SFL rate question

 

We make financial decisions all of the time.  Are you making your financial decision solely on the rate that you will receive? Are you considering other factors when making financial decisions?  If you are trying to simplify your finances, don’t let the interest rate be the determining factor in your decision:

New Deposit Account

You see an offer for a higher yielding account.  Before you decide to open the new account because of the interest rate you will receive ask yourself a few questions:

What other services or benefits will I receive from this new account?

Do I need another account?

If I open this account should I consider closing one of my other accounts?

Is this rate just a teaser rate to get me to open a new account with this institution?

How long will I receive this rate?  Six months, One year, or longer.

Why do I need this account?

Is the rate worth the time and effort to manage this account?

How much more is the rate compared to my existing accounts?

Should I consider consolidating my other accounts with this bank?

Why is the bank offering a better rate than all of the other banks?

Consider these factors before you decide to open a new account which tempts with a better rate.  You may thank yourself later because if you decide not open the account that will be one less account you will have to keep track of as well as one less statement.   If its a good rate see if your existing bank will match the offer for you or if they have similar type of account.  This way you do not have to move your relationship and still benefit with the better rate.

New Credit Card

You receive a credit card offer in the mail that looks very enticing. The new card offers a lower than you are currently receiving.  Here are a few questions to ask yourself before you apply for the new card:

How long will I receive this lower rate?

How much will I really save by having a lower rate?

If I do not carry a balance what other benefits will I receive from the new card?

Could I receive this rate from one of my existing cards?

Should I close an existing card to replace the new card?

How will this card impact my credit score?

What will I use the card to purchase?

Do I really need another credit card?

New Mortgage

You are looking to purchase a new home or considering refinancing your existing mortgage.  Will you chose the mortgage provider who offers the lowest interest rate? Remember this decision will be a long term one since you will have at least a 10 year relationship with your mortgage company.  All rates are not the same.  Ask yourself these questions before accepting the lower rate:

Am I paying other fees to make up for the lower rate? Some mortgage providers will offer lower mortgage rate but will charge other fees such as orgination, application fee or lender fees

What is the reputation of the mortgage provider? You want to work with provider that will be able to close your mortgage in a timely manner. If not that lower rate will not be worth it if not able to close on time.

Does the rate come with prepayment penalty?  You may have to pay a penalty if you pay the loan off early.

What are their underwriting standards?  Are they the same as other lenders.

Will my mortgage be sold to another mortgage company?

Doing a little research on rate on the front end will simplify the process on the back end.

New Investment

Did you just see an advertisement to receive a set rate of return which is great rate and sounds like a good deal.  Here are some questions to ask yourself before you make this invest:

How risky is this investment?

Is the expected return higher than other similar investments?

How long is my money locked up?

How quickly can I liquidate the investment if needed?

Does this investment fit within my current investment goals and objectives?

What fees do I have to pay for this investment and what commission does the sales person receive?

Asking yourself these questions will help you save some future headaches and prevents you from investing in some investment just for the rate.

As you can see taking a minute and asking yourself a few questions may prevent you from opening a deposit account that you really did not need, obtaining a new credit card that you did not need, find the right mortgage provider, or make the right investment that meets your investment objectives.   Doing this will also help you simplify your finances because that will be one less deposit account, credit card, or investment you have to manage.

Which of these questions will you ask yourself next time  you see that higher interest deposit account, lower rate credit card or low rate mortgage offer?

Til next time take one step at a time to simplify your finances.

If you enjoyed this post and would like a simple checklist of questions to ask before you open that next account, sign up for my newsletter and you will receive a free eBook as well as an easy checklist of questions to ask before you open that next account.

 

 

Copyright: timbrk / 123RF Stock Photo

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http://www.dreamstime.com/stock-photos-automated-control-money-file-eps-format-image37029823

 

“ Let go of all the stuff you can’t control and start using your time to master what you can control. ”

 

Control – The power to influence or direct people’s behavior or the course of events.

Are you frustrated when the stock market is down and your saving rate remains low.  Are you allowing things you can not control such as stock market, interest rates, or even the weather control your personal finances. Stop worrying about those things.  The only way to simplify your finances is to control what you can control.  If you can’t control it try not to worry about it.  You can not allow those things to control your financial life.  It may be preventing you from achieving your financial goals you set for yourself.  It sounds so simple but many times we find this to be a challenge.  We all do it.  I know I do it as well.  We worry about the things we can not control.  If you think about it, if we would just focus on the things we can control , I am pretty confident you can simplify your finances.   Simplify your personal finances by controlling what you can control.

Here are 7 things you can control that will help you simplify your finances:

Your Asset Allocation

You can not control the stock market but you can control how you allocation your assets.  We know the stock market goes up as well as goes down.  But having the appropriate investment allocation based on your risk tolerance and time horizon will help you weather those ups and downs.  Also building a diversified investment portfolio will help reduce the risk in investing in the stock market.

Having Emergency Fund and Proper Insurance

You can not control the weather or when an emergency will occur.  But you can control if you have a properly funded emergency fund in place for those unexpected expenses.  You can also control the amount of insurance you have in place on your home, car, and medical coverage to cover those unexpected expenses which maybe caused by the weather or other factors.

The Amount You Save

You can’t control the interest rate you earn but you can control how much you save.  You determine how much you save each month.  You don’t at least I hope you don’t determine the amount you save based on current interest rates.  Consider saving a set percentage of your income each month.  This post Secrets to Savings may help you with your savings.

Your Spending

You can not control the price of products and services but you can control your spending.  Controlling the amount you spend dictates how much debt you may carry as well as how much you are able to save.

Multiple Income Sources

You can not control when your job is eliminated but you can create multiple sources of income.  Having another source of income will help in case your job is eliminated.

Where You Bank

You can’t control the fees your bank charges but you can decide where you bank.  Make sure you match your banking needs with your bank of choice.

Having Life Insurance and Will in Place

You can’t control when you die put you can prepare for it with will pre-plan arrangements and life insurance.  Having preplanned services will not help you but will make it easier on your family when they have to make arrangements as well as decided how to handle your assets.

As you can see there are many things you are not able to control so stop worrying about them and focus on those things you actually can control.  What you can control is what will make the difference in your financial life so worry about those.
What are somethings you can control in your finances that will improve your finances?
Til next time take one step at a time to simplify.

 

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SFL Going home to FinCon

 

I will attend FinCon 14 this week.  I can’t wait. I have heard many great things about the conference and look forward to attending.  This will be my first year attending the conference.  If you have not heard about FinCon, it a conference for the financial media.  This is the 4th year for the conference.  The conference was started by Phillip Taylor aka PT.  If you want to learn more about the conference check out the FinCon website.  This year’s conference will be held in New Orleans which is my hometown.

I lived in New Orleans my entire life until Hurricane Katrina forced us to evacuate and flooded 80% of the city due to the levees breaches.  My family and I decided to relocate to Texas where we have now lived for 9 years.  These 9 years have gone by fast.  I visit New Orleans often because I still have family and friends who live in the city.

When I read that FinCon was going to be held in New Orleans this year I thought it would be fun to attend.  This will be my first conference I ever attend.  As I am looking to grow this blog and learn more about personal finance blogging I thought this would be the perfect conference to attend.  Also you can’t beat attending a conference in New Orleans either.

I look forward to meeting many of the blogger who I interact with on Twitter as well as those I am unfamiliar with.  The schedule was released about a month ago and there are many great session to gain some knowledge.  It also will be great to see some family and eat some New Orleans cuisine while I am there.  Another bonus to this trip is I will be attending the home opener for my beloved Saints.  I can not wait.   WHO DAT.  If you are attending FinCon and are football fan I would suggest walking over to Champion Square to enjoy some tailgating if you are still in town on Sunday morning.

So if you see me say hi.  I will be the guy that speaks like everyone else you have come in contact with from New Orleans once you arrived. So if you need any suggestions about New Orleans or just how to pronounce something correctly I am happy to help.

Look forward to see all of you who will be attending.  I will have a follow up post about all the great things I learned and wonderful people I meet.

I am on my way.  See you on Thursday.

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SFL Domino effect on finances

When it comes to making personal financial decisions do you consider the long term effect it could possibly have on your finances? Many times when making a decision financial in nature or not we often don’t consider the long term impact that decision can have on your life.

Consider when you may have applied for a store credit card to receive a discount on your purchase as well as received 0% interest for 90 days. It sounds like a great deal at the time so you may purchase a little more than usual because you planned to planned to pay off the debt before 90 days

You receive the first bill and to your surprise you discover that you are only required to make a minimum payment of $25.00. You say to yourself this will really help my monthly cash flow. Well making the minimum payment each month does not enable you to pay off the debt before the interest free period ends. Instead of paying off the debt you make additional purchases since you received an offer that offers you an additional discount on all purchases with your store credit card.

You continue to get deeper and deeper into debt. You accidentally forget to make a payment because you miss placed your bill. I know this maybe a little extreme but wanted to illustrate how one simple seemly minor decision can have long term impact on your finances. Instead of paying no interest you ending up:

  •  Paying interest which cost you more
  • Missed a payment which incurred a late fee and impacted your credit score
  • Used card to add additional consumer debt to balance sheet
  • Added another credit card and bill to your existing collect
  • Not enabling you to save since your potential savings is use to pay off the debt

Here are a few other short term financial decisions which can have a long term financial impact on your finances:

Not putting down 20% on home purchase

Yes home ownership is wonderful financial accomplishment. But you want to do it right without costing you in the long run. If you are unable to put a down payment of at least 20% you could possibly have a higher interest rate. Having higher interest rate means you will have a larger monthly payment each month. In addition to higher monthly principal and interest payment, you will also have PMI payment which is an additional monthly cost. Not saving the additional 10% will cost you more in the long term than you thought. The amount you finance will also be larger which means you pay more in interest and carry more debt on your balance sheet. So consider waiting until you have that additional 10% saved to purchase your new home.
Not paying off your credit card monthly – it may help your monthly cash flow but longer term you will pay more in interest payments. It may not seem that much at first but if you continue to not pay off the balance you will end up spending more money on your purchase than you thought. Debt continues to grow and more debt you carry the less money you will have to prevents you from saving or put toward retirement.

Buying more house than you can afford

Yes the bank may be willing to lending that amount but is it really necessary. Larger house comes with larger insurance payments, larger property tax bill utilities expenses as well as maintenance expenses. What seems like a great idea to start can end up costing you more long term.

Not having emergency fund

Deciding not to have an emergency fund will cost you more in the long term. You thought it would be better to use the funds for other things instead of putting it a side just in case. Yes I know just in case may not happen and you assumed you would be in a better financial position something did happen and that you could handle it. Well guess what it happened well before you had planned for it happen. You never know when an emergency will occur just be prepared for it. If you don’t have an emergency fund you will have to figure out a way to pay for the unexpected emergency. For example you have unexpected car repairs, it will cost you a $1,000. That amount will significantly impact your monthly cash flow. You don’t have the money set a side so instead you have to use your credit card to cover the expense. You hope to pay off the additional debt at the end of month. But it’s unlikely so you add the additional expense to your existing debt. Doing this will increase your consumer debt balance as well as increased your monthly expenses and does not allow you to save. That one decision you made to not have emergency fund cost you more money because you had to pay additional interest on your credit card balance and cost you future savings as well as tightened up your monthly cash flow.

Guaranteeing a friend or family member loans

We all want to help out a friend or family member when we can. But sometimes those simple things can backfire and end up costing you. If you sign on as guarantor for loan, that means if the person does not pay you will be responsible for the loan. As long as your friend or family member pays as agreed upon and pays off the loan no problem. If they miss a payment or two guess who the bank or finance company will come looking for to pay the past due bills. You got it. They will be looking for you now. This will create additional debt for you to pay off as well as possible late fees and additional interest charges since your friend or family member has stop making payment. Now you have additional debt with nothing to show for. It’s possible this could end up impacting your credit report.

Not having sufficient insurance coverage

Who does not want to save on their insurance. It nice to have a lower insurance bill as long as you don’t have any damage or need to file a claim. Having the lower cost mean you possibly have a higher deductible or you are under insured. Having a higher deductible means more that you have to come out of pocket when there is a claim you hope you have that amount saved in an emergency fund. Under insured means you don’t have enough insurance to replace or cover the cost of damage. This means you have to come out of pocket to cover the difference. Which can set you back if you don’t have the money available. It could also add more debt if you have to finance the cost.

Not saving for retirement

Instead of saving for retirement you use the funds now. This results in you losing out on the long term grow and you may have to work longer than you planned. The longer you wait to invest for retirement the more you will need to save to meet your retirement goals.

Large impulse purchase

You see it and you need to purchase it now. It will satisfy your current desire but how will it impact your future finances. Did you consider the additional debt you may incur with the financing of the purchase or any additional maintenance or insurance ? That one large impulse buy may set you back several years. Consider planning and doing a little research before make that large purchase.

As you can see from these examples having a short term view can impact long term impact on your finances can be like dominoes.

Have you ever made a short term financial decision that has had a long term impact on your finances?

PHOTO CREDIT: Copyright: texelart / 123RF Stock Photo

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SFL Online Banking One site to simplify

I am always trying to find new ways to simplify my finances or at least make it easier to keep track of my finances.  Having multiple things to keep track of can be time consuming as well as cumbersome.   Why not have one website you can keep track of everything or at least the majority of your personal financial life.  It will not only make your financial life better as well as easier.   Yes one website can help you simplify your finances.  I talking about your bank’s website.  Now I know every bank has different features on their sites but the majority banks have features to help you simplify your finances which I will discuss.  I have not used a credit union so they may also offer some of these features as well.

So you may be wondering how can my bank’s online services simplify my finances.  Here are 6 ways  your bank’s online banking services can help you simplify:

Review all of your accounts -when you looking to simplify you are also probably looking to save some time in the process.  If you have all of your deposits accounts (checking and savings), credit cards, mortgage, and investments account with the same bank you are able to review all of your accounts on one site.  Makes it easier since you do not have to remember multiple log-ons and passwords.  Think of the time you save by just going to one site instead of several sites.

Review all transactions – Keeping track of your account balances is important when you are trying to simplify your finances.  Being able to monitor your transactions in one location makes things so much easier.  You can just log on to one site and you can see credit card and deposit transactions.  This helps you monitor you account balances and spending in one place.

Set and receive alerts – another great way to help you simplify your finances is to set alerts on your accounts.  These alerts can alert you when your checking account reaches a certain balance minimum.  This lets you know you need to transfer or deposit money before you make your next purchase to avoid those ugly overdrafts.   You can also set alerts to let you know when a certain amount has been withdrawn from you or when a debit has been taken from your account.  This helps you track payments and alerts you if a transaction over a certain amount has occurred that you did not initiate.  For example, you may want to be alert to all transactions over a certain dollar amount.

Setup online transfers - when you simplify you want to automate as much as possible.  You can have everything automated from you bank’s website.  You can set up monthly transfer to your savings account as well as investment accounts.   You can also set up automated transfers to your checking account when you balance reaches a certain balance.  Helps you prevent overdraft charges.

Setup bill pay services – not only can you set up transfers to various accounts, you can also pay your bills from you bank’s website.  Paying your bills through bank’s website makes it easier to simplify.  Instead of writing out those checks you can simply set up the company that needs to be paid and the check will be issued for you.   Makes keeping track of your bills easier also.

Review statements – reducing the amount of mail you receive as well as the number of statements to   keep will help you simplify and better organize your finances.  Using online banking you can pull up  your statements online which means less paper you would receive in the mail.  When you use online banking many banks will keep several years of statements for you to access.  This means less statements  you would need to store.

As you can see by signing up for online banking it can help you simplify your finances.  So if you are not using online banking or only some of your bank’s online capabilities sign up and give it a try.  You never know you use may  benefit from it.  I am aware there are other financial website such as Mint available to help you review your finances.  However, since everyone has a primary bank why not give it a try as  you are already using their services.

Let me know what you like about your bank’s online capabilities?

Til next time take it one step at a time to simplify your personal finances.

 

PHOTO CREDIT:Copyright: jcjgphotography / 123RF Stock Photo

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Are you finding it a challenge to save money?  Does it seem like as soon as it is deposited into your account it disappears?  Are you looking for a simple way to save money as well as simplify your finances?  We all have a tendency to spend a little more when we know we have some money in our checking account.

Here is a solution HIDE IT FROM YOURSELF.  No I am not saying pull out the shovel to dig a hole to bury it in your back yard or stuffing it in your mattress.  There are some easier ways to hidden your money so you can build your savings and begin to simplify your finances.

Here are a few ways to hide your money from enemy number one yourself:

Hide it in a savings account – open a savings account and set up automatic monthly or bi-weekly transfers from your checking to your savings account.   Decide how much you will need to cover your monthly expenses and send the excess to your savings account.  By doing this you will not see money sitting in your checking account which may tempt you to buy something.   It also forces you to save.

Hide in brokerage account – just like you opened the savings account you can open a brokerage account instead.  You can set up automatic monthly or bi-weekly transfers from your checking to your brokerage.

Buy a certificate of deposit (CD) – you can purchase a CD with your excess funds.  You may need to accumulate a few months of excess to purchase the CD but it’s an option.   Purchasing a CD at current low interest rates may not be the best option currently but it prevents you from spending it.  The added feature with a CD is that you cannot pull the money out until the CD matures without a penalty.

Buy a mutual fund – if you have a brokerage account or mutual fund account automatically transfer funds each month to purchase mutual funds.   Holding mutual funds makes it a little more difficult to spend the cash.  You would have to sell  the funds to have cash to spend.  Having mutual funds forces you to save and invest as well as helps you build a nice nest egg over time.  Making monthly purchases enables you to dollar cost average your purchases over time.

Transfer funds to your IRA – automatically transfer cash to your IRA to help you save for retirement.  To maximize your retirement savings, divide the maximum annual contribution amount by 12 and contribute this amount each month.  This way you can contribution the maximum allowed as well as make sure you do not over contribute.   By using your cash to contribute to your IRA you will not be able to spend the money and once its contributed you cannot withdraw it without penalty until 59 1/2.

Before you begin to hide your money make sure you have established a budget so you know how much excess  money you should have each month.

It is now time to TAKE ACTION.  Which hiding place will you use to begin saving instead of spending your money.  Remember take it one step at a time in order to simplify your personal finances.

 

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