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Mortgage

What is PITI? 

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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If you’re getting ready to buy a home, you might hear the term “PITI” from your real estate professional. You might also come across it in emails with your lender or read it in your mortgage paperwork.

So what is PITI? Simply put, it’s an acronym that describes the four key components of your monthly housing costs as a homeowner. 

Specifically, PITI stands for: principal, interest, taxes and insurance.

Many people make the mistake of comparing the cost of their monthly rent and utilities with a monthly mortgage and interest payment. In this kind of flawed comparison, owning a home can often seem like the better deal. 

However, as evidenced by PITI, there is more to owning a home than paying a mortgage plus interest. Not even addressing utilities, you also have to factor in property taxes and insurance, which can definitely increase your monthly payments.  

That’s why it’s important to use a PITI loan calculator, like this one from our parent company LendingTree, and speak to your lender to find out what your actual PITI payments will be. Only then will you have a comprehensive idea of the true cost of homeownership. 

To help you get there, we’ll go into more detail below about each of these four components of a mortgage and what to consider before you buy a home. 

Principal 

Your home’s principal is the base amount of money you borrowed to buy it. So, if you financed $200,000 for a home, you have $200,000 of principal left to pay off. 

It’s very important to note that your entire mortgage payment will not be applied to your principal balance. Only a portion of it will. The rest of your mortgage payment will go toward interest, taxes and insurance. If you want to pay down your mortgage faster, you’ll have to send in extra payments and instruct your mortgage company to apply that cash to the principal, not toward future interest. 

Interest 

Interest is the cost you pay for taking out a loan. The bank charges you for lending you money in the form of interest. After all, if it lends you X dollars, that’s X dollars it can’t use itself. So there is a cost associated with lending. You’ll normally see interest in percentage form. (The interest rate on this loan is 4 percent.)  

Still, it can be difficult to understand how to calculate your interest rate and how that affects your mortgage payment. Here are some of the ways to determine your interest costs: 

There is also a difference between your mortgage interest rate and your APR. According to the Consumer Financial Protection Bureau, your APR (annual percentage rate) includes your mortgage interest and other charges like fees. So be sure to ask your lender to see your APR so you can get a sense of the total cost of your mortgage. Knowing APR is also a good tool to use to properly compare lenders, because some lenders charge higher fees than others even if they’re offering the same loan amount. 

Lastly, your interest payment will not be the same every month. This is called amortization, the gradual reduction of a debt by regular scheduled payments of interest and principal. Many first-time homeowners are surprised at how much of their mortgage payment goes toward interest and not principal. In order to plan ahead, ask your lender for a sample amortization schedule so you can get an idea of how much of your monthly payments will go toward interest and how much will apply to principal over time. As you pay down your interest costs, you’ll start to see the principal balance reduce more and more. 

Taxes

As a homeowner, you pay property taxes on your home. These funds are used to fund your local communities, including your local public schools, fire departments, police forces, libraries and more. 

Here is some information on property taxes and how your city determines them: 

  • Property taxes vary from one state to the next. 
  • A local tax assessor will determine your local property tax, but has no control over your state tax rate. You can also look up how to calculate property taxes to find out more information about your own home. 
  • You can check your property tax assessment every year to make sure there are no errors on it. In some areas, you’ll have an updated assessment every year, but in others, it could be every few years. 
  • There are many factors that impact your property tax rate. Some of these factors include improvements to your property, the price of similar homes in your area, and even things not related to your home, like state and local budget cuts 

Luckily, the property taxes you pay are often an income tax deduction, so that is one benefit to homeownership. 

Insurance 

The amount of insurance you pay as a homeowner really depends on where you live, how  much of a down payment you gave your lender, and what type of coverage you want or need. Below are three examples of common types of insurance that homeowners carry:  

  • Homeowners insurance: Homeowners insurance typically protects your home against damage caused by things like a house fire. Most homebuyers put their insurance payments in an escrow account ahead of time. Then, your bank uses the funds you put in the account to pay the insurance on your behalf. 
  • Flood insurance: Not all homeowners buy flood insurance. This will really depend on where your home is, and whether there’s a risk of flooding from hurricanes or being in a low-lying area. It’s important to do your research and get a flood certificate to find out if the property is located on a floodplain.  
  • Private mortgage insurance: If you can’t put 20 percent down on your house, some banks (but not all) will require you to pay for private mortgage insurance, also known as PMI. Some types of mortgages, like FHA loans, require such insurance.

    What is not included in PITI payments? 

Although PITI is comprehensive when considering how much it will cost you to own and operate your home, there are some other costs that aren’t factored in.

Below are some examples.

  • Utilities: Your utilities might include electricity, natural gas, water, trash collection and the like. 
  • Recurring subscriptions: Have you factored in things like cable, phone, internet, Netflix, etc. 
  • Homeowners association fees: If you live in a condo or in a neighborhood that shares the costs associated with common spaces or services, you might have to pay an HOA fee on top of your PITI costs. 
  • Home improvements: If you want to upgrade some part of your home, this will be an added cost. 
  • Home maintenance costs: You can predict basic home maintenance costs, like cutting the grass or fixing a leaky faucet. You can’t predict some of the larger expenses, like those arising from termite damage or a broken hot water heater.This is why it’s important to have an emergency fund before buying a home.

    Ryan Inman, a Las Vegas based financial adviser, often works with young families and potential homeowners. He says it’s important to pay attention to the non-PITI costs mentioned above. “My best advice to first-time homebuyers is to compare the amount of rent and utilities you are paying now with how much PITI, HOA fees and utilities will be on a home,” he tells MagnifyMoney. 

“Save the difference for three to six months, and see how your lifestyle is affected. 

The key to Inman’s strategy is figuring out if you can maintain a comfortable lifestyle (no dramatic changes or sacrifices) on your mock homeowner’s budget. If it’s no problem, then you might be ready for homeownership.  

“Also, factor in that you will now be responsible for maintaining the home,” he adds. “There is no rule for how much this can be,” since it really depends on the age and quality of the home, “but it could be costly.” 

Next steps: 

Now that you understand more about what PITI stands for and represents, it’s time to do your research. Remember, you can calculate your total mortgage PITI payment by using a PITI payment calculator 

When you get your results using the PITI payment calculator, don’t forget to add in the uncounted items mentioned above, like home maintenance costs and utilities. 

It’s also important to have a cash buffer for unexpected emergencies so you don’t go into debt fixing a flooded basement or addressing significant damage from a storm. 

If you do all of this, you’ll have an excellent idea of what your cost of homeownership will be. If you feel comfortable with this cost and are convinced you’re set to handle anything unexpected that might pop up, then you’re well on your way to becoming an owner. 

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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Retirement, Strategies to Save

Why You Should Open Up a Roth IRA for Your Kids

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

A Roth IRA is probably one of the most powerful retirement vehicles available on the market. Unlike a traditional IRA, the contributions made to a Roth IRA are pre-tax, which allows you to withdraw your money tax-free after age 59½ .

When it comes to a Roth IRA, it’s important to think of how you can use it in other ways too, namely, how your kids can use one to become financially successful one day. There are two ways unique ways you can use a Roth IRA to help your children.

The first way is to open one in their name that they can use to save for their eventual retirement. The second is to use a Roth IRA in your name as a college savings account.

Both of these options come with pros and cons, and it’s important to know them before deciding if either of them is right for you.

Opening an IRA in Your Child’s Name for Their Retirement

The challenge of opening an IRA in your child’s name is that in order to open an IRA in your child’s name, the child has to have a paycheck. You can see exactly what qualifies as earned income here. It might seem like this is impossible, but it’s not. Entrepreneurial parents all over the country who see the value in early retirement savings are taking advantage of this.

For example, if you run a business, you can employ your children to stamp your mail, be models for your brochures, and even manage your social media. As long as you issue them a 1099 or a W2 for their work, they are eligible to open a Roth IRA.

Another negative is that you can’t supplement your child’s income to reach the $5,500 cap on Roth IRA contributions. They can only put in what they earn up to $5,500. So if your child only earns $1,500 from working part-time at an ice cream shop one summer, they can only invest $1,500. However, if they earn $6,000 from that same ice cream shop, they can only invest $5,500.

When children have a Roth IRA in their names, the money is officially theirs. This is different from earmarking a savings account for them in your name. Instead, this is money that they earned going into an account that can benefit them in retirement. The biggest pro is that this is an awesome teaching tool for them. You can really show them how their money can compound and grow over the years.

Even if you start the Roth with a small amount and never touch it again, a one-time $5,500 investment (the current Roth IRA contribution limit) can grow to over $100,000 at a 6% return if your child lets it grow from age 12 to age 62. Fifty years of compounding interest will do that!

What an awesome gift that would be if your child never touched this until they were at their retirement age and got a bonus six-figure payout from work they did when they were a kid. That’s a good memory to leave with them.

Opening a Roth IRA in Your Name as a College Savings Account

Many people don’t realize that another great benefit of a Roth IRA is that you can use it as a college savings account. You could use a Roth IRA in your child’s name for their college savings, but let’s say your child doesn’t work, or if they do, you’d rather they kept the IRA for their own retirement one day.

If that’s the case, you could use your own Roth IRA for their college savings, and here’s why. According to Certified Financial Planner, Matt Becker, “If the money is used for higher education expenses for you, your spouse, your child, or your grandchild, there is no 10% penalty.” (Usually, if you withdraw earnings from a Roth before age 59 ½ there would be a penalty, but not if the money is used for college.)

The downside to all this is that if you use this money for your child’s college education, then you’re not saving it in your Roth for your own retirement someday, and that’s pretty important! The pro is that your money isn’t locked into a 529 plan where you have to use the money for qualified higher education expenses. Another interesting pro is that 529 assets are counted toward your Estimated Family Contributions on the FAFSA, but investment accounts, like Roth IRAs are not.

That said, it’s important to look very closely at the differences between 529 plans and Roth IRA plans if you want to use your Roth as a college savings vehicle. Additionally, if you are a high-income earner, you might not be able to contribute to your own Roth IRA unless you do what’s called a backdoor IRA. The current 2017 income limit for Roth IRA contributions is a $186,000 annual income for those who are married and filing jointly or $118,000 for those who are single.

As you can see, Roth IRAs are great accounts for a variety of different savings purposes, and you should try to think outside the box when it comes to using them to help your children create a bright financial future.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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Student Loan ReFi

Why I Refinanced My Student Loans — Twice

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

 

Refinancing your student loans can be a great way to accelerate debt repayment or free up some of your monthly budget. I recently refinanced my student loans for a second time, which was a strategic move to improve my overall financial health.

Here’s why I think this can be a smart idea, if you do it at the right time in the right way.

What Is Student Loan Refinancing?

If you’re new here and wondering what refinancing even is, allow me to explain. When you refinance your student loans, you essentially apply for a new loan so that a new lender will buy out your current student loans and give you a new loan with better terms.

“Better” terms depends on what your goal is. For many people, getting a better loan means getting a lower interest rate. If you want to save hundreds of thousands of dollars of interest over the life of your loan, refinancing is a great way to do that. You can structure your loan to pay it off faster at a lower interest rate. This might mean higher monthly payments than you’re used to but a much lower cost of your loan overall.

If you’re having trouble paying your student loans and your monthly payment is too high right now, you can also refinance your student loans to lower your monthly payment. So if you’re on a 10-year plan now, you could refinance to a 15- or 20-year plan to spread out your payments until you get on better financial footing.

Why I Refinanced Twice

About a year ago, I refinanced my federal student loans with SoFi because I wanted to get a better interest rate and pay off my loans faster. My student loans totaled $33,000 with an interest rate of 6.8% with 15 years left on the loan. My monthly payment was around $295 a month. I dropped over a half a percentage point in the interest rate to 6.25% and chose to pay off my loans in 7 years, which increased my monthly payment to about $485. Had I stayed with this loan, I would have saved almost $12,000 in interest fees over time.

I paid my monthly payments dutifully every month, but when my husband and I recently sat down to plan an aggressive debt payoff using the snowball method, we realized that I had been a bit too aggressive with my initial refinance.

Essentially, we wanted to throw as much money as possible at our high-interest debt. Our student loans were at manageable interest rates compared to our credit cards, and we wanted to restructure things a bit to free up more cash.

After receiving a refinance advertisement from College Ave in the mail, I decided to see if I could refinance my student loans and my husband’s graduate school loans with them. It had been only a year or so since my first refinance, but I was still interested. For the record, I tried twice previously to refinance my husband’s loans with SoFi, but they didn’t like his current salary as a medical resident, and they said I was not a qualified co-signer.

Well, luckily College Ave thought I was, so I was able to refinance both my student loans and my husband’s graduate school loans with College Ave. Our interest rates remained the same but I was able to customize a payoff plan that works well with our current debt snowball.

Basically, I chose a plan that allowed us to make graduated payments, so my payments for the next two years are significantly lower than they used to be. That gives me two years to knock out some of our credit card debt without worrying about having large student loan payments.

The Benefits of Student Loan Refinancing

In addition to getting longer or shorter payoff periods and better interest rates, there are other reasons why you might choose to refinance your student loans. For example, if you co-signed your student loans with your parents, sometimes student loan refinance companies will let you get a new loan entirely in your name, getting your parents off the hook.

Many people also refinance their student loans to be more organized. If you have several different student loans and bills with a mixture of interest rates, consolidating your student loans allows you to finally have one monthly bill with one interest rate in one place. This helps reduce the possibility of being late on your payments.

Things to Watch Out for Before You Refinance

While I’m obviously an advocate of refinancing, it’s important to know the downsides as well. The main downside is that if you refinance to a private company from having federal student loans, you lose a lot of the flexibility and perks of the federal student loan system.

Not all private lenders have as many repayment options as federal loans have, and most of them do not offer the perks that come with income-based repayment. For example, my husband’s medical school loans are under the income-based repayment plan called REPAYE, where the government is subsidizing his interest payments (several hundred dollars a month). This is not a perk I was willing to give up, but I was happy to refinance his private graduate school student loans to another private lender with better terms.

It’s Easier Than You Think

I know that switching student loan providers might sound like a complicated process, but with all the online financing companies available now, it’s easier than ever. The process to apply to refinance my student loans took less than 20 minutes both times.

Just make sure to have some identification documents on hand, like your driver’s license and Social Security card, to keep the process running smoothly. After my application was approved, it took about two weeks for my student loans to be completely moved over. Plus, since my new servicer paid off my own loans, that counted as a “payment,” which freed up even more cash this month.

Ultimately, student loan refinancing can be a strategic tool you can use when it comes to bettering your finances and getting out of debt faster. As long as you understand the process, ask to make sure you’re aware of any possible fees, and double-check that the process runs smoothly, you could be well on your way to financial freedom just by adjusting your interest rates and your payments on your student loans.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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College Students and Recent Grads, Strategies to Save

5 Ways to Make Extra Money That Don’t Take Much Time

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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We all want to make a little extra money, whether it’s to pay off debt, go on a vacation, or just have a little bit of a cushion. The problem arises when people have very little time to work on the side due to family responsibilities or other obligations. To combat this issue, I’ve compiled a list of ways to make extra money that don’t involve a lot of time.

1. Do One-Time Gigs

Sometimes it takes a long time to build up a substantial side business. Whether you are a freelance writer, car detailer, or dog walker, you often have to work for a few months to build a client base, which takes significant time and energy.

Instead of doing that, Grayson Bell of the blog DebtRoundUp recommends that you look in the Craigslist Gigs section. When Grayson was paying off $50,000 of credit card debt, he looked at his local Cragslist Gigs section every weekend. He said, “I would help people move, pull weeds in lawns, and remove stumps. These gigs can be almost anything and they don’t require you to invest any money, just look and find something you want to do. It also doesn’t require an ongoing time commitment. It’s not passive, but you can find ways to earn cash when you have free time.”

As always, when using Craigslist, use caution when applying for work and make sure the person offering the work is legitimate and safe to work for. Whether you want to clean houses, do yard work, or paint walls, there are probably many opportunities available in your town on any given weekend.

2. Give Your Opinion

Everyone loves giving his or her opinion, right? Well, it’s much better to actually get paid to give your opinion! Chonce, a writer at Single Moms Income has had extensive experience working as a secret shopper, survey taker, and in focus groups.

Her favorite focus group was when “a few other ladies and I met in a beautiful building in downtown Chicago where we received food and drinks while discussing several different hair care products. I answered questions based on my own personal experience and chimed in whenever necessary. After an hour long discussion, we each received $100 and went on our way.”

You can find these opportunities on Craigslist or on a website like Find Focus Groups. Although they do take time to complete, they are usually enjoyable, pay a high hourly rate, and don’t require any preparation.

3. Play Sick

My husband is in medical school and he often works with standardized patients when practicing for large board exams and also in the exams themselves. He just flew to Atlanta to take an 8 hour-long board exam where he had to work with 7 different patients, who were all actors. If you like to act, you can get paid to do this too.

Katharine Paljug is a freelance writer but she’s also an actor who has worked as a standardized patient before. She says “the companies that staff [the patients] want a diverse group to pull from. Best of all, they don’t require any specialized skills or experience, and they can pay anywhere from $15-$60 per hour! When I worked as a standardized patient, I earned $25 per hour, and every month I got to choose how many days I wanted to work.”

To get standardized patient jobs, follow the steps in this post. Essentially, you can look for jobs on Indeed.com or contact the medical schools near you to inquire about opportunities.

4. Work While You Run Errands

One of the best ways to make money without a lot of time investment is to get paid to do the chores and errands you’re already planning on doing that day!

For example, Gretchen of the blog Retiredby40 (and MagnifyMoney contributor) never pays for an oil change. She says that anyone who owns a Chevy, GMC, or a Buick can do the same. Essentially, she works at as a secret shopper using a company called Bestmark. She takes her car to get the oil changed and gets reimbursed for it and paid to write a review.

She says, “In my area oil change or tire rotation secret shops reimburse up to $45 and pay between $25 – $35. This means that you will have to pay out of pocket for the oil change at the location you’re assigned, but Bestmark will send you a check for the cost of the oil change, up to $45, as long as you complete the shop correctly.”

5. Sell Your Junk

Everyone knows that having a garage sale is a great way to make extra money. However, the time commitment involved in setting up the sale, advertising it, and pricing everything seems exhausting. Don’t worry though; there’s a way you can have a garage sale without much headache. Holly Johnson of ClubThrifty recommends that you piggyback off of your neighbor’s sales. Let them set up the signs and put in the work to advertise, and all you have to worry about is setting out your stuff. She also recommends grouping items that are the same price so that you don’t have to spend time individually pricing them.

Using these ideas, you’ll be well on your way to making some extra cash without the intense time commitment. It takes significant time build a side business in addition to your full time work and other responsibilities but with the tips above, you don’t have to!

Finally, Eliminate Credit Card Debt

If you have credit card debt, you are likely paying a very high interest rate to your credit card company every month. The average interest rate is 13%, and the average household has more than $10,000 of debt. That means the average household is likely spending more than $1,000 of interest every year. Another way to put extra money into your pocket quickly is to reduce the amount of money you give to credit card companies. There are two good strategies to reduce your interest rate. One way is to transfer your debt from a high interest rate credit card to a low interest rate credit card. You can find deals with 0% interest for 15 months, with no fee. The best balance transfer deals are updated here.

Another option is to consolidate your credit cards into a low interest rate personal loan. Interest rates start as low as 4%, and (unlike with balance transfer credit cards) you can shop around for the best interest rate without hurting your credit score. You can find personal loan companies here. You will probably discover that reducing your credit card interest rate gives you the biggest savings.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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Life Events

Money Lies that Could Ruin Your Relationship

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Money Lies that Could Ruin Your Relationship

Over the past few years of being a personal finance blogger, I’ve heard some pretty incredible stories about money lies.

One story that stands out is my friend’s husband who one day admitted to her that his work hadn’t been paying him for months. The only way he could pay their mortgage was by withdrawing money from their retirement funds. His employer kept promising the money was coming, but the company simply wasn’t doing well. He didn’t tell his wife anything about the situation and drained all of their savings while she went about her normal routine of bringing kids to school, shopping, and spending time with her friends. When he finally hit rock bottom and told her, it wasn’t pretty. This is definitely an extreme example but highlights how bad money lies can get in relationships.

If you aren’t careful, even small money lies can ruin your relationship for good. Here are some to avoid:

1. Hiding Credit Card Debt

Many people hide their credit card debt from their significant others. A couple I know worked hard to get out of debt together, and the husband was so proud of all their accomplishments. The only problem was that his wife, feeling constricted by their budget, took out another credit card and quietly used it. She kept intending to pay it off quickly (it was used just for one large purchase initially) but as it happens with most credit cards, the interest and the costs just kept rising. Keeping separate debt and separate cards can ruin the trust of your significant other. It’s best to come clean and have transparency with your spending.

2. Lying About the Price of Something

“How much did that cost?” “Oh it was only about $20.00.”

Does that sound familiar?

Many couples lie about the cost of their extra spending. For example, women might fudge just how much their highlights actually cost while men might say they got a great deal on their 50” plasma. It might seem harmless, like a white lie, to adjust the price slightly when reporting back to your significant other, but again it’s best to be honest. If you feel constricted in your spending then perhaps it’s better to have separate accounts where you each get a certain amount to spend without having to divulge the details. 

3. Lying About Helping Friends or Family

If your significant other has a friend or family member who always experiences hard times, you might get tired of helping them out. Whether they never pay you back or always show up at your house asking for money, a needy person like this can wear on a family’s finances. Even if you and your significant other are well off, there is definitely a limit to generosity. If one person forbids their partner from helping in one of these situations, but they do it anyway, it would be a breech of trust.

4. Lying About Bad Habits or Addictions

I thought a friend of mine had the perfect family. They lived in a beautiful home, her parents had great jobs, and she and her brother got along really well. The problem was that her dad had a hidden addiction to gambling. He was the most upstanding person imaginable, and needless to say, the addiction was quite a shock to their family. He finally admitted it when he started being late on his house payments, but luckily he got the help he needed. His employer was very generous with giving him time off so he could get help, and his wife helped him figure out how to get back on track. Now I’m sure this would have been the downfall of most relationships and I’m sure the conversations were very tense in their house, but I admired this family for sticking together because a secret addiction would likely ruin most relationships.

5. Lying About Time Out With Friends

My husband often goes out with his guy friends to catch up and grab a beer. Most of them are in medical school with him, so I enjoy the fact that he can bounce ideas off of them or ask them questions about exams without me having to be there to hear about it. He always goes with a budget and occasionally buys a beer for his friends. The point is, I don’t really mind how the money is spent, so long as he doesn’t go over budget.

Significant others who lie about how money is spent when they’re out with friends can erode trust. For example, if they tell their partner that their friends will pay them back or that they only bought one drink (and it’s not true) their partner will be less and less likely to encourage them to go out, which will make one person feel constricted and controlled.

It’s About More Than Money

You see, money lies are never just about money. They are about trust. The reasons people lie about money are actually more important than the lie itself. Getting to the bottom of why your partner lied, whether they feel scared to tell you the truth because of your reaction or controlled by your rules, is important to know. Money lies don’t have to be the end to a relationship, and learning why they happen can actually strengthen your bond. The point is to come clean and work on things and not let lies about money control the future of your relationship.

Need debt help? Sign up for one of our free debt consultations. 

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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Eliminating Fees, Life Events

The Downsides of Having Joint Bank Accounts

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Joint Banking

Although I am a big supporter of having joint accounts with your spouse, I won’t deny there are downsides. Currently, my husband and I use Charles Schwab for most of our banking and investment needs.

We opened that account when we moved out of the country because Charles Schwab charges no foreign transaction fees and refunds all ATM fees. They also have excellent customer service and were able to help me with getting my paycheck deposited and a laundry list of other issues as we tried to navigate the tricky waters of international banking.

Although joint bank accounts inspire teamwork and openness in marriage, my husband and I definitely had some tense moments over the last five years of banking together. 

1. Analyzing Each Other’s Purchases

One of the most common reasons men and women want their own bank accounts in a marriage is because they want the autonomy to spend as they please. Early in our marriage, before we had regular money dates or discussed our financial goals, I frequently went through our online accounts pointing to various charges and asking my husband why he made them. After several months of this, he was scared to make a purchase at all, not knowing if I’d point it out or not. Over the years, we’ve remedied this problem by having our own cash spending money and also starting a rule that you only have to ask the other one about a purchase if it’s over $50.00. That way, I overlook all the little Starbucks charges and he overlooks all the small updates I make to my business.

So, depending on your upbringing or the personality of your spouse, having this oversight can be difficult on a marriage, which is one of the reasons I’m counting it as a downside of having joint accounts.

2. Difficulty in Gift Giving

A week before Mother’s Day this year, my husband told me to look out for any packages addressed to him. He didn’t want me to see the return address because it was a Mother’s Day present. I asked, “Is it from an Etsy seller?” and he was so disappointed.

Technology and our joint banking accounts ruined a little of his surprise. My Mint App (one of many financial tools I use) already told me he spent money at Etsy. I assured him that Etsy was a pretty big range and that I wasn’t disappointed at all, but it was more about the principle of the matter.

This has happened several times in our relationship, to the point where we tell the other one around Christmas time to not look at our account for a few days, which isn’t good either. Many people have suggested that we simply buy gifts with cash, and although that works at times, we both prefer the convenience of online shopping.

3. All Your Eggs in One Basket

In 2005 my family’s life completely changed after Hurricane Katrina blew its way through our town. It was so hectic after the storm. Banks were closed, ATMs weren’t working, and it was difficult to do anything that required using local banks. Everything was underwater. My mom was able to call an open branch of her bank and stop the large check she just wrote for my student housing expenses at my college (which was by then totally closed because of the storm.) I remember how stressed they both were.

Having a joint checking account and putting all your eggs in one basket can be detrimental in an emergency or if your bank has a breech or some other security issue. Spreading out your accounts and your money in different banks and different accounts provides a layer of security that you can’t get with just having one main joint account.

My husband and I feel comfortable banking with Schwab because it’s such a large company but for an extra layer of security, we do have separate accounts in Smarty Pig, an online high yield savings account, which does not allow joint accounts. So, if you do like having joint accounts, you should know that some banks are better about allowing joint accounts than others.

It’s All About Communication

Really, when it comes to joining finances with your spouse (or not), it all comes down to communication and trust. I know many couples that are happily married with joint accounts because they have to work together on all of their money decisions. I also know other couples that are equally as happy with their separate accounts because they trust each other to make wise financial choices and feel like they have a sense of independence.

Whichever path you choose, just remember to have regular financial check-ins to see the status of your combined net worth so you know how far you have to go before you can reach financial goals and ultimately retire.

Find the best accounts for your joint banking needs by using our comparison table. 

Cat Alford
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Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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Life Events

How to Break Even on Baby Purchases

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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When you have a child, there are so many supplies to buy. In the very early days of having my twins, I remember making an Amazon order for $400, and I’m not even sure what was in it at this point. I do know my husband and I have been very selective about our purchases for our children, avoiding products that many people consider staples like bassinets and baby swings.

Still, the costs add up no matter how frugal or minimalist you are. Luckily, there are ways to break even on baby purchases or to recoup almost all the cost you put into them. This is especially true if your baby gear is for a first baby, since many, many people gift you baby products at your baby showers.

Here’s how to do it:

Sell on Craigslist

There is definitely an art to selling on Craigslist. You have to consider many factors like season, price, the quality of the product, and location. Here are some tips.

  1. Take excellent pictures. You want to make sure to photograph your product in full, natural light against a blank wall or outside if it makes more sense. You don’t need an expensive camera. Just put a little thought into your space. For example, don’t post a high chair with food all over it. Try to make your items look as new as possible. The same goes for your product description. Put a little effort into it for the best returns.
  2. Price it well. I know you’re trying to make money from your purchase but many people are trying to make a deal. For example, I just sold my twins’ infant car seats on Craigslist. They were $180 each but they were also both gifts from my baby shower. Even though I know they were worth far more than $150 for both because my twins only used them for a few months, I sold them for that because it was pure profit.
  3. Be safe. There are many horror stories about Craigslist, so it’s best to be safe. Meet someone in a neutral location, like a parking lot during the day, never at their home. If you do have to go to someone’s home, make sure to bring 1-2 people with you and let another know where you’re going to be.

Sell on eBay

My friend makes a living getting free or used baby clothes at garage sales and selling them for profit on eBay. Because she is able to get such great deals on the clothes to begin with, she always breaks even or makes a profit.

What many new parents don’t realize is that nice baby clothes don’t get dirty. Unless your kids have a bad accident or have a bad case of reflux, their clothes remain pristine. Babies don’t exactly run outside and play in the dirt like toddlers do. They also grow so fast they only wear nice clothes once or maybe twice. I have dresses people gave my daughter that she never wore. By the time an occasion came up where she could wear it, she outgrew it. So, these are the types of clothes that sell really well on eBay, as opposed to onesies you used every day.

An eBay Case Study:

I used cloth diapers for my twins, and I was able to sell their newborn diapers for the exact same price I paid for them. The reason is that there is such a high demand for the nicer brands of cloth diapers. The diapers are usually $13 each. I purchased mine second hand from a diaper service for $8 each. I took excellent care of them, and similar to my tips for selling on Craigslist, I took really good pictures of them and gave good, honest descriptions, including the fact that they were purchased second hand. When the bidding was done, to my surprise they sold for $8 each again, meaning I essentially paid nothing for my twins’ newborn sized diapers for the first few weeks of their lives since I broke even on the costs.

Saving Your Cash

There are many other options for recouping your baby costs, but those are the two companies I used personally. Many moms like to go to clothing swaps or sales geared specifically for babies. I am on a Facebook clothing sale group just for people with boy/girl twins. So, the possibilities are really endless.

What’s really important is that you save the money you make when you break even or profit from your baby gear. I like to use Smarty Pig to store my extra cash. Smarty Pig is a high interest savings account that currently earns 0.75%, which is much better than typical savings accounts you have with your bank. I constantly have a baby fund going since they grow so fast and always need new products that I hope to break even on later.

Don’t miss: 5 Things Every New Mom Needs to Learn About Money

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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Pay Down My Debt

Even a Six-Figure Salary Won’t Keep You Away from a Payday Loan

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Trevor* was at the end of his rope. The very, very end of it, in fact. He was in six figures of credit card debt. He wasn’t communicating with his wife at all, and he had exhausted every single financial option available to him. He couldn’t do any more balance transfers, and he couldn’t get approved for any new promotional rate credit cards fast enough to get to his next payday. He was sinking, quickly, and he didn’t know where to turn.

All he cared about was making it to his next paycheck, so he went with the only option left to him and what thousands of people across America do every day: take out a payday loan.

When things are going badly with your finances, it’s difficult to know where to turn. Many people have family or friends they can rely on for help in a financial emergency, but others seek out the “help” of a payday lender. I put “help” in quotation marks for a reason, since payday lenders rarely, if ever, truly benefit the person taking out the loan. Instead payday lenders are known for their sky-high fees and their tendency to trap people in debt who already have serious financial issues.

Trevor was one of those people, but the catch was that he actually had a very high income. Years of spending too much, however, had caught up with him. He was so nervous walking into the doors of the payday loan shop, wondering what the person behind the counter was thinking. She tried to give him a smile to reassure him, but he felt like she was judging him, his high income, and his need for $1,000 right then and right there.

It only took a few minutes, but he walked out of the shop with $1,000 cash in his hand. He felt a wave of relief. Unfortunately, the relief only lasted 10 days. He got his paycheck and went back to the payday loan shop to pay $120 in interest and fees. Of course, his financial situation hadn’t improved so he was left with the same problem. So, he took out another payday loan to get to his next paycheck.

Trevor’s situation is not uncommon. An article in the Washington Post asserts “more than 80 percent of payday loans are rolled over or are followed by another loan within 14 days.” This is because people, like Trevor, can’t afford their expenses, and borrowing money from the next paycheck is only going to help them in the short term. Eventually, they are going to be short on cash again…and again…and again. The process of payday lenders letting borrowers take out a new loan and roll their old one into it creates a deep trap of debt with interest rates that can reach in the three and four figures.

Last month the Consumer Finance Protection Bureau said soon it would propose some restrictions on payday lenders. These restrictions would call for a stricter loan process to ensure borrowers actually have the ability to repay the loans in a reasonable manner.

[Stuck in a payday loan trap? Here are ways out.]

All of this is good news for the future of an industry that has profited on others’ financial struggles for far too long. However, the best way to avoid the trap that comes with payday loan debt cycles is to not take part in them at all.

I know this is easier said than done for someone who is in a financial pinch, but before you look for a quick fix to your money problems, instead try to utilize one of the options below:

Short-Term Financial Fixes

Use one of these methods if you are in need of a short-term loan right away. This is for those of you who are in such a bad financial position that you are considering a payday loan as a last resort.

1. Borrow money from someone you trust

It’s not easy to ask people to borrow money, but there is a way you could make it official. Instead of just asking to borrow money, actually give your family member or friend a detailed proposal asking for a particular amount, naming an interest rate, and listing out a repayment schedule. Include information about your income and the steps you will take to ensure you can pay your bills in the future. If you approach borrowing from family or friends in this way, it shows you mean business and don’t want to take advantage of them. Rather you want to pay them in interest (just not interest as high as payday lenders!)

2. Credit Union Loans

Credit unions offer loans or a personal line of credit that may help alleviate your financial struggles. Typically credit unions are situated within their communities and understand the people who live there. They will be more willing to work with you on a personal loan if they understand your current struggles.

3. Negotiating with creditors

Don’t always assume that your debt is fixed at a certain number. Anything is negotiable and at some point, people just want to get paid. This is especially true when it comes to healthcare costs, collection agencies and possibly your credit card bills. Stay strong, be firm but friendly when you ask, and you might be surprised at how much money you can save on your total debt repayment.

4. Credit card cash advance

Most credit cards have the ability to give cash advances, and many of them come in the mail with checks. This is definitely a last resort because the interest rates can be extremely high; however, they are not nearly has high as a payday loan interest rates and for that reason, should be considered before a payday loan.

Long Term Financial Fixes

1. Credit Counseling

Getting your finances on track is a very long-term process. I’ve been writing for personal finance blogs for five years now, and I still have months where I totally blow my budget and other months where I’m right on track. So, just because you’re not in the best financial shape of your life doesn’t mean you never will be. Start with non-profit credit counseling if you have a lot of debt and work towards trying to get out of it. Slowly but surely make your way to the finish line with the help of some professionals.

2. Budgeting

Budgeting is a great habit to start whether alongside credit counseling or just on its own. There are many different ways to budget, but essentially, it’s best to give each dollar a place in your budget. I like creating a budget at the beginning of the month and checking in once a week to see how things are going. That way, if I fell off the wagon and ordered too much pizza, I can do better in the weeks going forward. Budgeting will also help you realize your weak areas so you’re always aware of them. It will also help you to see which expenses might not be necessary so that you can continue to reduce them and throw that money at debt repayment instead.

3. Tracking Expenses

When you are trying to get out of debt, tracking expenses is a very difficult but effective habit to start. When you have to write down everything you spend, you are much more likely to avoid spending at all. This will help with sticking to a budget, which will in turn help with minimizing expenses and paying off debt.

You Can Break the Debt Cycle

Trevor’s story has a happy ending. He admitted that there was no way to get out of the payday loan debt on his own. He ended up borrowing the money from a family member who they paid back over time without interest. Fed up with his situation, he enrolled in credit counseling to get help. It took several months but by making massive changes to his lifestyle and large payments each month, he successfully paid off over $100,000 in debt and has been debt free ever since.

So, it is definitely possible to become financially savvy in the future even if you find yourself in debt and struggling right now. With just a few adjustments, a bit of knowledge, and a lot of support, you can definitely turn your financial life around. The way to do it, though, is through budgeting, expense tracking, smart borrowing and not payday loans.

*Names have been changed.

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Cat Alford
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Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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Pay Down My Debt

3 Stories of Real People Who Overcame Debt

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Cat in Grenada

I’ve been a personal finance blogger for almost 5 years now, and because of that, I often hear success stories when people conquer their debt and organize their finances. It always gets me excited when I hear from friends who have decided to embrace financial responsibility and get on the right track. It just goes to show that no matter how bad your debt is, there’s always a way to conquer it once and for all.

1. My $6,000 of Debt

My debt is one of the reasons I’m a full time blogger today. I moved out of the country to Grenada a few years ago (although I’ve since moved back) and when I moved I had no job prospects and $6,000 of credit card debt. Since I had trouble finding a job because I was a foreigner, the only way I could pay my credit card bill was working online.

So, I got my first writing job for $10 a post solely to pay that bill, and slowly but surely I added clients. I was able to pay off that $6,000 in 18 months just from the income I made writing online.

The best part as that when I got on the plane to come back to the United States three years after I moved abroad, I was completely credit card debt free and also self-employed.

My debt came from overspending and stupidity in my early 20’s but it’s also the one thing that led me to start a career I love.

2. Kayla: My Shopaholic Friend

My husband’s best friends and roommates in college were actually fraternal twins, a brother and sister. Kenneth and his twin sister, Kayla, were totally different when it came to money. Kenneth was a chronic saver. He counted every single penny. Kayla had a huge personality, loved shopping, and especially loved name brands.

promo-balancetransfer-halfAfter college, they both worked a variety of jobs, and we kept in touch with both of them. About three years ago, Kayla e-mailed me and said she was inspired by my blog and wanted to get out of debt. She had started the process by using balance transfers to move her credit card debt to 0% interest rates one-by-one until she could get the payments under control.

She was a hard worker who worked in real estate. Every time she made a big sale, Kayla applied the extra money to her debt. What started out as $30,000+ worth of debt on credit cards, student loans, and a beautiful Mercedes is now at $0.

It took her three years to do it, but it’s one of my favorite stories ever because it was such a big turnaround. I always reference Kayla when I talk about loving name brand items and still being able to be debt free. Even if you’re someone who likes to shop, you can be financially responsible about it. Budgeting is everything!

3. Ann: $30,000 in Student Loans

My best friend in the world for the last ten years, Ann, went to an expensive private school for college. She got a small scholarship but between the room and board and the rest of her tuition, she had over $30,000 in student loan debt when she graduated.

Ann is excellent with her money and very frugal. In fact, one of the reasons we get along so well is that a day of fun for both of us is just strolling through a flea market or antiques sale. Needless to say, she has been on track to pay off her student loans, but health problems and an inability to find a high paying job made the process challenging.

With a degree in political science, she tried out a few different careers from working in doctor’s offices to working for a travel company. She excelled everywhere she went and was always given raises. Still, in the rural area where she lived, she had trouble clearing more than $30,000 a year.

What she did to make a huge dent in her debt was live with her parents for very minimal rent and drive her old car that she’d had since high school for as long as possible. She is turning 29 this year and just moved into her first apartment by herself.

I praised her for this endlessly because instead of jumping into an apartment she couldn’t afford, she really took her time to make sure she would be able to make her student loan payments. It’s been five years since she graduated from college, and she’s been able to pay down 75 percent of her student loans. She is side hustling, blogging and is doing extremely well.

She filled her new apartment with some awesome Craigslist and flea market finds and she has a true sense of independence since she’s been able to accomplish all of this on her own with her own paychecks.

Her story shows that it’s really not about how much you make every year but how you actually decide to spend it. She should be debt free in less than five years, far better than the 30 years most people take to pay off their student loans.

Working hard but still struggling to pay down your debt? Try our FREE dig out of debt guide.

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Cat Alford
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Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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College Students and Recent Grads, Life Events, Strategies to Save

Why You Shouldn’t Buy a House By the Time You’re 30

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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I am 27, and my husband is 31. Although we have been married for five years and have two children, we have absolutely no plans to buy a house before I turn 30 or any time even remotely soon.

I know it seems odd, especially because many of our friends and family members who are in their 20’s are anxious to buy a home because they want to invest in real estate or they want to set down roots.

While that’s admirable, I strongly believe there are many reasons why you should consider waiting to be a first time homeowner and rent instead.

1. The Freedom to Pursue Your Passions

One of the big reasons I am not a homeowner today is because my husband and I pursued our passions. We were actually looking at houses in the Richmond, VA area where we lived until my husband got accepted to medical school in the Caribbean.

We were so lucky that we didn’t buy a house before choosing to move to the Caribbean, as it was a down market and would have been very difficult to sell. Because we were not homeowners, we were able to sell our things, buy one-way tickets, and leave for a great adventure.

When you are in your 20’s, remember that you are still early in your career. Your preferences could change. Your goals could change. Even your luck could change! You could get incredible job offers or several other opportunities that you might not get when you are older.

So, for example, if you were a renter instead of a homeowner you could easily enroll in cooking school in Paris without too much hassle. You can accept the internship at that awesome winery in Napa. You can join the start-up that your college friend founded in Manhattan. You can do all of these things when you’re a homeowner, sure, but it makes things a lot more complicated because you’ll have a major asset you have to decide what to do with if you need to move.

Even now, I’m glad I’m not tied down to a home because my husband is finally applying to residency this year. For all I know, he could be accepted to the hospital down the street or a hospital in Alaska. It’s really up in the air, and not having to worry about a home to sell is a huge perk. We’re not even sure we’re going to be buying a home until my husband is almost 40! And you know what? That’s completely fine with us. We’d rather do what’s best for our finances and for our career paths than be saddled with debt.

2. The Ability to Focus on Early Investing

Again, you can do this when you own a home, but many people don’t. Homeowners tend to be very concerned with improving their home, creating additions, updating the wood floors, and finally getting that granite countertop.

When you rent, even if you pay a little extra for a nice place, you don’t have to stash away $10,000 or more for that kitchen remodel. You can use it to invest for retirement instead. I know in my area of New Jersey, it’s very difficult to become a homeowner because housing prices are extremely high as are property takes. My neighbors have million-dollar houses that are small, and their property taxes are as much as $1,000 a month and sometimes more. Even though my rent is high, I’m glad I’m not paying property taxes or paying to fix the hot water heater. At this stage in my life, renting is perfect and allows us to put some money in investment accounts that we wouldn’t be able to otherwise.

3. The Trend Towards Starting Families Later in Life

Many, many people are getting married in their late 20s and starting families in their 30s. In fact, only 26% of the millennial generation (18-32) are even married.

If you buy a smaller home for yourself in your 20’s you’ll quickly find that when you get married and have kids, your home might not meet your needs anymore. Once you find your partner in life and you decide whether or not you want a family that will help you determine the size home you need.

Sure, you can make money buying and selling a smaller starter home, but it’s also beneficial to purchase what your family needs from the outset instead of risking a downturned market again.

I got married young at 22 and had my twins at age 26, so I definitely don’t match up to the majority of millennials. However, I know I would not be comfortable in the 300 sq. ft. apartment I had in the Caribbean right now or the 500 sq. ft. studio my husband had during his bachelor days. Each stage of your life is different, and home ownership in America is really synonymous with putting down roots and starting a family. For these reasons, it’s important not to be impulsive and buy a home when you’re in those early stages so that you have the financial wherewithal to get one you do want when it’s time.

Of course, once I find out where my “forever” location will be, likely where my husband gets his first job offer, I’ll start saving to pay for a large portion of my home in cash. Until then, I’ll happily pay my landlord rent. Sure, it’s a lot, but I’ve also maintained my right to freedom, to picking up and going whenever I need to, and that, my friends, is a luxury.

For the counter-argument, read about the benefits of buying a home in your 20s.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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