When to Refinance Your Mortgage

Consider refinancing your home when interest rates go down. The easiest way is to request quotes with various lenders while factoring in closing costs and expenses, and any change in the loan length.

One rule of thumb is that you should refinance if the interest rates drop by 2%. Another rule was the 2-2-2 rule. Refinance if you have been in your house for 2 years, the interest rates have dropped by 2%, and you plan on being in your house another 2 years. More recently, some say that you should refinance if rates drop only 1%.

There are several reasons to refinance your home: 1. You wish to save money by paying less interest; 2. You need cash that is currently tied up in your home, 3. You wish to lower your monthly payment; or 4. You wish to change the terms of your loan, from an adjustable rate to a fixed rate, for example.

The decision to refinance depends on several factors: the interest rates, the closing costs, the length of the mortgage, and the length of time you will be staying in the house. It doesn’t make sense to refinance if you are planning on selling in a year or two.

Find your total closing costs. Your lender can give you a good faith estimate. If your new monthly payment is lower, then how many months will it take you to get back these closing costs? Once you have recouped the closing costs, you are coming out ahead. For example, if the closing costs are $2,000 but your new monthly payment is $100 less, then you will pay off the closing costs in about 20 months. At that point you will be coming out $100 ahead each month.

In summary, consider the closing costs, don’t lengthen your loan, don’t refinance often unless you get very low closing costs (or none at all), be sure to stay in the house at least until you recoup your closing costs, and always consider total interest over the course of the loan. Refinancing smart can save you a lot of money.

How Much Life Insurance Do You Need?

This is different for every person, and is a highly personal decision. What do you want the life insurance policy to do for you? Once you answer that question, you will be in a better position to determine the amount you need. Perhaps you want it to provide for your family if you die. Perhaps you want it to pay for your funeral only. Perhaps you want it to protect your business partner. How much money will fulfill your goal, and how long will this need last?

The people with the greatest need for life insurance are the sole breadwinners of young families. Let’s say you are married and have two children and your spouse doesn’t work. What if you die? How much will be enough for your surviving family to live happily without your income? A general rule of thumb might be 10 times your annual salary. This big lump sum might be enough to provide food, clothing and shelter for your survivors and possibly more. Do you feel that this amount would provide for your family until the children are grown and your spouse could get a job?

Another person without children might only need to protect his or her spouse. The need is less, particularly if the spouse is working. How much is enough? That is a question to discuss with your spouse.

Perhaps you have a disabled child, and you need insurance to provide for this child for the rest of his life after you die. It might be a considerable sum.

Perhaps you just want an insurance policy to pay for your funeral so your family won’t have to think about that when you die. In that case, a $5,000 to $10,000 policy is probably enough.

Perhaps you have no family responsibilities and you never will. You probably don’t need life insurance, particularly if you are elderly.

For most people, a prudent plan would be to carry a large amount of life insurance (maybe 10 times your salary or more) during that period of you life when you have heavy responsibilities such as children and mortgage. Then reduce the amount of insurance when the children are grown. Finally, when you are elderly, life insurance is just too expensive and is dropped altogether. Of course, it is different for every person.

Save on Textbooks for College

With the spring semester starting for some and already started for most students, college textbooks are expensive and it’s tough to avoid paying for them. Your professor writes the book, forces you to buy it for $100, and then changes the edition every year so you can’t sell it back.

With that in mind, remember that the book itself is worthless. It only has value because they force you to use it. Once they make a newer edition, your copy will be worth $0. Here are some tips to limit the damage.

Buy Used. This is kind of a no-brainer. If you can’t find used books locally, try Amazon.com. Just make sure you get the correct edition.

E-Books. Most colleges and universities are switching to using e-books or electronic books. Most of them are a much lower cost than textbooks, and some schools may offer these books for free. Check with your school bookstore.

Use the Library. Don’t buy the book – just use the reserve copy at the school library. If you have to read a novel for an English class, check it out from the school or town library.

Always Sell Back. Once the class is over, most people never look at their textbook again. So sell it now while it still has value. If you change your mind, you’ll be able to buy it back later for cheap.

Returns. Understand the return policy for your books. Opening a DVD can make the item unreturnable. The worst thing is buying a textbook for a class you never take!

Borrow From a Friend. Find a friend who took the class last semester and foolishly decided to keep the book. Borrow it.

Winter Car Maintenance

Cars are expensive to buy and maintain. If you live in a cold weather climate, it’s even more important to keep your vehicle serviced regularly. Nothing’s worse than driving on a freshly salted highway, and finding out that you have no windshield washer fluid or that your windshield wipers are worn out and don’t work properly. These are simple things that anyone can do themselves, and will help to prevent accidents. Preventive maintenance is usually cheaper than having to make expensive repairs later. Here’s the most basic inspections you should do in preparation for winter driving.

1. Check your windshield wipers. Save money by changing the blades yourself if needed.
2. Check your windshield washer fluid regularly. You can keep a jug of this at home and refill as needed. Just be sure to store it in a safe place where young children and pets can’t get at it as it is poisonous.
3. Check the tread on your tires. At the same time, check the tire pressure.
4. Have your brakes inspected.
5. Check your battery.

Winter driving presents its own set of challenges. Taking the time to clear off the the windows and making sure they’re adequately defrosted keeps you and other drivers safe. Driving slower and watching out for the other guy will save you money and aggravation in the long run.

Tips on Saving Money on Groceries

In hard times, people tend to stay home more often and eat at home. However, the cost of groceries can be costly as well. Below are some easy ways that you can save money on groceries.

Clip Coupons. Did you know that most grocery stores post their weekly coupons online? PrintableGroceryCoupons.net will help you find the coupons for most national chains. Also, when checking out, ask the cashier if there are any coupons for the items you bought. Additionally, find more coupons at Coupons.com and SmartSource

Buy Generic. Many generic products are identical to the more expensive brand names – some are even made in the same factory and shipped from most of the same warehouses. Haven’t tried generic recently? Many store brands, such as Shop-Rite, Giant, Walmart and Target, can taste better than the brand names.

Buy in Bulk. When an item is on sale, buy it in bulk. This is especially true for things that don’t go bad, like toilet paper or laundry detergent. Also, shopping club outlet stores such as BJ's, Sam's Club and Costco can help you save when shopping in bulk.

Buy Whatever’s On Sale. Stock up on your favorite brands when they’re on sale. If all of your usual favorites are full-price, then buy whatever is on sale. It’s good to try new things.

Double-Check the Price. Watch the register as items are scanned. Make sure you are not over-charged.

These tips can save you lots of money on your weekly grocery bill. So during these cold months, stock up on your groceries and enjoy the savings. 

Food Assistance for the Needy

For those struggling with paying monthly bills, assistance with food purchases can be a great help. The Supplemental Nutrition Assistance Program or SNAP, which used to be called food stamps fills that need. Surprisingly, many of those who qualify for assistance either aren’t aware of it, or don’t apply for it.

Food stamps often had a stigma associated with them since everyone at the store knew that you were using them. In addition, they could be lost or stolen. The new program puts money directly into a person’s account every month, and then issues them a card which they use like a credit or debit card at the store.

A new addition to the program is the participation of many farmer’s markets. This allows recipients to get fresh produce at a reasonable price. It is also a benefit to the farmers in that more people have the money to purchase their products.

To find out more information about SNAP and eligibility requirements, you can visit their website at:http://www.fns.usda.gov/snap/Default.htm.

To apply for benefits, you need to contact your local or state office. The phone numbers and locations can be found at the aforementioned website, or you can look in your phone book under local and state government. A few states allow you to apply online.

Tips on What to Do With Your Tax Refund

Income tax time is upon us, and some of us are going to get a nice refund. What a lot of us do is get our taxes done, get our refunds and will end up spending it within a few weeks. And that’s a problem with some of us as a people. We take our tax refund and try to keep up with the Joneses. In recent years, you can take your W-2’s to a car dealership and get your taxes done. They prepare your taxes in exchange for a car. The sad part is that the dealerships that are in the urban neighborhoods are focusing on this because they assume that we only buy cars around income tax time. And most check cashing locations in our neighborhoods do the same thing as well. What we have to do is control our own income tax refunds. Here are a few suggestions on what we can do with our upcoming income tax refunds for this year and maybe we can follow these going forward every year:

Pay Off Debt

If you have a credit card with a double-digit interest rate, the best thing you can do with your money is to pay down this debt. If you're like many Americans, you may not be paying much more than the minimum payment each month. When you pay only the minimum payment, most of it goes towards interest instead of reducing the amount you borrowed (the principal), which is why it takes so long to pay off the original debt (often 20 to 30 years).

Start A Retirement Fund

Did you know that if you put away $1,000 a year for 25 years at a 12% interest rate, you can accumulate $1,000,000 by the time you retire? That way, if or when they decide to eliminate Social Security altogether (which I think will eventually happen), you’ll still be able to retire and live comfortably with no worries.

Make an IRA Contribution Now

If you're eligible to make an IRA contribution, you can come out ahead by making it now instead of waiting until you file your taxes in April. Why wait until April to start earning money on your contribution?

Pay Down Your Mortgage

Making a lump sum payment to be applied to the principal on your mortgage can save you the most money in the long-term because mortgages are usually our largest and longest-term debt. A $1,000 pre-payment on a $100,000 mortgage at 7% would save you over $4,000 over the life of the loan.

Pay Off Your 401(k) Loan

If you've borrowed from your 401(k) account and are thinking you're coming out ahead because you're paying yourself back by making the loan repayments, think again. You'd be better off to pay off the balance and use the money you would have applied to loan payments to make additional tax-deferred contributions to your account instead. Remember, the money you borrowed is not in your account and therefore is not earning interest or appreciating in value.

Beef Up Your Emergency Fund

The job market is unpredictable, and your job might be one of the next to be cut. Don't be caught unprepared if you're one of the hundreds of thousands of people who are laid off or fired. You should have an emergency fund that would cover three to six months worth of your basic living expenses. If you don't, adding your tax rebate or refund to your emergency fund may be a smart thing to do.

What's best for you always depend on your personal situation, but for most people, one of the options discussed here will benefit you most in the long run.

All in all people, we have to become debt free and financially independent for 2008 and beyond. A lot of us claimed in resolutions that we want to get out of debt and save some money. What better way to start your plan to get out of debt than with your income tax refund? That way you can still live off your regular income and still be able to save. You can do these steps once a year for the rest of your life and still keep your standard of living the way that it is now. The best and most important part in all of this is that you’ll be in control of what you do with your money. 

If you need any further assistance, please contact Provident Business Services at 484-857-7012 or mwaring@provbiz.net.