, your policy will pay your mortgage for a limited amount of time, giving you the opportunity to find work or to make a backup plan. Again, your house is saved, your family still has a roof over their heads, and you’re a hero for thinking ahead. Accidents happen and people lose their jobs every day. Mortgage protection is there to catch you if you fall.

One More Thing… <br>
A mortgage protection policy is a term policy, so you don’t need to keep paying premiums after your house is paid off.

Now that you know a little bit more about mortgage protection policies, have those 99 worries ticked down to 98? Reaching out to me for guidance on your financial worries could help you make that number smaller and smaller… 97… 96… 95…

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A Beginners Guide to Saving and Shredding Documents

May 12, 2021

A Beginners Guide to Saving and Shredding Documents

It’s time to manage all those papers that are taking up space in your filing cabinets!

But how? Which documents should you preserve? Which ones should you shred? Here are 11 helpful tips on what to do with tax documents, legal documents, and property records.

Documents to keep <br> At the top of this list? Estate planning documents. Your will, your living trust, and any final instructions should be carefully labeled, stored, and protected. Your life insurance policy should be safeguarded as well.

Records of your loans should be preserved. That includes for your mortgage, car and student loans. Technically, you can shred these once they’re paid off, but it’s wise to keep them around permanently. Someday you may have to prove you’ve actually paid off these debts.

Tax returns <br> Here’s a trick—keep tax returns for at least 7 years. Why? Because there’s a 6 year window for the IRS to challenge your return if they suspect you’ve underreported your income.¹ Keep your records around to prove that you’ve been performing your civic duty by properly reporting your income.

(Check your state’s government website to determine exactly how long you’re supposed to keep state tax returns.)

Property records <br> Keep all of your records pertaining to…

  • Your ownership of your house
  • The legal documents for buying your house
  • Commissions to your real estate agent
  • Major home improvements

Save these documents for a minimum of 6 years after you move out of your home. If you’re a renter, keep all of your records until you’ve moved out. Then, fire up your shredder and get to work!

Speaking of your shredder…

Annual documents to destroy <br> Every year, you can shred paycheck stubs and bank records. Just be sure of two things…

First, make sure that you’re not shredding anything that might belong in your tax records.

Second, be sure that you’ve reviewed your finances with a professional who will know which documents may need preserving.

Once you’ve done that, it’s fine to feed your shredder at your discretion!

Credit card receipts, statements and bills <br> Once you’ve checked your monthly statement against your bank records and receipts, you’re free to shred them. You may want to hold on to receipts for large purchases until the item breaks or you get rid of it.

When in doubt, do some research! It’s better than tossing out something important. And schedule an annual review with a licensed and qualified financial professional. They can help you discern which documents you need and which ones can be destroyed.

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¹ “Save or Shred: How Long You Should Keep Financial Documents,” FINRA, Jan 27, 2017, https://www.finra.org/investors/insights/save-or-shred-how-long-you-should-keep-financial-documents

Home Buying for Couples: A Starter Guide

April 12, 2021

Home Buying for Couples: A Starter Guide

Buying your first home is an exciting, yet daunting process.

You and your significant other already have a lot on your plate in planning this huge purchase—from deciding how much house you need to fitting it all into a budget. Read on for some tips that will help ease the process of buying a house as well as help you save money in the long run!

Evaluate your financial situation before you start house hunting. It’s important to know what kind of mortgage payment is feasible for the income in a household. You’ll also have to contend with hidden housing costs like property taxes, renovations, and repairs. Calculate your total income, and then subtract your current expenses. That’s how much you have at your disposal to handle the costs of homeownership.

Improve your credit score. If you’re a first-time homebuyer, your credit score is important—it can profoundly affect your ability to get approved for loans and mortgages! The higher that number goes up, the easier it may become to get approval from lenders. You can help yourself out by paying off any outstanding debt balances such as student loan payments, medical bills, and credit card debt before going house hunting.

Start saving for a downpayment. As a rule of thumb, you’ll want to put down at least 20% of the home’s purchase price. This can take years, especially if your budget is tight! However, it’s well worth it—you may avoid the hassle of paying private mortgage insurance (PMI), which can substantially add to your monthly housing payments. A sizeable downpayment can also lower your interest rate and reduce the size of your loan.¹

Decide how much house you need. This is a tough question to answer, but it’s crucial that both partners are united on this front. Otherwise, one partner might feel like a house doesn’t meet their needs. Sit down with your partner and discuss what exactly you desire out of your home. How many bedrooms will you need? Do you want a big yard or a small one? How close to work do you want to live? Hammer out the important details of what you want in a home before the shopping begins!

Decide on your budget. Knowing how much you can afford before shopping for a home will help narrow down the options. Typically, housing costs should account for no more than 30% of your budget. That includes your mortgage payment, repairs, HOA fees, and renovations. Spending more than 30% can endanger your financial wellness if your income ever decreases.

Buying a home can be an exciting time for couples. But it’s important to take the necessary steps before you start house hunting. Remember, you want your new home to be a source of joy, not financial stress! Do your homework, talk with your partner, and start saving!

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“Do you need to put 20 percent down on a house?,” Michele Lerner, HSH, Sep 2, 2018, https://www.hsh.com/first-time-homebuyer/down-payment-size.html

Tips For Saving Money At The Grocery Store

March 24, 2021

Tips For Saving Money At The Grocery Store

Every penny counts, especially when you’re trying to balance your monthly budget.

But unless you plan ahead and only buy things you need, it’s easy to overspend at the grocery store. If you keep these tips in mind when you’re shopping, you can save money without sacrificing quality.

Bring a list of what you need to buy. Why? Because a list keeps you on task. You’ll be far less likely to wander the store, spying things you don’t need and snapping them up, if you go with a clear plan of what you need to buy. Make a list, check it twice, and shop with a purpose!

Buy in bulk when it makes sense for your family size and lifestyle. If you have a big family, buying in bulk can save you big money, especially if items are on sale! But don’t just buy anything that seems like a good deal—only buy what your family will consume, and be sure to store it properly. That means non-perishable food items, hygiene and cleaning products, and home supplies.

Compare the unit price. A low sticker price doesn’t always indicate it’s the best buy. Always check the unit price to maximize your savings. The cheaper it is per ounce, pound, or unit, the better bargain it probably will be!

Use coupons and sales flyers when available. It’s simple—just download your favorite store’s app and look for the savings or coupon page. All you have to do is tap the items that you want to save on. Then, just scan your phone when you check out and watch the savings!

Rack up loyalty points when possible. Afterall, why shouldn’t you be rewarded for your usual shopping? Just scan your card every time you shop, and eventually you can earn free or discounted items. However, be careful that you don’t increase your spending to maximize your rewards!

Why not try one of these tips for just a month and see how much you save? It’s a worthwhile experiment that may result in a substantial boost in your cash flow. Let me know how it goes!

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How to Manage High Costs of Living

March 22, 2021

How to Manage High Costs of Living

It’s no secret that living in a larger city can be more expensive than in other areas.

Depending on where you live, the cost of buying groceries, public transportation, and even rent can vary drastically! If you want to learn how to manage your finances when living in an area with a higher cost of living, read on…

Lower your housing costs. Keeping a roof over your head is probably your number one expense, especially if you live in a major city. The most straightforward way to free up cash flow, then, is to downsize your apartment or home size.

While that sounds simple, it’s not always easy, particularly if you own a house! But if your budget is too tight and it’s at all possible, moving to a cheaper home or apartment can be the single most effective way to cut your spending and increase your cash flow.

Consider moving to a cheaper area. To find less costly housing, you may choose to relocate to a new neighborhood. But be sure to keep tabs on the price of daily expenses like groceries or increased transportation costs in your new stomping grounds—just because housing is cheaper doesn’t mean everything else will be!

Take on a second job, like freelancing, dog walking, or babysitting. Fortunately, living in a high cost of living area might mean you have access to plenty of part-time or side work. Check out sites like Upwork, and leverage your social networks to find viable gigs.

If you live in an area that’s high cost and has poor employment opportunities, you may need to consider relocating entirely.

Trim your budget. Try using a free budgeting app like Mint or PocketGuard for this one! They’re easy-to-use tools that can help you identify problematic spending patterns. Once you know where you’re wasting money, you can develop a strategy for cutting costs.

Coping with a high cost of living can be challenging, especially if you love the lifestyle of a big city or your work requires you to live in a certain area. Using these strategies can help reduce the burden of living in an expensive neighborhood. Which one would be easiest for you to apply to your financial life?

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How to Save for Large Purchases

February 10, 2021

How to Save for Large Purchases

So you’re saving for retirement. Good for you!

You’re further in the game than a lot of people. But retirement’s probably not your only financial priority that requires saving for. Buying a house, raising children, buying cars for your children, and paying for college for your children are just a few expenses you can expect along the way. Preparing for those purchases now can protect your finances from getting blindsided when the time comes. Here are a few steps you can take to start preparing for substantial purchases today.

Write down upcoming expenses and purchases. Make a timeline of all your major, non-regular expenses. Determine how much they could cost, and then rank them in terms of urgency and importance. If it’s urgent and important–like saving for the delivery of a newborn–address it as soon as possible. If it’s important, but less urgent–like toddler-proofing your home–schedule it for later.

Budget out how much you’ll need and start saving. Once you have your priorities straightened out, figure out how much you’ll need to have saved and how much time you have available. Then, set up automatic deposits that put aside money for your savings goals.

Seek higher interest rates. Saving for your purchases in accounts with higher interest rates can give your money the extra juice you need to crush your goals. That may mean opening a high interest savings account with an online bank. But for some items, you might be able to find accounts specifically designed to help you. Meet with a licensed and qualified financial professional and see what options you have available!

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Getting Your Reindeer In a Row

Getting Your Reindeer In a Row

Dasher. Dancer. Prancer. Vixen.

Comet. Cupid. Donner. Blitzen. (And Rudolph.)

The reindeer that pull Santa’s magical sleigh – and a holiday staple roll-call that’s clean, clear, and instantly recognizable. But what if things got so hectic at the North Pole that when it was time to hitch up the reindeer on Christmas Eve, they were all out of order?

Prancer. Cupid. Dasher. Comet. Dancer. Vixen. Blitzen. Donner.

Did you notice that Rudolph was missing the second time around? (He got left at the North Pole due to plain, old forgetfulness and overlooking.)

Since so much can change from one “Happy Holidays!” to the next, your reindeer may not even be in a row at this point. They could be frolicking unattended in a field somewhere! And who knows where your Rudolph is.

We can remedy that. An annual review of your financial strategy is key to keeping you on track to your unique goals. So much can change over the course of a year, and your strategy could need some reorganizing.

1. Are you on track to meet your savings goals? A well-prepared retirement is a worthy goal. Let’s make sure nothing drove you too far off of your goal this year, and if it did, let’s explore what can be done to get you back on track.

2. Do you have the potential for new savings? Did your health improve this year? Did that black mark on your driving record time out? Changes like these have the potential to adjust your life insurance rate, but we’d need to dig in and find out what kinds of savings might be in store for you.

3. Have your coverage needs increased? Marriage, having kids, or buying a home are all instances in which your life insurance coverage needs would increase. Have any of these happened to you over the last year, and have you added the new family members as beneficiaries?

If you haven’t had a chance to review your strategy this year, we can fit one in before Santa shimmies down the chimney. Together we can get you situated for a well-ordered, reindeer-in-a-row attitude for the New Year!

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Two Rule That Could Save Your Financial Life

November 2, 2020

Two Rule That Could Save Your Financial Life

Almost 70% of Americans have less than $1,000 saved.¹

That means most Americans couldn’t cover unplanned car repairs, home maintenance, or medical bills without selling something or going into debt. They’re constantly living on the edge of financial ruin.

That’s where your emergency fund comes in. It’s a stash of cash that you can easily access in a pinch. You’ll be able to pay for that blown transmission without visiting a payday lender or selling your grandma’s silverware!

But here’s the catch: Your emergency savings account won’t help you much if it’s under-funded.

Follow these two rules to ensure that your rainy day savings can withstand the storms of life.

Rule #1: Only use your emergency fund for real emergencies.

I get it. Your emergency fund is an easily accessible chunk of money. Of course it’s going to be tempting to tap into it when you’re buying a new car or planning a dream vacation.

But your rainy day savings shouldn’t fund your lifestyle. They should protect it.

Think of it like this. Your vacation fund pays for your annual beach trip. Your emergency fund covers the bill when your car breaks down on the drive home. Only touch your emergency fund for unexpected expenses and enjoy the peace that comes from being prepared.

Rule #2: Always refill your emergency fund when it’s low

Ideally, your emergency fund should be stocked with 3 to 6 months of your income at all times. That should be enough to cover the gambit from small unexpected costs to a month or two of unemployment.

Don’t be afraid to tap into your emergency savings when you face unforeseen financial hiccups. Just remember to refresh your fund when the emergency has passed. The last thing you need is to be caught in the crosshairs of another crisis without a buffer.

Don’t let a financial storm blow you off course. Prepare for your future, and start building an emergency fund now. If you follow these rules, it can help financially protect you from the challenges life will inevitably send your way.

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¹ “Most Americans Lack Savings,” Maria Vultaggio, Statistia, Dec 18, 2019, https://www.statista.com/chart/20323/americans-lack-savings/#:~:text=Dec%2018%2C%202019-,Personal%20savings%20in%20the%20U.S.,45%20percent%20have%20nothing%20saved.

Is Your Home An Investment?

October 26, 2020

Is Your Home An Investment?

It’s a law of the universe that your house is an investment, right?

Just ask your grandparents who bought a $250,000 home for $50,000 during the 1950s. Better yet, listen to your savvy landlord buddy who rules an urban real estate empire that they gobbled up following the Great Recession. We’re surrounded by evidence that conclusively demonstrates the power of houses as investments… or are we?

Hmmm.

It turns out that buying a place of residence may not actually pay off in the long run like it might appear on paper. Here’s why you might want to rethink having your primary residence be an investment only.

Houses (usually) don’t actually grow more valuable <br> Think about that suburban mansion your grandparents snagged for $50,000 that eventually “grew” to be worth $250,000. On paper, that looks like an awesome investment; that house quintupled in value! But remember, $1 in 1950 had about the purchasing power of $10 today. Four gallons of gas or two movie tickets were just one buck!¹ That means $50,000 at that time could buy a $539,249 house today. Your grandparents actually lost money on that house, even though it looked like they made off like bandits!

It’s all because of one simple feature of economics: inflation. Prices tend to rise over time, meaning that your dollar today doesn’t go as far as it would have in 1950. So while it looks like your grandparents netted a fortune on their house, they actually didn’t. They lost over half its value! Unless your neighborhood suddenly spikes in popularity with young professionals or you start renting, your house probably won’t accrue any real worth beyond inflation.

Houses have to be maintained <br> But it’s not just that houses usually don’t actually appreciate in value. They also cost money in property taxes, utilities, and maintenance. Homeowners spend, on average, $1,105 annually to maintain their dwelling places.² You can expect to pay $12,348 annually on the average mortgage and $2,060 for utilities.³ & ⁴ That comes out to a total of $15,513 per year on keeping the house and making it livable. Let’s say your home is worth about $230,000 and appreciates by 3.8% every year. It will grow in value by about $8,740 by the end of the year. That’s barely more than half of what it costs to keep the house up and running! Your house is hemorrhaging money, not turning a profit.

It’s important to note that homeownership can still generally be a good thing. It can protect you from coughing up all your money to a landlord. Buying a property in an up-and-coming neighborhood and renting it out can be a great way to supplement your income. Plus, there’s something special about owning a place and making it yours. But make no mistake; unless you strike real estate gold, your place of residence probably shouldn’t be (primarily) an investment. It can be home, but you might need to rely on it to help fund your retirement!

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. Any examples used in this article are hypothetical. Before investing or enacting a savings, investment, or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.

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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. Any examples used in this article are hypothetical. Before investing or enacting a savings, investment, or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.


“7 Things You Could Buy For $1 in 1950,” Megan Elliott, Showbiz Cheatsheet, Oct 9, 2016, https://www.cheatsheet.com/money-career/things-you-could-buy-for-1-dollar.html/

“How Much Should You Budget For Home Maintenance,” Paula Pant, The Balance, May 26, 2020, https://www.thebalance.com/home-maintenance-budget-453820

“National Average Monthly Mortgage Payment,” Hannah Rounds, LendingTree, July 11, 2018, https://www.lendingtree.com/home/mortgage/national-average-monthly-mortgage-payment/#:~:text=What%20is%20the%20average%20monthly,the%20typical%20homeowners’%20monthly%20income

“How much is the average household utility bill?,” Nationwide, https://www.nationwide.com/lc/resources/personal-finance/articles/average-cost-of-utilities#:~:text=The%20typical%20U.S.%20family%20spends,climate%2C%20and%20your%20usage%20patterns

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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Good Debt?

August 24, 2020

Good Debt?

Debt is often seen as something you don’t want.

Monthly payments can be a huge drain on your bank account and can seriously lower your saving and investing power. That’s why eliminating debt is often an early step in most financial strategies.

But does good debt exist?

Are there situations where it’s acceptable or even wise to borrow money? Let’s explore what makes debt “good” or “bad” and some examples of both!

What makes debt good? <br> Not many would argue that living within your means isn’t good. But there are opportunities that you might not be able to afford with your basic income. It turns out that it sometimes takes money to make money! Taking out a loan to pursue those opportunities might be considered good debt. Sure, you might be in the hole for a little while, but you’re hoping you’ll increase your income and net worth further down the line.

Good debt <br> Most of us simply can’t afford a house or college education with money from our checking account, so we have to borrow those funds. But we’re expecting that those investments will pay off. Higher education paid for with student loans will hopefully equip you to land a better paying job that will help you pay down your debt and make you more money long-term. A wise real estate investment might be pricey, but you hope that your property will increase in value and you can make a profit when you sell. Taking out a loan to launch your entrepreneurial dreams is considered an example of good debt. Starting a business, while risky and expensive, can increase your value over the long-term. You’re taking the calculated risk that your long-haul earnings will heavily outweigh your short-term debts.

Bad debt <br> It’s important to remember that bad debt still exists. Most of what we buy loses value very quickly. Try reselling lunch meat a few days after you buy it to see what I mean! Cars depreciate by about 60% in the first 5 years of ownership.(1) And while it might be worth going into some debt to get a reliable vehicle, you shouldn’t typically treat a car purchase as an investment.

It’s also worth considering that even what appears to be good debt might come back to bite you. Neighborhoods and real estate markets change, and a once solid property might end up losing value over the long haul. And while a better education is usually a good thing, going into huge amounts of debt at a private school to study a non-lucrative field might not pay off.

Debt should never be taken lightly. Whether it’s a credit card, a personal loan, or a mortgage, make sure you do your homework to figure out the best move for you. Some of those decisions might be easy (not buying a high-end sports car) but others might take some serious consideration and research (starting a business). Figure out the costs and the earning potential and then make your decision!

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Source:

  1. https://www.nerdwallet.com/blog/insurance/car-insurance-basics/car-depreciation/#:~:text=Your%20car’s%20value%20decreases%20around,more%20of%20their%20initial%20value.

First time home buyer? Beware hidden expenses.

First time home buyer? Beware hidden expenses.

If you’re getting into the home buying game, chances are you’re feeling a little overwhelmed.

Purchasing a home for the first time is exciting but it can also be very stressful! Anyone who’s been through that process could probably share a story about a surprise hidden expense that came along with their dream home.

Read on to help prepare yourself for some common costs that can pop up unexpectedly when you’re purchasing a home.

Emergency fund Before we get into the hidden costs of homeownership, let’s talk a little about how to help handle them if and when they do arise. If you’re getting ready to buy a home but don’t have an emergency fund, you may want to strongly consider holding off that purchase, if at all possible, until you do have an emergency fund established. It’s recommended to put aside at least $1,000, but preferably you should save 3-6 months of your expenses, including mortgage payments. An emergency fund is the most fundamental personal finance tool you can have in your toolkit. It’s like the toolbox itself that holds all your other financial tools together. So, before you start home shopping, build your emergency fund.

Homeowners associations If your dream house happens to be in a neighborhood with a homeowners association (HOA), be prepared to pony up HOA fees each month (some HOA’s may charge these fees every quarter, or even annually). HOA fees may cover costs to maintain neighborhood common areas, such as pools or parks. They may also cover maintenance to your front lawn, and/or snow removal from driveways, etc. Typically, a homeowners association will have a board that enforces any agreed-upon property standards, such as having you remove ivy from your home exterior, or making sure your sidewalk is pressure washed regularly.

If you purchase a home with an HOA, be prepared for the added cost in fees as well as adhering to the rules. You may incur a fine for such things as your grass not being mowed properly, or parking your boat or camper in your yard.

Private Mortgage Insurance (PMI) PMI comes into play if you can’t make at least a 20% down payment on your new home. If that’s the case, your mortgage lender charges PMI which would kick in to protect them if you default on the loan. It can cost 0.3 to 1.5% of your mortgage. However, once you have 20% equity in the home, you don’t have to pay it anymore. (Note: You may have to proactively call your mortgage company and tell them to remove it.)

Maintenance costs If you’ve been living the maintenance-free life in an apartment or rental home, the cost of maintaining a house that you own may come as a shock. Even new homes require maintenance – lawn care, pressure washing, clearing rain gutters, painting, etc. There’s always going to be something to upgrade or repair on a home, and many first-time home buyers aren’t prepared for the expense.

A good rule of thumb is to budget about 10 percent of the value of your home for maintenance per year. So, if you buy a $250,000 home, you should prepare for $2,500 a year in maintenance costs.

Home insurance Be prepared for some sticker shock when purchasing your homeowners’ insurance. Homeowners insurance is typically significantly more expensive than purchasing a renter’s policy. If you live in an area prone to natural disasters, be prepared to pay top rates for homeowners’ insurance. If you live near a body of water, you may also need flood insurance.

Life insurance Many first-time homebuyers may not give life insurance a thought, but it’s an important factor that can help protect your investment. You probably need life insurance if anyone is depending on your income. Especially if your income helps pay your mortgage every month, you should strongly consider a life insurance policy in case something were to happen to you. This will help ensure that your spouse or significant other can continue to live in your home.

Homebuying is exciting and part of the American dream. But don’t neglect to come back to reality – at least when making financial decisions – so you can budget properly and anticipate any hidden costs. This will help ensure that your first-time home buying experience is a happy one.

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Are Gym Memberships Worth It?

Are Gym Memberships Worth It?

Let’s face it—we’ve all botched a New Year’s fitness resolution.

Sure, we started the year with great intentions and a few gym visits, but it didn’t take long for our resolve to waver and we never returned. However, many of us have kept that membership around. After all, we paid so much to sign up that we might as well hold on to it just in case our motivation comes back, right?

Wrong.

It turns out that gym membership might have been a bad value right from the start. But how can you tell? Here’s a few things to consider if you’re thinking about finally moving on from your overly ambitious New Year’s resolution.

How gym memberships work <br> Gym memberships seem pretty simple on the surface; you pay once a month for access to gym equipment during operating hours. But annual fees and initiation fees can add up pretty quickly, meaning that you can potentially sink hundreds of dollars into a gym. National gym chains may range in price from $164 to $1,334 per year, but the national average comes out to $696 annually. Plus, some gyms make you sign a contract locking you into a year-long membership. You have to pay for the membership regardless if you work out!

The big question: Are you paying for something you won’t use? <br> Gym memberships are more cost effective the more you take advantage of them. Going to the gym seven times a week at an average priced gym? Let’s do the math. You’ll pay $1.90 per visit. Go four times per week? $3.36 (1).

But let’s say you visit the gym about four times per month for an hour-long sweat session. You’ll wind up spending $14.50 per hour! To put that in perspective, we spend an average of $0.28 on Netflix per hour. Sitting around watching TV is far more cost effective than working out.

Alternatives to gym memberships <br> So what can you do if you want to get fit but don’t want the potential financial black hole of a gym membership? It’s often cheaper in the long run to build your own gym at home rather than getting a membership. You also might want to see if your apartment or office has a serviceable gym. If all else fails, you can always do body weight exercises. You might be surprised by how grueling and intense push-ups and squats can be!

The bottom line is that the keys to making your gym membership worth it are motivation and discipline. The cost of buying a membership isn’t enough incentive (2). You have to find a deeper drive to get you in the gym week in and week out. Check out the costs of your local gym, weigh the alternatives, and ask yourself why you want to start working out before you sign that contract!

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3 Ways to Save Money (No Formulas Needed)

January 13, 2020

3 Ways to Save Money (No Formulas Needed)

When you’re ready to take control of your finances, it can seem overwhelming to get your savings plan going.

Every finance expert has a different theory on the best way to save – complete with diagrams, schedules, and algebraic formulas. Ugh. But saving money isn’t complicated. Here’s a secret: the best way to save money is not to spend it. It’s that simple.

Turn Off the TV
The act of turning off your TV to save money on electricity may not make much difference. Running a modern TV for as long as 12 hours per day probably costs about $8 per month. The real expense associated with your television comes from the advertisements. Look around your home and in your driveway and you’ll probably see some of the fallout associated with watching television. Advertisers have convinced us that we need the latest and greatest gizmos, gadgets, cars, homes, and that we need to try the latest entree at our favorite chain restaurant before the deal goes away forever! Skipping the TV for some time spent with family or enjoying a good book may not only cost you less money in the long run, it’s priceless.

The 30-Day Rule
Here’s how it goes. If you want something, and that something isn’t an emergency, make a note of it and then wait 30 days before revisiting the idea of purchasing that item. Your smartphone is perfect for this because it’ll probably be in your hand when you first find the item you want to buy. Use a note keeping app or a reminder app to document the date and details about the item. After 30 days, the desire to purchase that item may have passed, or you may have concluded that you didn’t really need it in the first place. If you still want the item after 30 days – and it fits into your budget – go for it!

The 10-Second Rule
The 30-day rule is useful in a lot of cases, but it may not work so well for some types of household spending, like grocery shopping. 30 days is too long to wait if you’re out of coffee or cat litter. Even so, the grocery store is a hotbed for impulse buying – sales, specials, and check-out aisle temptations may be too much to resist. Instead of dropping items into your cart on a whim, wait 10 seconds and then ask yourself for one good reason why you need to purchase this particular item right now. Chances are pretty good – that there isn’t a good reason. Ding! You just saved money. That was easy. (Hint: Always make a list before you head to the store.)

Now that you’ve gotten rid of the idea that trigonometry + calculus + geometry = financial independence, which money-saving tip will you put into practice first? (Quick note: The 30 Day Rule does not apply here – no need to wait to get started!)

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What Does “Pay Yourself First” Mean?

September 18, 2019

What Does “Pay Yourself First” Mean?

Do you dread grabbing the mail every day?

Bills, bills, mortgage payment, another bill, maybe some coupons for things you never buy, and of course, more bills. There seems to be an endless stream of envelopes from companies all demanding payment for their products and services. It feels like you have a choice of what you want to do with your money ONLY after all the bills have been paid – if there’s anything left over, that is.

More times than not it might seem like there’s more ‘month’ than ‘dollar.’ Not to rub salt in the wound, but may I ask how much you’re saving each month? $100? $50? Nothing? You may have made a plan and come up with a rock-solid budget in the past, but let’s get real. One month’s expenditures can be very different than another’s. Birthdays, holidays, last-minute things the kids need for school, a spontaneous weekend getaway, replacing that 12-year-old dishwasher that doesn’t sound exactly right, etc., can make saving a fixed amount each month a challenge. Some months you may actually be able to save something, and some months you can’t. The result is that setting funds aside each month becomes an uncertainty.

Although this situation might appear at first benign (i.e., it’s just the way things are), the impact of this uncertainty can have far-reaching negative consequences.

Here’s why: If you don’t know how much you can save each month, then you don’t know how much you can save each year. If you don’t know how much you can save each year, then you don’t know how much you’ll have put away 2, 5, 10, or 20 years from now. Will you have enough saved for retirement?

If you have a goal in mind like buying a home in 10 years or retiring at 65, then you also need a realistic plan that will help you get there. Truth is, most of us don’t have a wealthy relative who might unexpectedly leave us an inheritance we never knew existed!

The good news is that the average American could potentially save over $500 per month! That’s great, and you might want to do that… but how do you do that?

The secret is to “pay yourself first.” The first “bill” you pay each month is to yourself. Shifting your focus each month to a “pay yourself first” mentality is subtle, but it can potentially be life changing. Let’s say for example you make $3,000 per month after taxes. You would put aside $300 (10%) right off the bat, leaving you $2,700 for the rest of your bills. This tactic makes saving $300 per month a certainty. The answer to how much you would be saving each month would always be: “At least $300.” If you stash this in an interest-bearing account, imagine how high this can grow over time if you continue to contribute that $300.

That’s exciting! But at this point you might be thinking, “I can’t afford to save 10% of my income every month because the leftovers aren’t enough for me to live my lifestyle”. If that’s the case, rather than reducing the amount you save, it might be worthwhile to consider if it’s the lifestyle you can’t afford.

Ultimately, paying yourself first means you’re making your future financial goals a priority, and that’s a bill worth paying.

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Big Financial Rocks First

September 9, 2019

Big Financial Rocks First

A teacher walked into her classroom with a clear jar, a bag of rocks, a bucket of sand, and a glass of water. She placed all the large rocks carefully into the jar.

“Who thinks this jar is full?” she asked. Almost half of her students raised their hands. Next, she began to pour sand from the bucket into the jar full of large rocks emptying the entire bucket into the jar.

“Who thinks this jar is full now?” she asked again. Almost all of her students now had their hands up. To her student’s surprise, she emptied the glass of water into the seemingly full jar of rocks and sand.

“What do you think I’m trying to show you?” She inquired.

One eager student answered: “That things may appear full, but there is always room left to put more stuff in.”

The teacher smiled and shook her head.

“Good try, but the point of this illustration is that if I didn’t put in the large rocks first, I would not be able to fit them in afterwards.”

This concept can be applied to the idea of a constant struggle between priorities that are urgent versus those that are important. When you have limited resources, priorities must be in place since there isn’t enough to go around. Take your money, for example. Unless you have an unlimited amount of funds (we’re still trying to find that source), you can’t have an unlimited amount of important financial goals.

Back to the teacher’s illustration. Let’s say the big rocks are your important goals. Things like buying a home, helping your children pay for college, retirement at 60, etc. They’re all important –but not urgent. These things may happen 10, 20, or 30 years from now.

Urgent things are the sand and water. A monthly payment like your mortgage payment or your monthly utility and internet bills. The urgent things must be paid and paid on time. If you don’t pay your mortgage on time… Well, you might end up retiring homeless.

Even though these monthly obligations might be in mind more often than your retirement or your toddler’s freshman year in college, if all you focus on are urgent things, then the important goals fall by the wayside. And in some cases, they stay there long after they can realistically be rescued. Saving up for a down payment for a home, funding a college education, or having enough to retire on is nearly impossible to come up with overnight (still looking for that source of unlimited funds!). In most cases, it takes time and discipline to save up and plan well to achieve these important goals.

What are the big rocks in your life? If you’ve never considered them, spend some time thinking about it. When you have a few in mind, place them in the priority queue of your life. Otherwise, if those important goals are ignored for too long, they might become one of the urgent goals - and perhaps ultimately unrealized if they weren’t put in your plan early on.

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What You Need To Know About Permanent Life Insurance

August 28, 2019

What You Need To Know About Permanent Life Insurance

Most people, when they think of life insurance, might think of two types: Term Life Insurance and Whole Life Insurance.

There are two types of policies, but it’s more accurate to think of them as temporary or permanent. It’s kind of like renting an apartment vs. buying a home. When you rent, it’s probably going to be temporary, depending on your situation. However when you buy a house, the feeling is more like you’re settling down and you’ll be there for the long-haul. When you rent, you don’t build value. But when you buy, you can build more equity in your home the longer you own it.

Permanent life insurance can build a cash value, something a term policy can’t do. A term life policy only has monetary value when it pays a death benefit in a covered claim. Temporary and permanent policies also have some types of their own.

For example, term life insurance can include living benefits or critical illness coverage, as well as group term life insurance and key person life insurance, which is sometimes used in businesses. These are all designed to be temporary coverage. Here’s why. The policy might guarantee premiums for 10 years – or as long as 30 years – but after its term has expired, a term policy can become price-prohibitive. For this reason the coverage is, for all practical purposes, considered temporary.

Permanent Life Insurance: Designed to Last a Lifetime

As its name suggests, permanent life insurance is built to last. It’s a common perception that permanent life insurance and whole life insurance are synonymous, but whole life insurance is just one type of permanent life insurance.

At first glance, a permanent life insurance policy can seem more expensive than a term policy, but you’d have to consider the big picture to be fair in comparing the two options. Over the course of a full lifetime, permanent life insurance can be less costly – in part – because term policies become expensive if you require coverage after the initial term has expired. An investment element also helps to build cash value in a permanent life insurance policy, taking pressure off premiums to provide coverage.

If I’ve left you scratching your head over your options, no worries! Understanding the benefits of each type is important, and choosing which policy is best for you is a uniquely personal experience. Contact me, and we’ll review your options to find the right strategy for you and your family.

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Quick Guide: Life Insurance for Stay-at-Home Parents

Quick Guide: Life Insurance for Stay-at-Home Parents

Life insurance is vitally important for any young family just starting out.

Milestones like buying a home, having a baby, and saving for the future can bring brand new challenges. A solid life insurance strategy can help with accommodating the needs of a growing family in a new phase of life.   A life insurance policy’s benefits can

  • Replace income
  • Pay off debt
  • Cover funeral costs
  • Finance long-term care
  • And even more, depending on the type of policy you have.

And replacing family income doesn’t only mean covering the lost income of one earning parent.

Replacing the loss of income provided by a stay-at-home parent is just as important.   According to Salary.com, if a stay-at-home mom were to be compensated monetarily for performing her duties as a mother, she should receive $143,102 annually. That number factors in important services like childcare, keeping up the household, and providing transportation. Sudden loss of those services can be devastating to the way a family functions as well as expensive to replace.   Stay-at-home parents need life insurance coverage, too.   Contact me today to learn more about getting the life insurance coverage you need for your family and building a financial plan that will provide for your loved ones in case a traumatic life event occurs.

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Is a home really an investment?

April 15, 2019

Is a home really an investment?

The housing market has experienced major peaks and valleys over the past 15 years.

If you’re in the market for a new home, you might be wondering if buying a house is a good investment, or if it even should be considered an investment at all…

“Owning a home is the best investment you can make.”
We’ve all heard this common financial refrain: “Owning a home is the best investment you can make.” The problem with that piece of conventional wisdom is that technically a home isn’t an investment at all. An investment is something that (you hope) will earn you money. A house costs money. We may expect to save money over the long term by buying a home rather than renting, but we shouldn’t (typically) expect to earn money from buying a home.

So, a home normally shouldn’t be considered an investment, but it may offer some financial benefits. In other words, buying a home may be a good financial decision, but not a good investment. A home may cost much more than it gives back – especially at the beginning of ownership.

The costs of homeownership
One reason that buying a home may not be a good investment is that the cost of homeownership may be much higher than renting – especially at first. Many first time homebuyers are unprepared for the added expense of owning a home, plus the amount of time maintaining a home may often require. First-time homebuyers must be prepared to potentially deal with:

  • Higher utility costs
  • Lawn care
  • Regular maintenance such as painting or cleaning gutters
  • Emergency home repairs
  • Higher insurance costs
  • Private Mortgage Insurance (PMI) if you don’t provide a full 20 percent down payment

A long term commitment
Another problem with considering a house as an investment is that it may take many years to build equity. Mortgages are typically interest heavy in the beginning. You can expect to be well into the life of your mortgage before you may see any real equity in your home.

Having the choice to move without worrying about selling your home is a benefit of renting that homeowners don’t enjoy. The freedom to move for a career goal, romantic interest, or even just a lifestyle choice is mostly available to a renter but may be out of reach for a homeowner. So, be sure to consider your long term goals and aspirations before you start planning to buy a house.

When is buying a home the right move?
Buying a home in many cases can be an excellent financial decision. If you are committed to living in a specific area but the rent is very high, homeownership may have some benefits. Some of those may be:

  • Not having a landlord make decisions about your property
  • Tax savings
  • Building equity
  • A stable place to raise a family

Buying a home: Not always a good investment, but may be a good financial decision
Although buying a home may not pay you in high returns, it can be an excellent financial decision. If owning a home is one of your dreams, go for it. Just be aware of the costs as well as the benefits. If you’ve always wanted to own your own home, then the rewards can be myriad – dollars can’t measure joy and the priceless memories you’ll create with your family.

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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. Market performance is based on many factors and cannot be predicted. Any 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, realtor, and/or tax expert to discuss your options.

Emergency Fund Basics

March 27, 2019

Emergency Fund Basics

Unexpected expenses are a part of life.

They can crop up at any time and often occur when you least expect them. An emergency expense is usually not a welcome one – it can include anything from car repairs to veterinary care to that field trip fee your 12 year old informed you about the day of. So, what’s the best way to deal with those financial curve balls that life inevitably throws at you? Enter one of the most important personal financial tools you can have – an emergency fund.

What is an emergency fund?
An emergency fund is essential, but it’s also simple. It’s merely a stash of cash reserved solely for a financial emergency. It’s best to keep it in a place where you can access it easily, such as a savings account or a money market fund. (It also might not hurt to keep some actual cash on hand in a safe place in your house.) When disaster strikes – e.g., your water heater dies right before your in-laws arrive for a long weekend – you can pull funds from your emergency stash to make the repairs and then feel free to enjoy a pleasant time with your family.

Some experts recommend building an emergency fund equal to about 6-12 months of your monthly expenses. Don’t let that scare you. This may seem like an enormous amount if you’ve never committed to establishing an emergency fund before. But having any amount of money in an emergency fund is a valuable financial resource which may make the difference between getting past an unexpected bump in the road, and having long term financial hindrances hanging over you, such as credit card debt.

Start where you are
It’s okay to start small when building your emergency fund. Set manageable savings goals. Aim to save $100 by the end of the month, for example. Or shoot for $1,000 if that’s doable for you. Once you get that first big chunk put away, you might be amazed at how good it feels and how much momentum you have to keep going.

Take advantage of automatic savings tools
When starting your emergency fund, it’s a good idea to set up a regular savings strategy. Take a cold, hard look at your budget. Be as objective as possible. This is a new day! Now isn’t the time to beat yourself up over bad money habits you might have had in the past, or how you rationalized about purchases you thought you needed. After going through your budget, decide how much you can realistically put away each month and take that money directly off the top of your income. This is called “paying yourself first”, and it’s a solid habit to form that can serve you the rest of your life.

Once you know the amount you can save each month, see if you can set up an automatic direct deposit for it. (Oftentimes your paycheck can be set to go into two different accounts.) This way the money can be directly deposited into a savings account each time you get paid, and you might not even miss it. But you’ll probably be glad it’s there when you need it!

Don’t touch your emergency fund for anything other than emergencies
This is rule #1. The commitment to use your emergency fund for emergencies only is key to making this powerful financial tool work. If you’re dipping into this fund every time you come across a great seasonal sale or a popular new mail-order subscription box, the funds for emergencies might be gone when a true emergency comes up.

So keep in mind: A girls’ three day weekend, buying new designer boots – no matter how big the mark-down is – and enjoying the occasional spa day are probably NOT really emergencies (although these things may be important). Set up a separate “treat yourself fund” for them. Reserve your emergency fund for those persnickety car breakdowns, unexpected medical bills, or urgent home repairs.

The underpinning of financial security
An emergency fund is about staying prepared financially and having the resources to handle life if (and when) things go sideways. If you don’t have an emergency fund, begin building one today. Start small, save consistently, and you’ll be better prepared to catch those life-sized curve balls.

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