Over the past five years, mortgage interest rates have been low! I know a lot of people who have moved during this time, and with their new house came a new loan that has these low interest rates. Those who haven’t moved also have the option of getting a new loan by refinancing. Refinancing our home almost a decade year ago saved us a ton of money (over $140k), but in order to know if it would benefit you, it’s important to understand your loan.

Getting to know your loan

If loans never changed, it would be simple to explain all of the different types of loans, but they do change. For example FHA loans borrowed before June, 2013 are different from FHA loans borrowed after June, 2013. You can find out the details of your specific loan by looking at your loan documents. If you can’t answer these questions from your loan documents, call your lender or mortgage servicer, and ask them these simple questions.

What kind of mortgage loan do I have?

Conventional

Follow-up question #1: How much is my PMI (private mortgage insurance) payment?

Follow-up question #2: What is required to remove PMI? (For example, if you pay down 20% of the loan, the PMI should be removed. But if your home’s value has increased, you may be able to pay for an appraisal that shows you have 20% equity, which would allow you to eliminate the PMI much faster than paying down the loan by 20%.)

FHA

Follow-up question #1: How much are mortgage insurance premiums (MIP)?

Follow-up question #2: Is there an option to remove MIP by paying down the principal loan balance to 80% of loan to value?

VA

Other

What is my interest rate?

Follow-up question #1: Is this fixed (locked in) or variable (not locked, which means it can increase)?

Follow-up question #2: How does my rate compare to interest rates today?

How many years is the term on my loan?

Most loans are 30. Some are 15 year terms, and a few are 20 or 40 year term.

How much equity do I have in my home?

Calculate this by dividing what you owe by the market value of the home

Storytime: Almost two years after we bought our home, the home’s market value had increased by thirty thousand dollars. The ratio of what we owed was 78%, meaning we had 22% equity. Our loan was conventional, so we were able to refinance and eliminate PMI. We did pay $4000 closing costs to refinance, but we also lowered our interest rate and the length of our loan. You can calculate how long it will take you to recoup those refinance costs. If you plan to stay in your home longer than that, refinancing will be worth the cost.

After you have gotten to know your loan, you can start to compare and see if it is worth refinancing your property.

Check here for more information on refinancing with Wasatch Peaks Credit Union. This calculator that Wasatch Peaks provides is a great tool to use to run through different scenarios. You can decide if refinancing is worth it to you.

What have you found out? Will it be worth it for you to refinance?

Thursday, 27 July 2017 15:14

Step #7: Find Your Investing Style

Now that you have successfully determined how much of a risk-taker you are, it’s time to choose an investing style that best suits your personality, your needs, and your financial standing.

First, you’ll need a basic understanding of the major investment styles available in today’s market. These styles can be broken down into three dimensions: active vs. passive management, growth vs. value investing, and small cap vs. large cap companies. Study each category to determine which style best suits your needs.

Active or Passive Management

When choosing your investment style, your first question is going to be how much trust you’re comfortable placing in financial advisors.

If you’d like to have professional money managers carefully select your holdings, along with a full-time staff of financial researchers and managers constantly seeking to gain larger returns for you, active management is the style for you. Of course, you’ll have to pay for those financial experts to work on your investments, but hopefully, the greater returns you’ll get will make the expense well worth it.

If you don’t think a team of professionals will do enough for your investments to justify the high cost, you might choose to be a passive investor instead. In fact, empirical research supports this style – it shows that many passively-managed funds actually earn better returns over the long run. You’ll need to do more of the legwork yourself this way, but your expenses will also be much, much lower.

Growth or Value Investing

The next question you’ll need to consider is whether you prefer to invest in fast-growing firms or in underpriced industry leaders.

Those using the growth style of investing, will choose firms with high earnings, high return on equity, high profit margins, and low dividend yields. The reasoning behind this choice is that a firm earning in this pattern is likely to be an innovator in its field and will continue earning high profits.

Since it is currently growing at a fast pace, such a firm will reinvest most – or even all – of its earnings for fueling further growth. As an investor, you want a chance to be part of that growth, even if it means paying a higher price-to-earnings ratio.

In contrast, the value style of investing is focused on buying a strong firm at a good price.To be considered a value investment, a firm must have a low price-to-earnings ratio, low price-to-sales ratio, and a higher dividend yield.

Small Cap or Large Cap Companies

The last question you need to ask yourself, is whether you want to invest in small or large companies. In investing lingo, the measurement of a company’s size is referred to as its “market capitalization” or “cap” for short. Market capitalization is the number of shares of stock a company has outstanding, multiplied by the share price.

Some investors prefer small-cap companies because they believe these companies can deliver better returns as they are more flexible, and have more opportunities for growth. As is usually the rule in the market though, the potential for greater returns comes with heightened volatility and greater risk. In comparison to large firms, small firms have fewer resources and a less diversified business line. Share prices of the company can therefore fluctuate dramatically, generating larger gains but also generating larger losses. If you’re comfortable with risk and like the potential for greater growth, this is the style for you.

If the thought of putting your money into a smaller company makes you uneasy, consider investing in a dependable, large-cap company. The names of large caps include some big firms you’ll be familiar with like Microsoft and Exxon Mobil. These companies are well-established and stable; you don’t have to worry that they’ll suddenly go out of business and leave you in the lurch.

On the flipside though, these companies are already so large, that they may have reached their capacity for growth and don’t have much more room for expansion. Investors putting their money into large caps can anticipate lower returns, but also less risk.

Review these three dimensions of investment styles until you can determine which choice from each category suits you best. When you have chosen one from each dimension, you’ll know your investing style. This will enable you to pick the investments that you’ll be comfortable holding onto for a long time.

What kind of investor are you? Share your style with us in the comments!

Published in Blog

Our family has started shopping for school supplies, and it was a little crazy with four kids helping me. School supplies and fees can cost hundreds of dollars, especially for teenagers. So, for this post, I planned on writing about budgeting for school expenses, but then I realized that I had written a post about that last year, which you can read here. Since I didn’t want to write that same post, I felt stuck with writer’s block.

A few weeks ago, my sister and I drove past our Elementary and Junior High schools on the way to visit our Grandma. It seems so long ago that we were headed back to school at those two buildings. Shortly after that drive, I received a Facebook invitation for my 20th High School Reunion.

As I headed back to high school for our alumni reunion, a lot of thoughts came flooding in. Some were regrets. Some were memories of my best friends and what we did. Since it was the first reunion I have attended, I didn’t know what to expect. Except for being hot, it was great. I visited with classmates way past the time the reunion was supposed to end. I learned a lot from going back to school!

Lessons Learned from Going Back to High School

Heraclitus said, “Change is the only constant in life."

In 20 years, a lot of things have changed in our lives. People have come into our lives: spouses, kids, in-laws, friends, neighbors, etc.. People have gone out of our lives: some of our classmates have passed away and our energetic principal Earl Heninger passed away over five years ago. Many of us have had family members pass away. Some have married. Some have divorced, Some have experienced severe health challenges. Some earned degrees. There have been job changes, relocations, and changes in hairstyles.

Every change in our life affects our finances. Budgets that don’t allow for change won’t work because change is inevitable. We can all plan on having changes to our plans, and that’s okay. As high school students, we were prepared for life, but we didn’t know exactly what life would bring us. We had to become flexible enough to handle change. Flexibility in your finances allows you to learn from a mistake instead of giving up on your financial plan and budget. Flexibility this month allowed for that $10 library fine. Flexible budgeting allowed me to buy new fish after ours died. Many events in life are unpredictable. Once we accept that, we can decide on how to respond financially.

Teachers can be our mentors.

Teachers have been so important in my schooling. I think they are the most important part of school. I wish they could have been at the reunion. I’m sure they have a lot of stories about our class of ‘97. My history teacher was so excited about history that it made me love European history too. I wish I had told her that. A good teacher makes so much of a difference! My art teacher loved art so much that I enjoyed it even though I wasn’t an artist. I had one teacher that didn’t care about us. We were his last class, and he really just cared about retiring. I didn’t learn much from him. He was gone as much as he possibly could be gone without getting fired.

Everyone you meet can teach you something.

Teachers are not just the paid professionals who stand in front of the class. Everyone we meet can teach us. Coaches, parents, friends, and neighbors are all teachers. Our peers can also teach us. Every classmate had a story of when they had to be strong and courageous. Our mascot was a warrior. Each of these classmates have had to be a warrior in some aspect of their lives. I loved seeing this part of my classmates. They are inspiring me to keep facing and overcoming challenges. I wish that in high school I hadn’t categorized anyone, but instead had seen what I could learn from each one of them, and what I could teach each of them. I wish I could see the courage and strength that they were developing to use when life’s storms hit them.

This applies to our finances too. It’s so important to have a good financial mentor because they inspire you to manage your money well — even if you don’t like to manage money. My grandpa was a good mentor to me. He taught me to work, give, save, and invest. Friends, neighbors, and family have been mentors to me. Many of them have taught me some simple things like save every raise that they received, pay off debt, and invest. Financially, we gain courage and strength by doing the little and simple things like tracking and gauging budget accounts. Finances have ups and downs. I would personally love to have a steady climb of income that always goes up, but these mentors have taught me that finances and life are more like roller coasters — they have a lot of ups and downs. These mentors have taught me to do the simple things in our finances in order to handle the ups and downs.

Much of our learning isn’t formal education.

Every experience teaches us something and can help us. I discussed feeling regrets as I thought back to my school days, but I decided that as long as I learn from those experiences, I never have to regret an experience. Now that we’ve all been adults a for a while, life has taught us a lot.

Much of our financial learning comes through life lessons. We learn about finances by living our life. We learn from trying and making mistakes. As long as we learn, we don’t have to feel regrets. We can take those financial lessons and help teach them to others.

The most important thing about going back to school isn’t buying the school supplies or learning the most facts. It’s about learning from everyone you meet. It’s about becoming strong enough and flexible enough to handle whatever life brings. It’s about learning to adapt to changes. It’s about learning from every experience you go through. We can apply all these lessons to our finances. What are some lessons you have learned since graduating from high school?

Whenever I talk to others about budgeting, I get asked for a recommendation for a budgeting system. (In fact, it just happened this weekend at our family reunion.) I haven’t found a magical budgeting system that will make us manage our money, but there are a lot of great tools that can assist us. Although it is a hobby of mine to try out personal finance apps and software, I don’t give a recommendation until I understand what that particular person needs. If you were to ask what kind of jeans I recommended, I could tell you, but my style may or may not be your style. There isn’t a one-size-fits-all system for managing your money.

So when I’m asked for a recommendation, I respond with questions. Please answer these, and you’ll be closer to finding a system that works well for you.

What do you want it to do?

I’m a nerd when it comes to finances. I can spend hours talking about finances. I have accounting degrees. I love spreadsheets, reports, and details. However, I’ve taken enough personality tests and known enough people to understand that not everyone is this way. I still think that budgeting is for everyone, but everyone needs to budget in their own way. Some people want more powerful software that does reports and details. Some like to do the work all themselves in programs like Excel. Others are super intimidated by Excel and need a simple budgeting app. For example, EveryDollar is strictly a budgeting app that I would recommend to those people. Understanding your personality is key to finding the budgeting system that works for you. I recently went to a presentation by Social Core. Check it out if you want to understand personalities better. Once you understand your personality apply it to budgeting.

How much time do you want to spend budgeting?

Budgeting really doesn’t take much time. Even detailed money management systems take under 10 minutes a day, but some have the capability of downloading your data (Mint, YNAB, Mvelopes, EveryDollar), which could save you time. For a long time, I used Excel because I liked it the most. I love to see other people’s Excel spreadsheets that they made. (I told you that I am a nerd. I’m cool with accepting this.) But, Excel does take time to learn and to use. Some people wouldn’t budget if they had to use Excel. These people could try out Peaks Money Manager or EveryDollar. These apps focus on budgeting and make it very simple. Again, your personality comes into play here. Detail oriented people are more likely to want to spend more time. Other personalities want to spend as little time as possible on managing their money.

Do you want support?

Learning new technology can be frustrating and even scary. Having support can be the difference between quitting and succeeding. Some systems have excellent support teams that answer questions when the program won’t do what you want it to do, or when other technical difficulties arise. Other systems won’t have as much support.

What does your spouse want?

If you are married, budgeting needs to be a team sport — not an individual one, but everyone can have different roles on the team. My husband is not a budgeting nerd like I am. He’s extremely supportive — even though he has fallen asleep during my budgeting meeting. Although I loved using Excel, I eventually switched over to Mvelopes and then YNAB. Lately, I’ve started trying out Peaks Money Manager to see if this sytem will work best for us as a couple. I’m happy to do all of the finances, but I know that it is better when we are both involved. Even though my husband knows how to use Excel, he didn’t ever enter in transactions into our Excel spreadsheet or look at our budget except during our budget meetings. So, I tried out other programs and found out that he will enter transactions into YNAB from his phone. Peaks Money Manager is an app that would allow him to do this too.

Do you prefer to use technology?

Budgeting existed long before computers, apps, and smart watches did. I often tell people that if they like pen and paper budgeting systems the best, there is nothing wrong with that! Technology has great tools available to assist you in managing your money, but it isn’t necessary. If you like to write out everything in ledgers- great! "Just Do It!" "Have It Your Way!" What other slogans can I quote to convince you to manage your money? Apps are great tools if they work for you. Paper budgeting systems are great, if it works for you. Budgeting software is great, if it works for you!

I suggest you try some of these budgeting systems out to find out which works best for you. Some of these are free or have a free version. Others give you a free trial period. All of these are affordable. Dive in! Trial and error is the best method to figure it out which budgeting system is best for you. I promise that you won’t break anything! Do you have budgeting tool that works great for you? If you post it, I’ll try it out.

I stayed up late Saturday night writing this post, and I heard the fireworks that were going off around the neighborhood. Those sounds reminded me about the 24th of July holiday, and I thought about our holiday memories. We often go to the rodeo and the parade in Ogden. This is the first time that my husband will have this holiday off work. Because it is a holiday that celebrates the pioneers settling Utah, and it isn’t celebrated in other states, my husband usually had to work. His past employer’s customers were out of state, but his current employer has given them the holiday off work.

So, I usually celebrate the 24th without my husband. One year, my kids and I planned to celebrate it by watching my brother run the Deseret News Marathon and then watch the 24th of July parade in Salt Lake. It was about an hour drive from my home. Ten minutes into our ride on the I-15, the rear passenger tire on my van blew out. A kind Utah Highway Patrolman came by and changed my tire for me. That tire blowout completely changed our plans that holiday. Instead of making it to the race’s finish line, we went to Discount Tire to purchase a new tire and then out to brunch. As I watched my kids eat their kids meals, I thought about how much our plans had changed for that day. Plans guide and direct us but sometimes circumstances are out of our control.

Don’t give up when plans change

Budgeting is making financial plans. We set out to do certain things with our money, but a lot of unseen circumstances change our plans. Budgeting is a constant struggle for me, which is why I blog about it. Blogging keeps me accountable to keep budgeting — even when the plan completely changes. Financial flat tires include getting sick, losing a job, illness, etc. This summer we’ve had a lot of changes to our financial plans. One of my sons has struggled to learn to read and do math, and I felt tutoring would be helpful. Our starter went out on our car. We thought the problem was fixed, but on Thursday night, the car wouldn’t start for my husband, and he called me to come and rescue them. Although we can't predict these things, we can adjust our plans to work with them. My family has relied on our emergency fund to help us get through these changes in plans. We haven’t given up on the budget, but we also have not stressed about the financial detours.

Learn from the detours and change

We can learn from these detours and change so that we are better prepared for the future. As the patrolman was changing the van's tire, I was thinking about how I could have prepared better. I could learn more about car maintenance, check the fuel pressure more often, pay closer attention to how the car drives and check my tires when I suspect a flat — especially when I'm in a hurry. Recently my Toyota Sequoia showed a warning light, which I didn’t recognize. I googled it and found out that it was a tire pressure warning. That surprised me because I had just had the tires rotated. It was inconvenient for me to have the tire pressure checked because I was taking a group of youth to Salt Lake that day, but I had learned from the experience a few years prior. I am grateful to that warning light. I went to Big O Tires, and it only took a few minutes for my tires to be checked. The technician said that the tires’ pressure was all over the place. I asked him questions to learn about why that happens. He explained that the change in weather could have done that. He was so kind, helpful, and fast. I was very grateful that I had taken a few minutes to do that so that we could have a safe ride.

Keep practicing and following the plan

When circumstances are out of control, we don't have to throw away the plan, but we will have to make adjustments and allowances for emergencies and other unforeseen events. The more we budget, the better we get at it, and the more we learn. As we celebrate the journey that the pioneers made, we can keep on our journey. They had so many obstacles and changes to their plans. They had sickness, deaths in their families, broken wagons and handcarts. There are many similarities between their journeys and our journeys. We can keep going like they did. We can keep stepping forward in our financial journeys.

How do you celebrate the pioneers on the 24th of July? What have you learned from them?

There are a couple of less known national days coming up this week: Parent’s Day and Tall Girl Appreciation Day. I’ve decided to celebrate both, but I’ll just discuss Parent’s Day here. Parent’s Day is celebrated on the fourth Sunday of July and was officially made a national day during President Clinton’s presidency. From what I’ve read, Parent’s Day was meant to be a combination of Mother’s Day and Father’s Day. I’m sure thankful for all those who parent my husband and me: our moms and dads, and also all the mentors who have parented me. I’m thankful to experience parenting four great kids.

Some of the best opportunities for me to teach my children come through everyday experiences.

Parenting Lessons Learned at the Grocery Store

Fidget spinners are the newest toy around our home. After my oldest son bought one, all of the other kids wanted to have one. Even after they had one, they wanted another one each time we saw them for sale. I didn’t want them to buy fidget spinners because my kids get distracted from what they are doing when they play with fidget spinners, but I let my two youngest children bring their money and buy one. This is one of the many purchases my kids have made, which I don’t agree with, but that’s okay. I want them to get to learn from the shopping experience, and they can only do that if they are allowed to spend some money in a way that they want to spend it.

I admit that I don’t always take my kids shopping. It can be an exhausting, embarrassing, and a time consuming task. It always takes longer, and I always spend more money that I otherwise would, but children can learn so many lessons through everyday shopping. Here are a few:

Math Skills

As long as we have a patient cashier, we get a chance to learn math skills. The cashier at Smith's Marketplace was great. He told my children how much they owed for their fidget spinners. Each spinner cost $6.50. Then, I helped my son and my daughter count $7. I asked them if $7 was more than $6.50. I explained that the cashier owed them some change. It made me realize how many math skills are involved in purchasing, which is why I try to allow them to do this quite regularly, even though it can be an exhausting experience.

Responsibility and Economic Skills

Kids are exposed to so many economic concepts by earning and spending money. Even though my kids bought fidget spinners, they saw plenty of other things that they wanted to buy. I explained that since they chose to buy fidget spinners with their money, they didn’t have any money left to buy the other things.

On another shopping trip, my daughter spent her money on treats. I asked her if she was sure, and she said, “Yes.” But at the last store, she got upset because she didn’t have enough money left to purchase a tiara that she saw. I explained that she didn't have enough money because she had already spent it on other things. She responded, “But I didn’t know that there was going to be a tiara, and I really want it.” I taught her about “opportunity cost” by saying, “If you spend your money on candy, you don’t have money for tiaras." (By the way, junk food is another example of an item that is difficult for me to allow them to buy. Kids already eat so much of it, but I want them to get to make choices, so I allow them to buy junk food with their money instead of mine.)

Patience and Delayed Gratification

My five-year-old daughter often wants me to pay for items that she wants, so she begs me to transfer money from her bank account. I refuse, and I tell her that she needs to get her money and spend it. She always forgets about the item that she wanted to buy because she didn’t even want it until she saw it.

Kids aren’t the only ones who learn patience. Tantrums usually follow this reply, so as the mom, I get a dose of patience too.

Self-Reliance

As my children paid for their fidget spinners, they gained confidence. They proudly paid for their own toy and told the cashier about it. It’s exciting to watch them learn this skill. Sometimes they hesitate and look to me, and I encourage them to do it. Although it took more time that it would have taken for me to buy everything, the experience of watching them grow was worth it.

I am thankful for my parents. My dad gave me opportunities to work. He had a variety of jobs, and one of them was to fix up houses and sell them. I remember helping him clean up those houses.

My mom often took me shopping and allowed me to learn. My mom is a bargain shopping queen, and she can find amazing deals. One day while shopping at an outlet, we found some jeans for sale for five dollars! The only problem was that we couldn’t try them on, but I couldn’t pass up a good deal. When I got home, none of them fit quite right. By shopping with her, I learned to find these deals, and I also learned that it’s only a deal if it’s something I really like.

I’m thankful to grandparents who gave me the chance to learn self-reliance through using money. My grandparents have always been super frugal. They lived through World War I and learned not to waste anything, but they gave us generous birthday and Christmas gifts. I teased them at the time that the only unfrugal ways that they spent their money was to give it to us grandkids, but now I realize that spending is an important skill to teach our children. Through it, we learn so many life lessons.

What lessons did your parents teach while you were shopping?

On June 25th, my mom sent a us a text asking if we knew what was was in 6 months? I figure it out. Mom is on top of Christmas shopping and planning. She gets her shopping done early every year. I always admire that she doesn’t stress about the holiday, but I often feel overwhelmed and don’t think I can do it. I’ve had Christmas ready early just once, so like almost every post I write, this topic is one that I am struggling through. With the weather hitting triple digits last week, and with crazy busy summer schedules, I know that Christmas is not on a lot of minds right now. I thought about changing this post, but there are some great reasons to start thinking about and planning for Christmas:

  • You can get better deals! Over the weekend I made a cheesecake and was reminded that when I plan ahead I can get a better deal. (I didn’t plan ahead, but if I had, I could have bought the cream cheese on sale or in bulk.) That purchase wasn’t a big one, but Christmas purchases can be. My mom shops sales throughout the year and can get the best possible price on the gift that she is buying. Black Friday prices can be the best prices of the year. This past year a lot of my friends gave their families annual passes to Lagoon for Christmas, and the best deal for those passes was on Black Friday.
  • Shopping early relieves a lot of stress during Christmastime. While I was stressing last year about finishing my shopping, my mom was relaxing. She avoided the lines at the post office by sending packages early to my siblings who live in other states. I wanted to relax but time was running out. I remember feeling uncomfortable chest pain caused by the stress. Pain can motivate me to change though!
  • You can have a more meaningful Christmas! Instead of fighting crowds and traveling in the cold weather, you can be home making traditions with your family. What are your favorite family traditions? We love decorating the tree. Another way to make Christmas meaningful is to make homemade gifts. I’m not crafty, but I am creative, and sometimes I think of the best gifts at the last minute when I have run out of time to do them. Also, my young kids love to make things, but kids need time to make their creations. So, I’m going to encourage them to start thinking about what they want to make for their Christmas gifts this year.
  • You can drink hot chocolate and play games with your family over Christmas break instead of shopping. Window shopping can be fun, but aimlessly walking up and down aisles isn’t any fun for me. In other words, you’ll have peace around Christmas time, which is what Christmas is about for me.
  • Selection is better! I’ll admit, there are some items that are only sold during Christmastime. Last week I was shopping for some makeup for my kids upcoming play, and the cashier told me that the only time they sell kids makeup kits is during Christmas. But, there are a lot of gifts that have a better selection throughout the year. For example, bikes go on sale in the spring. One year we decided to give our family camping gear for Christmas. We didn’t find good deals or good selection because we shopped in the fall. Please learn from our mistake, and if you want to buy a spring or summer item, shop during spring or summer.

Are you convinced to shop early? Please share why you are or aren’t convinced.

I’m determined to have my Christmas shopping done early by doing three things:

Set a goal!

Since there are so many stresses, getting ready for Christmas early had to become a priority for my family. My goal is to be done by Black Friday. Since I don’t like crowds, and I didn’t need what was usually on sale during Black Friday, it was a disappointment, but now that so many Black Friday sales are available online, I’m totally onboard with shopping on Black Friday for a few things. One good thing about stores putting Christmas items for sale after Halloween is that Christmas shopping can be done early.

Budget what you need to buy and how much will it cost.

I know this financial exercise can be painful, but it is so important because it’s the key to relieving stress during the holiday season. Plus, it gets easier each year you do it. We started doing a detail budget for Christmas in 2015. It’s a spreadsheet, so I just copied and pasted the information for 2016 and 2017. Christmas shopping is pretty similar from year to year. I usually buy for most of the same people. There are minor changes, but once you’ve done it, you can tweak the next year and it is a lot easier that the first year. Your presents will be more meaningful. Here’s a personal example. My mom’s side of the family always had their Christmas party on Christmas Eve. I remember one year as a teenager that I used my gift of money that I received from that party to buy my brother’s Christmas present. I remember I got him a CD holder at one of the few stores that were still open. I’m sure I didn’t get a great deal, and I didn’t get a really meaningful gift. When I run out of time, I buy gifts like that ... just to buy a gift, and I don’t like doing that.

Budgets help me do what’s best for our family. I mentioned that a lot of my friends bought Lagoon passes, and they are loving them, but Lagoon passes were not the right choice for my family. My husband and I don’t love amusement parks. We have only gone to Lagoon once together since we’ve been married (almost 14 years). Although we had a good time, we would much rather be at a national park than an amusement park. When I buy passes like this, I want to get my money’s worth, so if I had bought a Lagoon pass, we would be going more that we would otherwise go just to get our money’s worth, and I don’t want to do that. So, we bought a pass to an aquarium instead. I’m able to feel happy for my friends because Ty and I intentionally chose what was the best option for our family’s personality and ages of our kids. I enjoy my friend’s pictures and stories without feeling envious or left out.

Budgeting helps me figure out how much money we will need. Finding money for Christmas is the hardest part for me about shopping early. There are so many other financial pressures that make it a challenge to save the money early for Christmas, which is why I chose to publish this post during extremely hot weather. (It helps me to be accountable.) I don’t have an solution wrapped up for you that will magically make money appear. We all have to figure it out, but by thinking about it, we get so much closer to finding an answer to this dilemma than we will by burying our heads in the sand. Besides, the sand is way too hot for that!

One idea is to use extra income that you receive to pay for Christmas. This is what we try to do, although I also considered working part-time. What other ideas do you have? I would love to hear what you are able to figure out because it will probably help out someone else. Another idea is to use a Christmas Club account to automatically save for Christmas.

Shop while I’m running other errands or shopping for other items online.

Finding extra time to be shop can be hard! So, by starting early, I can shop a little at a time and multi-shop. Since my Christmas list is in the back of my mind, when I see one of those items for a good price, I can buy it. If you know what you are looking for, you can look while you’re shopping for other things. We are going to give our kids carry-on luggage, so when i was shopping for groceries at Costco, I walked by the luggage and started pricing it.

Although these are simple suggestions, they can feel overwhelming, but it doesn’t have to be. Here’s our plan for Christmas:

1. Goal: Be done by Black Friday!

We want to give an experience — a trip to visit my sister’s family who lives in Alaska. My family is planning a family reunion there next summer. Everything will be that theme. Luggage and tickets.

When others share what they are doing, it helps me come up with ideas. So, I hope this helps!

2. Budget

Christmas 2017   Amount
Family Luggage 600
Ty   50
Nat   50
Jackie basketball warm up suit, book 50
Wes book, 50
Tommy   50
Chloe book, swim toys 50
Parents   100
Murray draw   25
Service Angel tree? 50
Neighbors use grocery budget 0
Teachers Make lotions 50
Stocking Stuffers use grocery budget 0
Christmas cards/ letters, stamps Smilebox Christmas slideshow 50
Decorations Tree Permit 25
Grandmas   50
Miscellaneous   100
travel use gas budget 0
Total   1350

 

Do you have suggestions to improve my budget?

We put Christmas music on the other day and my kids asked to put it on again. (I haven’t yet though!) I don’t mean to mislead you into thinking I’m not on top of everything. I’m not. I do plenty of last minute things, but I’m trying to start thinking about Christmas along with everything else.

You know that deciding to invest some of your money in the market automatically means you’re setting yourself up for possible loss.

But how much losing can you take? Does the thought of your stocks plunging make you sick to your stomach? Or are you a genuine thrill-seeker who loves the rush of adrenaline you get when you think about putting your money somewhere shaky?

Determining your risk tolerance is an important step to take for ensuring you’re completely comfortable with your investments. You might also come across trade recommendations that are discussing options based on different risk tolerances.

While your risk tolerance will change according to your age, income requirements and financial goals, there is no fixed label for those who fit certain criteria. There are simply too many variables. For example, most people think that the younger you are, the more of a risk-taker you’ll be. They reason that the years ahead afford you the freedom to take more chances with your money. While this may be true in general, it is not a fixed rule, and determining your risk tolerance depends on several variables besides age.

So, how do you determine your risk tolerance? Consider the following before answering the question:

Time frame

The first factor to determine is the actual length of the investment horizon. When will the funds be needed? Even a younger investor can have a short-term horizon if they’re trying to earn enough capital for a goal they hope to fulfill in the near future, such as buying a home. If the investment horizon is indeed short, the risk tolerance should shift toward being more conservative, regardless of the investor’s age. For long-term investments, there’s room for more aggressive investing.

If you’re an older investor, don’t fall into the trap of thinking that, just because you’re pushing 70, you need to move everything into conservative investments. This may be suitable advice for some, but it’s not recommended as a one-size-fits-all approach. For example, a retiree who has sufficient funds to live off the interest without touching the principal can safely invest in volatile stocks. Also, with today’s growing life expectancy, a 70-year-old investor may still have a 20-year investment horizon – or more! When determining your risk tolerance, be sure to consider your actual time horizon, irrespective of age.

Risk capital

An obvious factor of your risk tolerance is going to be how much money you have available to put into the market. What is your net worth? To find this number, simply add all your assets and subtract your liabilities. Risk capital is defined as the amount of money you have available to invest or trade that will not affect your lifestyle if it is fully lost. It is also referred to as liquid capital, meaning assets that can easily be converted to cash.

Naturally, an investor with a higher net worth will be able to take more risk. The smaller the percentage of your overall net worth the investment represents, the more aggressive the risk tolerance can be.

Unfortunately, those with little or even no net worth are often attracted to riskier investments because of the lure of quick and large profits. Bear in mind, though, that when too much risk is taken with too little capital, a trader can be forced out of a position too early to make the investment worth it.

On the other hand, if an undercapitalized trader using limited risk instruments “goes bust,” it shouldn’t take that trader long to recoup the losses. Contrast this with a high-net-worth trader who throws caution to the wind and puts everything into one risky stock and loses – it will take this trader a lot longer to recover.

Investment objectives

Your investment objectives are another important factor in determining your risk tolerance.

Are you saving toward a specific goal? Are you investing your child’s college fund with the hopes that it will grow? Are you trying to earn enough to support your retirement? If your goal is to raise enough capital for a pressing need, you will likely be more risk-averse. Or, you may be so desperate to raise those funds that you’ll make some hasty decisions.

On the other hand, if you’re simply trying to increase your net worth with extra capital, you’ll probably be more open to investing in riskier stocks.

Knowing your risk tolerance goes beyond being able to sleep at night without stressing over your investments. Ultimately, knowing your risk tolerance – and sticking to investments that fit within it – should keep you from complete financial ruin and allow you to invest with a clear head.

Do you love the thrill of the unknown or are you more risk-averse? How does this affect your financial decisions? Share your risk tolerance and reasons for it with us in the comments!

Published in Blog

A couple of months ago, I was thinking about how similar eating and spending are. Although I planned my spending, I wasn’t planning what I ate, and I realized that was silly because I already knew how. So, I decided to apply budget my eating. Before doing this, I thought that I was healthy. I started trying out different apps to track my eating. As I tracked, I realized that I didn’t eat as healthy as I thought that I did. A lot of little things, like mayo and snacks, added up. Last week I put on some jean shorts, which I hadn’t worn for a year. A year ago these were very comfortable, but this year they fit very tight! One of my friends called these my “gauge jeans.” As soon as I put them on, I knew I had gotten bigger over the last year.

The same principles of physical health apply to financial health. We have to have a gauge that lets us know when we are keeping within our budget. We can think we are doing fine but unless we are really tracking it and gauging it, we won’t know until we incur overdraft fees, denied debit cards, or other negative consequences.

Can you imagine driving your car without a fuel gauge and trusting your general feelings that you are fine since you filled up the tank recently? That may work for a while, but eventually you would probably run out of gas. I like to keep the gas tank in my car half full, but the other day I looked down and it was almost to the E! If I hadn’t had my gauge, I probably would have thought that there was plenty of gas, but we had driven more than usual, and we hadn’t filled up the tank.

When Ty and I first started budgeting, we didn’t gauge our spending, and every month we overspent. I only reviewed our spending at the end of the month. After a few months of doing this, I realized that we needed to have a spending gauge — like our car’s fuel gauge. I needed to know how much I had left in my groceries and repairs budget. Although I could still overspend, I would be aware that I was overspending. Our car still run out of gas even with a fuel gauge, but the gauge makes you aware of what will happen. On holidays and vacations, I know I’m going to spend more than usual because I have tracked it, so I have to allow myself more calories and more money during those times. Tomorrow, being the Fourth of July, will be one of those times. I can allow more and still use my gauge.

Noom Coach, which is the app I’ve been using for tracking my eating, works well for me personally because I can relate to it. It even calls my eating plan a “budget” and it has a gauge built in gauge. The other day it told me, “1576 calories left in budget.” I’m not a nutrition expert, but I do know enough to know that nutrition is more complicated that just calories. I'm just simplifying the analogy in order to illustrate my point. Tracking and gauging my spending and my eating make me so much more mindful than when I don’t track and gauge them. If I consistently overeat, my pants are going to get tighter and tighter until they don’t fit anymore. If I consistently overspend, my debt will increase and money will become tight.

It’s easy to say, “I’m frugal.” It’s a general statement and anyone can say they are frugal because they can easily compare themselves to others who spend a lot more that they do, but as you track and gauge your spending you may find you are overspending. A lot of small purchases can really add up.

I struggle with self-discipline, so a gauge helps me realize what’s going on. Gauging can’t force me to stop spending or stop eating, but it lets me know what I am spending and helps me to be more mindful of what I’m doing. If I’m wise, I won’t go past the “empty” mark on our gauge, because doing so will make me run out of money and be forced to call for help or refuel (earn more).

There is no magical app that can force you to be financially fit, but apps can be so useful. I love to try out new financial apps! What’s your favorite app for managing your finances? If I haven’t tried it, I will.

Did you know that Wasatch Peaks Provides access to the Peaks Money Manager app? I’ve been trying it out. Here are a few things that it helps me do.

  • Keep track of all my accounts. I can put all your financial accounts into this so that I have a picture of your financial situation. Simplifying your finances helps to understand them.
  • Track net worth. Tracking networth motivates me. When I don’t feel I’m making progress, I can look at my net worth and realize that I have paid down debt and increased my net worth.
  • Set goals. Again, it’s nice that everything can be in one spot.
  • Budget. The Money Manager program tracks my spending. I can then use that information to set up your monthly budget.
  • Alerts. Peaks Money Manager sends alerts when you are running out of money in a category. This is a spending gauge. This is especially helpful if you pay for almost everything electronically.

Do you gauge your spending? If so, how?

Monday, 26 June 2017 14:07

The Basics of Jumbo Loans

When you reach a certain spending threshold, the mortgage loan process becomes different than it would normally be. There are limits to many mortgage programs, and people looking for larger amounts of financing have to take different avenues.

One such avenue is a jumbo loan, one of several options we offer at Wasatch Peaks Credit Union. This is a loan that’s for a larger amount than usual, and it can come with some other benefits as well. Let’s look at the basics of these loans, and whether they’re right for you.

What’s a Jumbo Loan?

In a conventional loan situation, there’s a threshold known as the conforming loan limit. This is the highest amount a traditional loan can be, and it’s often between roughly $400,000 and $650,000 depending on several factors, including location. In our case, the conventional limit is $424,100.

A jumbo loan allows you to receive more than this amount on a single loan, and as a result, there are some different requirements. Higher credit is typically required, and the down payment will often be larger. Jumbo loans can take longer to close, and have to go through two underwriting processes – and sometimes two appraisals. In most cases, the mortgage rates will begin higher than usual – the lender is taking more risk by loaning this much money, so that has to be accounted for in the interest rates.

Financing Amounts

The key benefit of a jumbo loan is the ability to finance a much larger sum without worrying about multiple loans or any other details. Qualified buyers can typically finance up to $2.5 million in a single shot, which is often a larger amount than most people would be able to get even through multiple lenders under the conforming loan limit.

Flexibility

Despite stringent qualification requirements, jumbo loans are quite flexible for those who qualify. They allow a choice between fixed or adjustable rates, and pricing is competitive. Many houses financed using jumbo loans are great options for quick turnarounds or to refinance a mortgage, and in-house underwriting can be done.

Interested in learning more about jumbo loans, or any of our other programs? Speak to the financial advisors at Wasatch Peaks Credit Union today.

Published in Blog
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