Can We Live on One Income?

Dear Dollar Stretcher,
I have been very interested in gathering information on living on one income. Although others have helped me with suggestions on saving and even investing, I still haven’t come across methods to calculate actual costs of working. Could you please advise me on ways to determine these costs?
Thanks!
Karen J.

Karen is not the only one asking this question. A lot of families are wondering if they could make a go of it on one income. And it’s not just moms who are electing to stay at home. More dads are getting into the act, too. But one of the key questions for these families is ‘can we live on one income?’. Let’s see if we can’t help them create a framework to make a decision.

The first step is not surprising. You’ll need to know your current income and expenses by category. If you use a budget you probably have the required info. Otherwise, you’ll need to set aside some time to go through your check registers, credit card statements and your earning statement from work that shows your income and deductions. Figure out your income and expenses for the year. That will be your starting point.

What we’re going to try to do is to take your current income and expenses and make adjustments to both that would occur with the loss of one income. Once you’ve done that, you can see if you have enough income to cover expenses. If possible use a one year period. That way you won’t forget annual expenses like property taxes.

Let’s start with the income. That’s the easiest. We’ll be reducing income by the gross income of the stay-at-home partner. The key here is to remember that we’ll be using gross pay. That’s your pay before taxes and the other deductions have been taken. We’ll consider those deductions in a moment.

Next we’ll get into the meat of Karen’s question. How much will expenses go down? Naturally that will depend on your family. So we’ll try to give you tools to estimate the answer for your family.

The first expense that will be lower is your taxes. The most exact way to calculate how much lower is to work through an income tax return at your new income level. I know that most of you won’t want to do that. The next best thing is to take the amount of money that was withheld from your pay for the ‘retiring’ person during the year. Unless you had to write a big check or got a large refund in April, that will be a reasonable approximation.

The next expense is the trickiest one. That’s insurance. You will save any money that had been deducted from your paycheck. So count any money deducted from your salary as a reduced expense.

But you’ll be losing any coverage you had. So decide whether you’ll be adding ‘family’ coverage to your spouse’s plan, finding a separate plan or paying the bills yourself. You might need to shop around to check out competitive rates. You’ll need to add that cost to your current expenses. It’s possible that insurance could cost you more than it does now.

What about auto expenses? At the very least you’ll use less gas if you’re not driving to work every day. You might get a low mileage discount on your insurance. If only one person is leaving the house each day, you might even be able to survive with one auto. Or if that’s not feasible, could you get by with one car that’s older to avoid a car payment? The things to consider with your auto are the payments, gasoline, maintenance, insurance, and parking/tolls. Remember, even if you don’t have a car you might still have savings by eliminating bus fares or contributions to carpools.

Daycare is an obvious area of savings if children are involved. And it’s not just the check you write to the daycare provider. They might require disposable diapers whereas you’d be willing to use the lower cost cloth ones. You’ll need to think about your daycare situation and to recognize the areas of savings.

Grocery expense will almost certainly change. But it can be difficult to estimate by how much. If you eat out often to save time you’ll want to keep track of what you spend that way. As a rule of thumb it costs only about half as much to eat similar foods at home. So if you spend $20 per week ($1,040 yearly) in restaurant food, you should be able to save about $500 when you have the time to cook at home.

Even if you do cook all your own meals, you’re likely to find some savings. The time to use coupons and shop sales can greatly reduce your food bills.

You could save money on clothing. Even if you don’t ‘dress up’ for work, you’ll probably still save some. It’s not uncommon to the stay-at-home partner to save 50% of what they’ve been spending on clothes.

You might also be able to save on dry cleaning and laundry service. Obviously, this will vary widely depending on your lifestyle. And any outside laundry services are likely to be eliminated.

Lunches at work are another expense that will be reduced. For those who bring lunch the savings might be fairly small. Perhaps just the cost of a daily drink or break-time coffee. Even a dollar a day is about $250 a year in savings. For those who eat in the company cafeteria or a local restaurant the savings can be significant. Just $5 a day for fifty weeks a year totals $1,250.

Another, often overlooked area is the amount spent on workplace gifts, cards and cakes. In many workplaces, it’s not uncommon to be asked to contribute on a frequent basis. Think of the requests during the last month and you’ll begin to get an idea of how much you can save in a year.

Finally, you’ll want to look for savings that could be unique to your family. Some children are especially prone to colds they pick up in daycare. Avoiding those doctor bills would provide savings. Another family might be prone to ‘treat’ themselves for surviving their busy schedule. Perhaps with a slower family pace those treats wouldn’t be purchased.

At this point you should be able to adjust your current income and expenses with the changes. You might be surprised at the results. Many families find that the second income is all but consumed with expenses that come with a second job. But the only way to know for sure is to work through your own income and expenses.

Ultimately, Karen will find that there’s more than just income and expenses to making this type of decision. But, whether her family decides to try to live on one income or not, it’s foolish to make a decision without considering what would happen to the family budget. We hope Karen finds the answer that’s right for her family.

This article by Gary Foreman first appeared on The Dollar Stretcher and was distributed by the Personal Finance Syndication Network.


FTC Warns Consumers about Vacation Rental Scams

With July 4th right around the corner, plenty of us are still running around trying to book a last-minute vacation rental. If that’s you, here’s what you need to know: scammers are ready with fake vacation rental ads. Rental scammers try to get your rental booking and take your money. But, when you show up for the vacation, you have no place to stay and your money is gone!

Here are some of the ways they pull off the scam:

Some scammers start with real rental listings. Then they take off the owner’s contact information, put in their own, and place the new listing on a different site — though they might continue to use the name of the actual owner. In other cases, scammers hijack the email accounts of property owners on reputable vacation rental websites.

Other scammers don’t bother with real rentals — they make up listings for places that aren’t really for rent or don’t exist. To get people to act fast, they often ask for lower than average rent or promise great amenities. Their goal is to get your money before you find out the truth.

So how do you avoid a rental scam?

  • Don’t wire money or pay with a prepaid or gift card for a vacation rental. Once the scammer collects the money, it is almost impossible to get it back.
  • Don’t be rushed into a decision. If you receive an email pressuring you to make a decision on the spot for a rental, ignore it and move on.
  • Look out for super cheap rates for premium vacation properties. Below-market rent can be a sign of a scam. Do some extra research to confirm the deal is legitimate before jumping in.
  • Get a copy of the contract before you send any deposit money. Check that the address of the property really exists. If the property is located in a resort, call the front desk and confirm the location of the property and other details on the contract.

If you come across any of these ads, we want to hear about it — report it to us at ftc.gov/complaint, whether you lost money or not.

If you sent money to a rental scammer, contact the company you used to send the money, such as your bank, Western Union, MoneyGram, Green Dot, iTunes, or Amazon and tell them the transaction was fraudulent. They may not be able to get your money back, but it is important to alert them of fraud.

This article by the FTC was distributed by the Personal Finance Syndication Network.

New research report on student loan repayment and broader household borrowing

Student loans make up an increasing share of the debt held by borrowers around the country, particularly for younger borrowers. Our previous research has shown that borrowers vary greatly in their ability to pay off their loans, how quickly they can do so, and the potential hurdles they face. Today, we released a new Data Point report providing a closer look at borrowers’ use of credit as they approach and make their final student loan payments, and in the months that follow. 

Looking at how borrowers pay off their student loans helps us understand how households manage their finances over time. The patterns we see highlight the interconnected nature of borrowers’ finances, as repayment of one type of debt affects payments and borrowing on other types of debt. This research can help us better predict the impacts new policies or products may have on homeownership, credit card use, and the broader economy as a whole. 

As background, the typical student loan has a term of ten years, with equal monthly scheduled payments. However, borrowers can pay the loan off early at any time by using savings, gifts, or other resources, or by refinancing with a new loan. Our analyses focus on how borrowers first pay off a student loan and what happens next.

Key findings include: 

  • Most borrowers paying off a student loan do so before the final payment is due, often with a single large final payment. The median final payment made on a student loan is 55 times larger than the scheduled payment (implying a payoff at least 55 months ahead of schedule), with 94 percent of final payments exceeding the scheduled payment and only 6 percent of loans paid off with the final few payments equal to the scheduled payments. Even among loans within five years of their scheduled payoff date, for which refinancing is uncommon, the median final payment is more than seven times larger than the scheduled payments made immediately prior.
  • Borrowers paying off a student loan early also reduce their credit card balances and make large payments on their other student loans at the same time. In addition, these borrowers are 31 percent more likely to take out their first mortgage loan in the year following the payoff than in the year preceding the payoff. While this is evidence of a link between the timing of student loan payoffs and home purchases, the simultaneous reduction in credit card and other student loan balances suggests that increased wealth or income may influence when borrowers pay off student loans, reduce credit card balances, and purchase homes. 
  • The smaller share of borrowers who pay off their loan according to the scheduled payments pay down, rather than take on, other debts in the months following payoff. Paying off a loan reduces borrowers’ monthly payment obligations, and those with additional student loans put 24 percent of these savings toward paying down those other student loans faster. Borrowers also use 16 percent of the drop in their required payments to reduce credit card balances. Unlike for borrowers paying off a student loan early, those paying off on schedule are not more likely to take out a mortgage for the first time.

Taken together, this new research suggests that when borrowers approach their final student loan payments most prefer to, and are able to, pay off the loans in full with a single large payment. The timing of this payment coincides with a broader reduction in existing debts and is followed by increases in home purchases. However, for those borrowers who are unable to, or choose not to, pay off their loans early, the reduction of other debts that follows their final payment suggests that their required monthly student loan payments constrained their ability to pay down these other debts. 

Understanding why so many borrowers use large lump sum payments, rather than gradual increases in monthly payments to pay off student loans, could help us better predict how the student loan market evolves as a whole, and warrants additional research. Our new findings suggest that the timing of many student loan payoffs may be determined by life events such as household formation or jumps in income or wealth, though transaction costs, rules of thumb, or inertia may also play a role.

Finally, while this analysis focuses on student loan borrowers who are successfully paying off their loans, similar approaches could be applied to the large population of student borrowers struggling with rising balances, delinquency, or default. Such research could shed light on how borrowers use other credit products to cope with their student debt, how their access to other credit may be inhibited, and how available repayment plans and other programs change these outcomes.

This article by was distributed by the Personal Finance Syndication Network.


6 Smart Ways to Save Money When Dining Out

Trying to make the thrifty choice in every situation of your life can be exhausting. Take for example the frugal decision to cook for yourself instead of eating out. While that’s a good plan to have the vast majority of the time, who doesn’t enjoy the chance to splurge a little and take an evening off?

A couple of years ago, my wife and I decided to start “Together Tuesdays.” While this weekly event can technically involve a number of different date options, it usually means dining out in some capacity. Although this might not be the most frugal idea we’ve ever had, we’ve managed to keep things in check by making efforts to keep our spending to a minimum and still enjoy the benefits of a nice meal out.

So how do we do it? Here are six of our top tips for dining out on a budget:

Check the Specials First

One of the best ways to save money when dining out starts before you even get to the restaurant — and maybe before you even choose where you want to dine. These days there are several ways you can research dining options, ranging from review sites like Yelp to Facebook pages run by the owners of each establishment. Beyond getting an idea for what people think of each restaurant, you can also garner some important information about what types of specials and promotions they may offer. In some cases, these specials may be tied to a certain day of the week (typically weekdays), a special event, or even a time of the year. Meanwhile, other promotions can be more random and will require a bit more research to spot.

If there are certain restaurants you enjoy going to, you can also sign-up to receive their e-mail alerts. Not only will this ensure you’ll be the first to know about great deals but these blasts may also include exclusive coupons or offers. It also doesn’t hurt to follow some of your favorites on social media for similar reasons.

Split a Dish or Take Some Home

This one may feel a bit obvious but it’s important to mention nonetheless. As you’re doing your pre-meal research, you’ll also want to get a sense for the portion sizes any given restaurant offers by looking at various photos and reading a couple of reviews. By doing this, you may decide that you and your dining mates will be able to split a dish (or dishes) and still leave with full stomachs.

I’ll admit that splitting entrees isn’t exactly my favorite pastime. Not only does it sometimes lead to awkward exchanges with the wait staff but certain restaurants may even tack on an additional charge or “split fee” as a result. Instead, if I anticipate that a single order will leave me with extra food, I’ll plan ahead and resolve to take the rest home with me for subsequent meals.

There are a few things to note with the “take it home” strategy, not the least of which is understanding what items can travel and which can’t. A classic example of this is french fries, which even when reheated in an oven can rarely be revived to their former glory (and don’t even talk to me about trying to microwave them). Because of this unfortunate truth, I may elect to finish my fries and take more of whatever they were on the side of home for future lunching.

Another important note is to plan your itinerary properly so that your leftovers aren’t sitting out for too long. While most foods can safely make the trip home, leaving items in the car for an extended period of time can increase your food safety risks. Because of this, if you don’t intend on heading home from the restaurant in a timely manner, you may want to rethink your options.

Skip the Show and the Flash

Have you ever been to Benihana? The purveyor of Japanese cuisine has become a popular destination for celebratory gatherings thanks in part to the fun experience that comes with each meal served. Not only is your meal prepared before your eyes by a skilled hibachi chef but the cook tends to throw in some fun gags and stunts along the way. While these show elements make for a great night out, they also comes at a price.

Don’t get me wrong — I love hibachi style meals, but that’s exactly why we skip Benihana and head to other establishments that exclude the show elements. By accepting that our food is going to be prepared in a normal kitchen instead of beside our table, we’ve been able to enjoy food that’s just as good but at nearly half the price.

Of course this is just one specific example, but there are similar lessons to be learned for other restaurants. Often times things like trendy decor, location, or a chef’s name on the door can raise the price per meal significantly. In some cases, having these unique experiences may be worth it to mark a special occasion or event. As for the rest of the time, you’re probably better off dining at a venue where the prices are based on the food and not the flash.

Stock up on Gift Cards and Join Loyalty Programs

Even though my wife and I make a point to dine out on a near weekly basis, she sometimes mocks me for always wanting to eat at one of small list of favorite restaurants. What can I say — I like what I like! Luckily, such loyalty can sometimes save you money thanks to the way some locations push their gift cards.

Seeded strongly in my regular restaurant rotation is Red Robin. I mention this because I’ve often seen offers from them where you can get a free $5 gift card just for purchasing $25 in cards. Although this is surely aimed at those giving gifts, there’s no reason you can’t take advantage of these offers yourself as long as you plan on making use of the balance.

Speaking of Red Robin, another thing I like about the chain is their strong loyalty program. For every nine burgers you purchase, you get one for free. Additionally, I always look forward to my free birthday burger each year (sidenote: I swear they’re not paying me to write this). That said, loyalty programs are far from exclusive to Red Robin. So whatever your favorite dining spots are, it may be worth looking into what types of programs they have for fans like you.

Nix the Booze (and the Dessert)

If the first half of this section title didn’t make you gasp, surely the parenthetical did. While enjoying a craft cocktail and/or concluding the meal with a decadent dessert can be half the fun of dining out for some, there’s no denying that these add-ons are often overpriced. In fact, how many times have you been at a restaurant where a single drink costs as much as an entree does?

For those who really want to sip a drink while dining out, you may want to aim for locations that offer happy hours or other drink specials. As for dessert, unless there’s some specialty your sweet tooth just can’t resist, you might consider heading home to truly conclude your meal experience or perhaps stopping off at a quick-service option that can satisfy your craving. In each of these scenarios, you’re bound to save some money on the night.

Use a Rewards Credit Card or Cash Back App

These days, there may be ways for you to save money when dining that don’t even really involve the restaurant itself. For example, in recent years, dining perks have been a big selling point for some rewards credit cards, leading to enhanced cash back when you use your card at restaurants. Personally the 4% back on dining is a major reason I decided to get the Uber Visa card. Similarly, I always look forward to the times when my Discover It card makes restaurants its quarterly 5% cash back spending category. Such kickbacks can help take a little bit of the sting out of each check.

What’s even better than these great credit card rewards is combining them with cash back deals from apps and services like Dosh, Visa Local Offers, and others. I’ve even been able to earn as much 14% back from dining out when you add up my Dosh and Uber Visa cash back — not even including any specials or coupons the restaurant offered. Needless to say, it’s definitely worth checking out these third-party apps and offers when choosing where to eat.

Sure dining out may not be the most frugal option in most cases, but there’s nothing wrong with splurging once in a while. Additionally, if you want to enjoy a night out without feeling guilty about your spending, there are several efforts you can make to save money on your meals. With a bit of pre-dining planning and research, some specials or loyalty offers, and the help of rewards credit cards and apps, you can have a great dining experience that won’t cost you a ton.

This article by Kyle Burbank first appeared on Money@30 and was distributed by the Personal Finance Syndication Network.


Home Staging Tips From the Experts

Do you need to sell fast to save for your next house? According to Professional Staging, a whopping 81 percent of buyers agree that home staging makes it easier to visualize the property for sale as their future home. Not to mention that after staging, a house will spend approximately 73 percent less time on the market.
 
Home staging is a great way to ensure your house is appealing to buyers and will sell quickly. But that doesn’t mean you have to hire a professional home stager. Although it can seem overwhelming, you can still stage your house effectively on your own. We asked the experts for their best home staging advice. With these professional tips, you’ll know exactly how to guarantee buyers will see themselves in your home.

Declutter

An experienced Realtor, Barry Richards, emphasizes how important decluttering is for house staging. Whether it is too many bold or personal decorations hanging from the walls or too much furniture, having a simplified environment is going to make it easier on the buyer. Richards explains this is often the case because “bold colors and unique decorations in a home will stand in the way of buyers with different tastes.” You want to ensure your tastes and possessions aren’t going to make it difficult for the buyer to “take emotional possession of a home.” Buyers want that freedom to envision themselves in the home, and it is easier to do that with “neutral colors and lack of personal pictures and possessions.” Give the buyer room to imagine!

Stick to the Basics

Realtor Michael Kelczewski states that a house presentation shouldn’t be “busy.” He expands, “Staging supports the creative envisioning of a prospective buyer. The objective jogs home ownership imagination, so attempt to place objects or furniture accordingly. Common mistakes over-stage a home, creating a “busy” presentation. I suggest sticking to the basic furniture, keeping attention to the property.” Having a simple presentation will, as Kelczewski explained, allow buyers to imagine what they would do with the house if they chose to go through with the purchase. You don’t want to have such a “busy” presentation that the only thing a buyer can see is what you have done with the home.

Identify the Most Important Rooms

Professional home stager and Realtor, Robin Leigh advises potential sellers to realize that “the most impactful rooms to stage for maximum appeal and scalability are the main rooms of the house, the living and dining rooms, the master bedroom and bath, and the kitchen and nook areas.” Leigh also explains that “the kitchen can get away with a minimal amount of accessories and bar stools at the counter; it just shouldn’t be left bare.” And most importantly, a seller should “stage the first rooms a buyer walks into. That is where they connect to the property.” First impressions go a long way with buyers. If they fall in love with the first rooms they see, it is more likely they are going to connect with the rest of the house.

Remember the Exterior

Evan Roberts, a Real Estate and Property Manager with Dependable Homebuyers, tells us to focus on the exterior and “curb appeal.” Roberts’ experience has shown that the exterior “appeal has a high impact on sales price, and staging the front of the house often costs the least.” He advises sellers to “spread new mulch in the garden, set up rocking chairs on the porch,” and add a ‘welcome home’ sign somewhere in the front yard to create “a welcoming start to a buyer’s showing.” Roberts ends by telling sellers to consider setting up flower planters on either side of the front door. He also thinks it’s an added touch if the color of the flowers matches the front door because it “adds a lot of character to a home’s curb appeal.”
 
Real estate professional Tara Nelson agrees that the exterior of the home is just as important as the interior. She specifically advises sellers to make the porch inviting, clean up the yard, and make the outside of the house feel homey.

Remove Personalized Wallpaper

Professional property stylist Karen Gray-Plaisted explains a specific and common mistake among sellers is not removing personal wallpaper. Although it may be a cute addition to your home, it most likely isn’t going to resonate with potential buyers. Buyers want to personalize things such as the wallpaper by themselves. That might also be a roadblock in their decision process because it screams “extra work” for them if they do decide to buy the property. What we are seeing time and time again from the experts is that depersonalizing your home to an extent is an essential home staging tip. 

Don’t Forget the Fireplace (If Applicable)

Jeff Miller, co-founder of the AE Home group real estate team in Maryland, advises home stagers to consider the fireplace. He says “everyone who tours your home sees [a room with a fireplace] as a gathering spot for all their friends and family. You need to make this room look inviting so that they can imagine making future memories in your home.” Miller explains his “go-to staging tool for the mantel is candles. You can buy a set of varying heights to add dimension for a low cost.” He also adds that finding a candle that matches the style and color of the room’s decor is a way to create “a consistent pallet.”

Make the Bathroom a Priority

Jessica Klingbaum, a real estate agent in New York City, draws our attention to how important the bathroom is to the selling of a house. You can’t, or more so you shouldn’t, go through the home staging process without making sure your bathroom looks pristine. Bathrooms can quickly and easily turn someone either on or off to the house, so it is important to take care of the grimy work. No one wants to buy a house with a less than spotless bathroom. “Re-caulk the tile, scrub the entire bathroom from top to bottom to make it sparkle and shine (as much as possible), reglaze your bathtub and/or tile, etc.” Anything you can do to make the bathroom more appealing is going to be worth it. Potential buyers will notice. 

Consider Introducing a Scent (Without Going Overboard)

Klingbaum also adds that it is important for your house to have a good smell that puts the buyer at ease and creates a homey atmosphere. She recommends using essential oils to create an immediate gratification the second the potential buyer walks through the door. This would also be a helpful tip to implement throughout the rest of the house, not just in the front room. The bathroom, for example, would be another perfect place to have some kind of diffuser or candle to make the room smell pleasant and seem cleaner and fresher. However, make sure you don’t have so many smells that it becomes overwhelming. Stick with the same subtle fragrance, and place it sparingly throughout the rest of the house.

Create a Calm Atmosphere

George Roser, Broker and Real Estate Agent, tells us another way to create an inviting atmosphere is to play soft music. Roser explains that it “not only sets a relaxing mood, but it helps to drown out any unexpected noise that may appear outside.” This would help keep the potential buyer focused and unaffected by possible distractions. But as Roser suggested, make sure it’s soft music; you don’t want to make it seem like you’re trying too hard or make it difficult to hear. The art of subtlety goes into almost every home staging tip. 

Let Less Be More

In the event that your home is already vacant, Realtor Bill Golden explains “staging can help, but it isn’t always necessary,” especially if the only way to fully stage the home is to poorly furnish it in a hurry. If you don’t have enough furniture and belongings to fill the home, consider using that to your advantage by focusing on other parts of the home, such as freshly painted walls or shiny wood floors. Allowing the home to be less “busy” will accentuate the other less obvious features of your home and create a more spacious area. This will also give buyers more of an opportunity to imagine their own furniture and belongs in the house. Lastly, just because your house is vacant doesn’t mean you can’t use the above tips to help stage your house just as effectively as a fully furnished house.

We hope these tips give you an idea of what home staging tips are going to be the most successful in selling your home. Once you have sold the old house and are starting to prepare the new one, consider looking into the best home warranty companies to protect your systems and appliances. This will not only be useful to protect your home, but if you ever have to home stage again in the future, you won’t have to worry about replacing anything because your systems and appliances will be covered. So, be aware of this and the other most worthwhile home investments and purchases because it will definitely save you in the long run. 

This article by McCall Robison first appeared on Best Company and was distributed by the Personal Finance Syndication Network.


Rest Home or Medical Alert System: The Better Use of Money

The older you get, the more likely you’ll need someone to take care of you. This presents a slew of different challenges, even financial complications. You might ask yourself any number of questions: “Should I pay to stay in an assisted living home?” “What about my independence?” “What about a medical alert system?” “What are the benefits of that?” If you’re not sure which option is right for you, here are a few important factors to consider:

Which Option Is More Cost Effective?

According to our research at BestCompany.com, top-rated medical alert companies typically charge a maximum of approximately $50/month for their most expensive programs. Some companies will occasionally charge an activation fee or equipment fee, but top-rated companies such as Medical Guardian and MobileHelp do away with those to give customers a consistent and affordable price.

In comparison, a nursing home is much more expensive. According to a study by MetLife in 2012, the average cost of a private room within a nursing home was $248/day! Now, there are less expensive options like assisted living and adult day care. According to similar studies, assisted living costs an average of $3,022/month and adult day care can be up to $100/day. It doesn’t take a master’s degree in mathematics to conclude that a medical alert system is more cost effective, but let’s quantify this in order to put it in perspective. We’ve broken the comparison down for you in the following infographic:

When you compare the two programs, the obvious choice regarding cost is a medical alert system.

But Is It the Best Choice for Me?

That depends. Just because a medical alert system is far less expensive doesn’t mean that it’s the ideal choice for everyone. Nursing homes and assisted living homes will usually offer additional services such as housekeeping, meal prep, recreational activities, and on-site medical assistance. You won’t get any of that from a medical alert system, except for a quick, on-hand response tool for medical emergencies. A medical alert system is recommended for an individual that still has the capacity to live independently.

Ultimately, this is up to you. Before you make a final decision, it’s important to assess your health and independence needs, and also to shop around.

This article by Best Company first appeared on Best Company and was distributed by the Personal Finance Syndication Network.


What Credit Score Do I Need to Buy a House?

When the time comes to buy a house, the first thing on your to-do list should be to obtain a copy of your credit report and credit score in order to get a clear picture of where you stand.

Your credit score will be a determining factor in the financing of your new home. Lenders look at your income, debt, and assets or savings when making a lending decision, but it’s your credit score that will ultimately determine whether you get approved for financing.

Lenders will look at your credit score as a measure or your creditworthiness, and your score will also determine the interest rate you’ll qualify for, which will directly affect your monthly mortgage payment. Because your mortgage will likely be the largest loan debt you incur during your lifetime and the term of the loan will be either 15 or 30 years, you’ll want to secure the lowest possible interest rate.

While you may still qualify for a loan even with a lower credit score, that score will equate to a higher interest rate and/or less favorable loan terms. Furthermore, lending requirements change with the economy. For instance, restrictions were drastically tightened after the housing market collapse of 2008 and lenders were rarely extending loans to anyone with a credit score under 720.

Let’s take a look at what qualifies as a good credit score and how different credit scores are used to determine the type of loan and rate borrowers can expect.

Credit score ranges

Most credit score algorithms — including the most commonly used FICO score, and the lesser-used VantageScore 3.0 — range from 300 to 850. The credit score average in the United States varies, but a score of 700 or above is generally considered to be good. Within the range of credit scores, there are different categories, ranging from bad to excellent:

  • Excellent Credit: 750+
  • Good Credit: 700-749
  • Fair Credit: 650-699
  • Poor Credit: 600-649
  • Bad Credit: below 600

These ranges offer a guideline, but each lender determines its own definition of excellent, good, fair, poor, and bad credit scores and how those are used for loan eligibility. For instance, one lender may approve applicants with credit scores of 680 or higher, while another may only approve those with scores over 720. Regardless of those definitions, borrowers will pay higher interest rates the further their scores dip below 700.

Different loans require different scores

Loan eligibility will also depend on the type of loan you’re applying for — for instance, VA loans typically require a minimum score of 620. For an FHA loan, borrowers must have a credit score of at least 580. Laxer credit requirements are based on the fact that FHA loans are designed to assist first-time home buyers by making it easier to qualify and by requiring a down payment of only 3.5 percent. While borrowers with lower scores may qualify, the down payment requirement goes up to 10 percent for borrowers with scores under 580.

USDA loans, designed for borrowers in rural areas, require a minimum credit score of 640. As an added benefit, both USDA and VA loans require zero down payment, allowing applicants to finance up to 100 percent of the price of their home.

Conventional loans, which require 20 percent down in order to avoid PMI (private mortgage insurance) usually require a credit score of 620 or higher. Jumbo loans — typically defined as any loan for more than $453,100 require a credit score of at least 700. If borrowers meet the credit score requirement, they are eligible to put only 5 percent down as opposed to the standard 20 percent.

Qualifying for a home loan with poor credit

If your credit score is lower than 580, it doesn’t necessarily mean you can’t get a loan, but it will be more challenging. Following these three tips will increase your chances of qualifying:

  1. Provide additional proof of credit responsibility. Particularly when your credit score is low, lenders will want to see plenty of documentation to prove that you can pay your mortgage and other bills on time, and that you are capable of saving enough money to pay down other debts. Before you begin the loan application process, you’ll want to gather the proper documentation: pay stubs, bank statements, tax returns for the past year, W2s, and investment or retirement account statements.
  2. Apply with a co-signer. If you are unable to qualify for a mortgage loan on your own, getting someone with good credit to co-sign can be a good option because it will significantly increase your chances of getting a home loan. It’s important to remember, however, that if you default on your loan, it will also negatively impact your co-signer’s credit.
  3. Repair your credit ahead of time. Of course, the best option is to clean up your credit well before you begin applying for a home loan. Working with a reputable credit repair specialist will enable you to check credit for free. Credit repair specialists can also provide you with a complete credit report evaluation and advise you on the necessary steps to improve your score. Often, loan applicants find that they can make positive strides in improving their credit faster this way than by trying to fix credit on their own, or just waiting for negative items to disappear.

Buying a home is an exciting step. Determining the credit score you need to buy a house is just as crucial as the other momentous details, such as saving for the house and deciding where to live. Even if credit issues are part of the equation, it’s important to understand that there are still options to help you secure the financing you need to make home ownership a reality. Once you have the credit worries out of the way, you can start tackling other things like unpacking and staying organized after moving, home maintenance, and home budgeting. There are so many exciting steps to look forward to after you get a handle on what credit score you need to buy a house. 

 

This article by Best Company first appeared on Best Company and was distributed by the Personal Finance Syndication Network.


The Reason Housing Confidence Is Hitting Record Highs

As millennials begin reluctantly crossing the bridge from youth into adulthood, conversations about buying a home become more and more frequent. Concerns about the cost of rental fees and general living expenses –– especially in expensive metropolitan cities –– are high enough to convert even the most devoted of apartment dwellers.

As more young people increasingly trade in their skyline views and landlords for a mortgage and some backyard space, housing confidence is at an all-time high. But how can we quantify something as subjective as confidence? Enter the Housing Confidence Index.

The Housing Confidence Index

Each month, the Federal National Mortgage Association –– commonly known as Fannie Mae –– conducts the National Housing Survey (NHS). The NHS is the first scientific study of its kind, used to create a systematic analysis of current consumer views about the state of the housing market.

In this survey, representatives from Fannie Mae contact 1,000 individuals at random to ask over 100 live survey questions. These questions are wide ranging and cover topics including personal finance, housing, and job security. The results of the survey are compiled to determine the Home Purchase Sentiment Index (HPSI), referred to colloquially as the Housing Confidence Index. These results are presented in the form of yes-or-no beliefs statements with corresponding percentages:

  • I believe it is a good time to buy
  • I believe it is a good time to sell
  • I believe home prices will go up
  • I believe mortgage rates will go down
  • I am not concerned about losing my job
  • My household income has increased in the last 12 months

At first glance, these statements and their results may not seem particularly scientific, but remember that this survey is not intended to report on the state of the actual housing market, but rather the state of consumers’ confidence in it. Several mortgage, lending, and real estate companies –– including Zillow –– have attempted to follow in Fannie Mae’s footsteps by creating their own version of this survey, though none have succeeded in engineering something quite as widely used or impactful.

The Housing Confidence Index, April 2018

The results of the April HCI rose 3.4 points to 91.7 percent, the highest rating ever, and up 5 points from April in 2017. Here are the individual results of the April 2018 survey, as reported by Fannie Mae:

  • The net share of Americans who say it is a good time to buy a home decreased 3 percentage points to 29 percent.
  • The net share of those who say it is a good time to sell rose 6 percentage points to 45 percent, reaching a new survey high.
  • The net share of Americans who say home prices will go up increased 7 percentage points to 49 percent in April.
  • The net share of those who say mortgage rates will go down over the next 12 months increased 4 percentage points to 48 percent.
  • The net share of Americans who say they are not concerned about losing their job increased 5 percentage points to 76 percent in April.
  • The net share of those who say their household income is significantly higher than it was 12 months ago rose 1 percentage point to 18 percent.

Across the board, consumer confidence in housing rose from March to April, with the exception of one category: Americans who say it is a good time to buy, which dipped by 3 percentage points. It would be fair to wonder how housing confidence can be so high when an increasing number of people feel that it isn’t a good time to buy a house, but these attitudes have many variables attached to them. In this case specifically, we might be able to connect increasing apprehension to purchase a home with rising housing prices, which also correlates directly with the growing belief that it’s a good time to sell; as with the housing market itself, this survey is cyclical.

What Increased Housing Confidence Means for Millennials

From March 2017 to March 2018, home prices in the United States spiked by 7 percent, the biggest bump in four years. That means that home prices are increasing at a much greater rate than income levels. On its own, the Housing Confidence Index growth may seem like a good thing, but it has its fair share of potentially negative implications –– especially for millennials.

Millennial homeownership rose for almost all of 2017, but for the first quarter in 2018 it took a hit. A fiercely competitive market, limited inventory, and increased seller confidence has led to skyrocketing housing prices. Millennials, who often have less capital saved due to the aforementioned high cost of living, can be losers in this market. In addition, they are often first time home buyers, who lack the experience –– and the earnings from selling a first home –– to adequately keep up with some of their older competitors. It certainly doesn’t help that millennials want to stay in the metro cities they’ve been renting in, which generally go hand in hand with higher down payments and even more competition.

Moving Forward

The best thing millennials can do in this lucrative market is to create a home-buying strategy. Downsizing to a smaller apartment or taking on a side hustle are great ways to increase income to build or add to an existing nest egg. Millennials should also consider amending their home buying wish list, like considering living in a nearby suburb to the metro area of their choice.

Also, putting money towards small investments that will save you money later on is a great way for millennials to get a foot in the door for more savings down the road. For example, if purchasing a home does work out for you, consider investing in small precautionary measures such as a home warranty. This way, you pay little money out of pocket every month and you will save large amounts of money every year in home maintenance costs. Unexpected repairs and/or replacements of major appliances are expensive, and if you have a home warranty to take care of that for you, you won’t have to worry about the extra costs and you can put that saved money towards other things.

For home buying, it’s important to note that if you have a strong credit history and a good lender, it’s always an option to put down a lower percentage down payment and pay Private Mortgage Insurance (PMI). PMI gets a bad rap, as it increases monthly payments to protect the lender from liability. But, if you are able to reach 20 percent down after the first year of purchasing your home, PMI can be removed via refinancing. Most importantly, millennials should be realistic about what they can afford to pay for a house.

While Housing Confidence is getting stronger every day, confidence in your ability to become a homeowner doesn’t have to shrink. By making sacrifices, setting goals, and staying up to date on market trends, it is possible for millennials to save enough money to be competitive with other buyers with better budgets, and to realize their ambitions of purchasing a home in even the toughest of housing markets.

This article by Best Company first appeared on Best Company and was distributed by the Personal Finance Syndication Network.


Is Home Automation Worth the Extra Cost?

Home security systems have been around for decades, but home automation has begun to be more commonplace with the introduction of smartphones. With the exception of a few companies, home automation features don’t come standard with most home security systems. So with the extra money you’ll be paying out of pocket every month, are the extra features really worth it? Allow us to explain what home automation is, what to expect, and if it’s really worth it.

What Is Home Automation?

Before we talk about home automation, we need to lay the foundation for understanding home security systems. If you’ve already signed a contract for a professionally-monitored home security system, you’re paying a monthly fee for features like door and window sensors. Once mounted, these door and window sensors communicate to a central station in your home. From this base station, you can arm or disarm your system. When your system is armed and a door or window opens, the corresponding sensor will send a signal to the base station, triggering an alarm and notifying authorities. Systems can cost as little as $19.99/month and will have basic features like door and window sensors, and may include extras like window stickers and a yard sign. Sometimes, these are enough to deter crooks.

While it’s nice to have a home that’s professionally monitored against burglars, carbon monoxide, and fires, what if you want something that’s on the cutting edge of technology? The home of the future probably sounds pretty appealing. This is essentially what home automation is, and luckily, home automation features are more approachable than you think. More and more companies are adopting home automation through tools like smartphones and voice-controlled devices such as the Amazon Echo or Google Home. When you pair your system with one of these tools, it’s almost like your home has a built-in super computer.

Typically, your home automation system will function off an app that can be installed to your Android, iOS, or Windows device. This way, you can manage all sorts of home features from your phone or tablet even if you’re halfway across the world. All you need is internet access. Here are some of the more common features for home automation:

  • Locks—Doors with specially-equipped locks can communicate wirelessly with your smartphone. Lock your doors after you pull in to work if you forgot before you left the house.
  • Thermostat—Adjust your home’s temperature from your phone. Sometimes, you can set it to a particular schedule.
  • Lights—Turn lights on and off through your phone. Like the thermostat, this can sometimes be automated. This is particularly useful if you’re on vacation and you want your house to look lived in.
  • Cameras—This is extremely common among DIY home security systems, but has become one of the most common home automation features. It’s a great tool to keep an eye on your pets. You can even get alerts if a camera senses movement.
  • Garage Doors—Open and close your garage door without a special garage door remote.
  • Appliances—This is rarer, but not unheard of. Imagine preheating the oven before you come home to cook your family’s prized chicken recipe before your guests show up.

Essentially, your smartphone app, Amazon Echo, or Google Home becomes an automation hub for all of these tools. You can adjust your thermostat, turn lights on and off, monitor security cameras, and more. Depending on the package, you can even set timers and schedules for your thermostat, lights, and other features. Make sure to consult with a professional home security representative from top companies so you know exactly what features you’re paying for.

How Much Will It Cost?

This depends on the provider. With some top companies, it can be as little as $12-22/month extra. With other companies, it can be difficult to say because they won’t post the pricing information outright on their website. This may not necessarily be a bad thing, though. When you go directly to a company and ask for a quote based on the needs of your home, they can give you personalized feedback on what package will best suit your needs.

But let’s grab a number for the sake of comparison. Home automation can cost as much as $144-$288 per year. This is as much as two dozen movie tickets or a month’s worth of groceries. For some, that might be just a bit out of their range because they can barely afford the payments on their standalone security system. For others, that’s chump change.

To be clear, almost every home security company these days will over some basic home automation feature standard. Usually, this is in the form of a smartphone app that can arm and disarm your home security system remotely. But when it comes to features such as remote lights, locks, and garage doors, that’s going to vary depending on the provider.

Is It Worth It for You?

By this point, you’ve probably already answered this question. Is it important to you to have these tools remotely available to you no matter where you are? Is this added peace of mind worth it? If you’re still on the fence, here are a few questions you might want to consider:

  • Are you a generally forgetful person when it comes to lights and door locks?
  • Are you trying to save energy?
  • Do you want to impress your friends, family, or neighbors?
  • Do you have enough expendable income to justify the upgrade?

If you answered yes to the majority of those, home automation is probably a good option for you. But before you reach for the phone to call your home security company, make sure they have the features you’re looking for. Top companies have different home automation packages, so you might find the features you’re looking for in a different company. It pays to do your due diligence before you sign on the dotted line.

This article by Best Company first appeared on Best Company and was distributed by the Personal Finance Syndication Network.


7 Reasons Younger Workers Need More Savings

When we’re young, it’s easy to convince ourselves that saving is something we’ll get to “later.” In fact, data show that building a healthy savings is even less of a priority for those under 35. The median savings balance for that age group averages $1,580, according to the Federal Reserve. And while that may seem like a healthy savings, in reality, it’s only about enough to handle an appliance breakdown or major auto repair.

Still, as many of us know too well, when it comes to saving money, the struggle is real. It’s not easy to save these days, especially for those just starting down a career path, and recent college graduates saddled with substantial student loan debt. That’s why so many younger workers are saving far too little. But there are some compelling reasons why this generation actually needs to be saving more than any preceding generations in America.

Let’s take a look at seven factors contributing to the need for more substantial savings accounts among younger workers:

1. The cost of living is increasing faster than wages

It’s a given that the cost of living rises as time goes on. However, in recent years average wages haven’t kept pace with the massive increases that are happening year over year in the United States. As of June 2016, the annual rise in rental prices was nearly four times the overall inflation rate. The median price to rent a two-bedroom apartment is currently $1,174, marking a 1.5 percent increase year over year — and that number is higher in the fastest-growing states.

2. They’ll face larger debt

In addition to basic living costs, the under 35 age group is also saddled with higher debts than previous generations. The Federal Reserve’s Survey of Consumer Finances found the average debt to be $82,500 for households with debt that have a head of household who is 35 years old or younger. The survey also found that mortgage debt on a primary residence in this age group hovers around $142,000.

3. Social Security benefits will run out

For years we’ve heard that Social Security is running out and won’t be there — at least not at 100 percent — for the younger generation. Recent estimates predict that it will be depleted by 2034. When that happens, according to recent predictions from the Social Security Trustees, the program would be able to provide just 77 percent of benefit payments. That means that the younger generation needs to plan to supplement their reduced benefits with other savings.

4. Retirement funds aren’t what they used to be

“Traditional” retirement options have changed in recent years. Twentieth Century retirement was built on several types of retirement accounts –– including pensions –– combining to supplement the golden years. Fast forward to 2018, however, and the majority of companies have eliminated pensions in favor of matching retirement contributions or nothing at all. The problem? As budgets tighten, fewer employees are contributing to 401(k) or other matched retirement accounts. In fact, two-thirds of Americans aren’t even saving money in a 401(k), according to recent data. Furthermore, only 4 percent of those earning below $50,000 and contributing to a 401(k) max out their contribution. 

5. Savings interest is low

Even for those who are saving what they can, interest rates on savings accounts aren’t yielding much extra. The average interest a person can expect to earn on a standard savings account is only about .03 percent and even high-balance accounts can’t expect to yield more than .10 percent.

6. Student loan debt is at an all-time high

College costs have grown exponentially, and most graduates are left with huge financial burdens to repay student loans before they can even consider financing a home. Approximately 70 percent of college students leave school with debt and the average borrower has $37,172 in student loans upon graduation. That’s a $20,000 increase from 13 years ago. 

7. They’ll live longer

In spite of all the doom and gloom, there is one positive reason why younger workers will need more savings: people are living longer. When Social Security began more than 80 years ago, the majority of Americans didn’t live much past 65. Recent data from the National Center for Health Statistics indicates that Americans can now expect to live 78.6 years. Better medical care and advances will likely push life expectancy even higher in the years ahead. This means younger workers will need more in savings to support longer retirement and increasing long-term care costs.

While it can seem impossible to save at this stage of life — particularly if your earnings are low and your debts are already high — it’s important to plan ahead and set aside as much income as possible for savings. There are several approaches you can take to help you save money on a tight budget, including the 50/30/20 method. This can be an effective approach to budgeting because it ensures you’re putting at least 20 percent of your take-home pay toward debt repayment and savings.

With a healthy savings plan in place, you’ll ensure that you can meet your future financial obligations and aspirations and maintain healthy credit scores for important investments, such as saving for a house. Being financially prepared will enable you to qualify for a mortgage and other loans in the future and to secure a more comfortable retirement. It will also guarantee you are prepared to make other smaller investments, such as a home warranty or a home security system, that will save you money down the road. It’s essential to be prepared for all kinds of purchases and investments if you want to handle the upkeep of your home, your possessions, and your financial well being.

This article by Best Company first appeared on Best Company and was distributed by the Personal Finance Syndication Network.