What type of mortgage should you get?
A fixed rate mortgage is one in which your monthly payment stays the same, regardless of what happens in the overall economy. If we experience a crisis that causes the average interest rate to skyrocket, you don't have to worry because your monthly payment is going to stay the same.
An adjustable rate mortgage changes over time, just as the markets change. The advantage is that you might be able to capture lower interest rates during times when the market is favorable, but the disadvantage is that your interest rate might explode into a payment that you can't make.
Learn more about mortgages in this article. Then leave your comments in the forum!
How should you spend your limited funds?
University of Colorado researchers found that spending money on experiences, like traveling or skiing, creates more "ongoing satisfaction" than spending on physical objects, like handbags or shoes.
They noted that memories tend to get better over time. You remember taking the kids to the water park, but you -- over time -- forget about the fact that your kids were cranky during the car ride.
So if you're going to budget your discretionary money towards something fun -- opt for a vacation, rather than a nicer piece of furniture.
Did you catch our interview with bestselling personal finance expert Jane Bryant Quinn?
If not, don't worry -- you can read it here.
This leading expert on money management talks about:
- Using envelopes to track your spending
- How much you should borrow for college
- The best way to pay down debt
.... and much more! Check out our interview with Jane Bryant Quinn, and leave your comments in the forum!
How much does Fluffy or Fido cost?
People often don't want to talk about the costs associated with owning a dog or a cat. After all, they're part of the family.
But in reality you need to budget for pet ownership costs. You may not realize how much those little expenses add up: Veterinary appointments, vaccinations, food, toys, and boarding - these can add up to more than $1,000 a year to your household budget, even if you are not spending on anything particularly unusual or extravagant.
How can you budget for the cost of a new pet? You'll have to find other areas within your budget that you are willing to trim. Can you cut your cable bill and put that money in a "pet care fund"? Can you dine out at restaurants one fewer time per month?
Use these worksheets to write out your budget. Then figure out what categories you can trim in order to make room for other things in your life that are more important to you ... like Fluffy and Fido.
How much cash should you keep on hand?
That's an excellent question. While you don't want to have too much cash -- after all, the interest that you are going to make in a savings account is most likely going to be lower than inflation -- you also don't want to have too little cash on hand. The cash in your savings account can be used to bail you out of some kind of unexpected crisis.
Many experts recommend keeping about three to six months of your living expenses in cash. This might seem like a lot, but you can rely on this in the event of a job loss.
Learn more about this in these following articles.
There are some experts who advise you to plan on replicating 70 to 85% of your pre-retirement income. In other words, if you earn $100,000 right now, you should plan for retirement as though you will need to be collecting $70,000 to $85,000 per year during your golden years.
Other finance experts, however, disagree. They say that you should plan for retirement based on your current expenses rather than your current income.
After all, if you currently earn $100,000 a year and you have a 50% savings rate, you're not likely to dramatically escalate your expenses during your senior years. If you're spending $50,000 a year now, you can probably plan on maintaining that lifestyle in retirement -- despite the amount that you earn.
Learn more about how to estimate your retirement needs in the following articles.
You have many, many budgeting goals. You want to take a trip to Paris, buy a washing machine, and fix the timing belt on your car. Which of these goals takes priority?
Find out more about juggling many goals in this post, There's Too Much to Save For!
What is an emergency?
Some people believe that if their car breaks down or one of their appliances needs repair, they're facing an emergency. But in truth those types of events are expected. They%u2019re not emergencies; they're normal parts of life.
As a result, you should have a fund dedicated to future home repairs and future car repairs. You may not know when these things will happen, but they invariably will.
Keep some savings set aside in order to deal with these types of events. Learn more about setting up future repair funds in this article.
Have you finished making car payments? If so ... congratulations!
Now I want to challenge you to do something that you may never have considered: Continue making car payments ... to yourself.
Once you're done making car payments, continue paying the same amount every month into a savings account that's earmarked specifically for buying your next car. After all, you'll eventually buy another car, even if that date is nowhere near the horizon.
If you set aside $200 per month for your next car, you'll have $12,000 after five years -- enough to pay cash for a decent car.
Are you trying to pay off your debt?
The "debt stacking" method recommends that you make a list of all your debts, ranked by interest rate, from highest to lowest. The "debt snowball" method says you should pay off the loan with the lowest balance, regardless of interest rate.
Which is better? Read more to find out.