Here’s a real easy Quick Tip for you! This is not my idea. This is from David Bach. Do you want to know how to shave 7 years off of your 30-year mortgage? This is not a get rich scheme or anything illegal at all! All you have to do is say the words “biweekly mortgage plan”.
This plan let’s you pay your mortgage “biweekly”, or in other words, “twice weekly”. This will split your mortgage payment into two for each month. So, for example, if your mortgage payment is $1000, there will be two payments of $500 each. What this does is it adds an extra payment a year. It may not seem like much, but in the end, it will shave your mortgage by seven whole years! What a quick and easy way to save a ton of money in interest payments! Plus your home will be paid off quicker!
So go call your bank or mortgage company and ask for the biweekly mortgage plan! Many banks are now offering this. Some banks do charge for this but the saved money and time is worth it in my opinion!
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I ran across an interesting CNN article on emergency savings.
Here are the vital statistics:
Only 40% of Americans have a separate savings for emergencies
Only 19% of those aged 18-24 have separate emergency funds
Only 23% of people with less than $25,000 in annual household income have them
31% of African Americans and 32 percent of Hispanics have them
58% of those with annual income of $75,000 or more have emergency funds
This is some sad news indeed on the financial state of this country. However, it is pretty expected since this is a debt nation with a negative savings rate. We are spending more than we’re earning and borrowing the rest. The sad fact of this survey is that the people who need an emergency fund the most, don’t have them. That’s why people have to resort to rip-offs like payday loans and credit card advances!
Another interesting thing to note about the survey was that 81 percent of those surveyed believed their rainy-day savings would be sufficient to cover emergency expenses this year. Are we delusional or what? How can 81% say that their emergency fund will cover emergencies when only 40% even have one? We really need to change our thinking in order to get into financial shape as a nation. It’s going to be hard, because it’s so ingrained in the culture, but it isn’t impossible. If you can change, and then teach your children the right way to manage money, we can change as a nation. It will be a slow process, but it begins with you. God Bless!
Here’s the link to the CNN article.
It’s pretty much common knowledge now that everyone should have an emergency fund of 3-6 months (some experts say even more) of expenses in liquid savings (money that’s easily accessible). But unfortunately, common knowledge isn’t necessarily common practice and many people just don’t have anything in savings. The key to getting out of debt is to have some sort of emergency savings that acts as a cushion against life’s hurdles. Without this cushion, you will be forced to use your credit card or payday loans and go deeper in debt.
If you’re struggling with debt, you absolutely need to have an emergency fund. It is extremely important. Here’s a great plan to get out of debt from Dave Ramsey:
Step 1: Stop borrowing. Simple enough.
Step 2: Save $1000 and put it in the bank. This is the beginning of your emergency fund. You want to do this before you start attacking your debt because this will act as a cushion to protect you for emergencies.
Step 3: Start attacking your debt using the “debt snowball”. We’re going to pay off all your debts except your mortgage. List your debts on a sheet from smallest to largest (in amount, not interest rate). Then start attacking the smallest debt and pay minimum payments on the rest. Once that’s paid off, take that payment and add it to your next debt and so on until all your debts are paid off.
Step 4: Fully fund your emergency fund which is 3-6 months of expenses. You can download an emergency fund worksheet from Bankrate. It’s a PDF that you can view or print. To get the 6 month emergency fund, you just need to multiply each line by 6 instead of 3.
Step 5: Then start investing and grow your net worth.
This is not my plan. This is from Dave Ramsey who is a great Christian finance guy. I’m going to do a review on one of his books so stay tuned for that.
A great place to put your emergency fund is a high yield online savings account. I’ll have another post on some of the savings accounts that I use.
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Here’s today’s verse of the day:
7The rich rules over the poor,
And the borrower is servant to the lender.
Proverbs 22:7 (NKJV)
Some wise words indeed from King Solomon and so true. When you look at society today, this country is definitely a debt nation. The savings rate continues to be negative which means that the American people are spending more than they’re saving. That’s not good and it’s hard to shake especially when we’re surrounded by it and it’s so engrained in the culture.
All I have to say is that you don’t have to “keep up with the Jones’s”. You have to fight the temptation to show off with your possessions because we came into this world with nothing and we will leave it with nothing as well. I would rather have money saved up and not have to live paycheck-to-paycheck than to “act like” I have money by borrowing, borrowing, and borrowing. Examine your assets. Do you really own anything? The title to your car and house has your bank’s name on it. The borrower is truly slave to the lender and until we get out of this mentality to spend, spend, spend, we as a nation will continue to be in debt. I mean, the government can’t even get out of debt and that just goes to show you that it is really part of this culture today.
Now I’m not saying that all debt is bad. I’m in the camp that says there’s “good debt” and there’s “bad debt”. Taking out a loan to pay for your education is good debt. Taking out a loan to buy a party boat to show off to friends is bad debt. I think that taking out a mortgage on a house can be good debt just because of the skyrocketing real estate prices in some areas. As long as you’re living below your means and buying a house that’s relatively affordable, owning a home can be the best investment you make. But if you can’t afford the payments with a 30-year fixed rate mortgage, you can’t afford that house. It’s generally unwise and risky to take out these interest-only loans and adjustable-rate- mortgages. Just don’t do it.
So next time you apply for a loan, remember that you are slave to the lender for the life of the loan. Not all debt is bad but make sure you really need what you’re trying to buy and that your investment will pay off some time in the future.