Happy Financial Literacy Month!
April is Financial Literacy Month — an idea so important, Congress designated an entire month to engaging Americans on ways to maintain healthy financial habits. A time to get your economic house in order, so to speak.
It couldn’t come at a better time as millions of people have seen their incomes dramatically change as a result of the coronavirus, some experiencing a drop and an urgent need to rely on savings, while others have had their savings accounts balloon from remote work and lifestyle changes keeping them home and spending less — a lot less.
That’s even more reason why a long hard look at your overall financial health is so important. And your mortgage plays a huge role in the overall picture.
Start with a Mortgage Check-Up
A mortgage check-up begins with a few simple questions: Do I have the best mortgage? How can I get more from my current mortgage? What about a cash–out plan? How does it work?
Even though rates have edged up ever so slightly recently, they’re still at historic lows. That’s good news for anyone buying or looking to refinance. Refinancing can mean a lower monthly payment and more money each month for savings or whatever you need.
A cash-out refinance is yet another option that allows you to take advantage of your home’s equity and provide you with extra cash. It’s a smart move when you consider today’s extremely low mortgage interest rates. The amount you save every month combined with a lump sum can provide you with emergency funds or an easy way to tackle home improvement projects. Thanks to COVID, we’re mostly homebound anyway, might as well get those projects done!
What about a 15-year, fixed-rate mortgage instead of the traditional 30? That also can equate to serious savings for those who are able to do it.
Of course, it’s personal — in order to find the best mortgage that’s right for you, you’ll need to consider your goals and overall financial situation. We can help make that analysis easy.
Tax Time…or Is It?
It’s no coincidence that April was chosen for Financial Literacy Month given that it’s also tax season. And yes, hard to believe, but it’s that time again. If you’re like me, it seems like we were just enjoying the holidays. Then, suddenly April.
Well here’s some good news: This year, the deadline for your taxes has moved to May in order to ease the effects of the pandemic, so if you haven’t filed yet, take the extra time and do what I always do — check and recheck to make sure you are taking advantage of every tax incentive you can.
It’s also a good time to check the withholding in your paycheck. If you are getting a big refund every year, it’s not a payday or “found” cash — it’s your own hard-earned money. And it amounts to an interest-free loan to Uncle Sam.
Here’s an effective strategy: Adjust your withholding and pocket the cash every month, or pile it into your savings. How much does it amount to? Just consider this: a $2,400 refund could mean $200 in take-home pay each month — not bad for a simple fix.
See what I mean? Financial Literacy Month can really get you on the right track — all while navigating COVID, the tax crunch, and working from home.
Anyone can get back to financial health, and there are many ways to do it. But I’m about to show you two quick and easy ways to get it done. And the results have been nothing short of spectacular.
2 Bad Habits You Can Change Right Now
Spiraling Debt-to-Income Ratio
Debt-to-income ratio sounds complicated but it’s really just a simple calculation of monthly debt and payments divided by income. So, if you make $6,000 per month, and your debt payments amount to $3,000, your debt to income is 50%.
Beware! Lenders cast a wary eye at those who have higher than about 40%, so calculate yours today, and pare it down as necessary.
Ignoring Your Credit Score
When’s the last time you checked? Let April be the first month you check, and then check every month. You can get a free report from each reporting bureau (Experian, Equifax, and TransUnion) or sign up for any number of free services for your report.
Your score matters — don’t ignore it. Check it and make a solid plan to get that number up. It’s easier than you might think. You’ll be glad you did — it can be the difference between a high interest rate and a low one on a loan.
Be proactive. Do those negative reports actually belong to you? You’d be surprised at how often mistakes happen. Contact the entity reporting it and find out. Others might be outdated and easily removed.
Then make a plan to pay off debt and keep balances low. That’s all part of lowering your credit utilization — the percentage of credit you’re using in any given month.
Experian provides this calculation: Gather up your credit card statements from the last 12 months, add the statement balances for each month across all your cards, and divide by 12. That’s how much credit you use on average each month. Lenders are happy with ratios of 30% or less.
Which brings us back to mortgages. While low credit scores can wreak havoc in anyone’s long-term goals, they are especially problematic for those seeking mortgage loans or refis.
Now’s the Time
Anytime is a good time for you to get on the road to better financial management, but Financial Literacy Month provides a set time to put it all together.
Celebrate with me — it’s a great time for you to take control of your financial health.