Tag: mortgage

Money Regrets are a Waste of Life: 3 Steps to Get Out

The Night My Friend?s Past Stole a Piece of Life

We were camping on the shore of a gorgeous prehistoric lake. The sun was still spread across the horizon as the moon slipped up over the pinnacles in the distance. We sat, my old college friend and I, sipping cocktails by the shore. It was breathtaking.

We hadn’t seen each other in years, we had a lot to catch up on. But all my friend could talk about is how much better it was in the old days, when he still had his house boat. It seemed as if he didn?t see the moon. Or rejoice at the pelicans diving majestically through the pink dusky sky to disrupt the mirrored surface of the lake. He kept mentioning how much better it was before. And as a result, it was stealing from him. Stealing a piece of his present life.

My friend?s problem was deeper than a house boat, however. Like many money regrets, it was part of a bigger story. My mate had sold and/or refinanced damn near anything of value?to fund his son?s pro-skiing career, which later came to an abrupt halt when the money ran out. I empathize with him. He took a calculated risk. It was his son. I would have done the same.

We Aren’t as Unique as We Think We Are

So many people are living under the constant stress of financial instability. Many have money regrets, but few have any idea how to move on from them. How to bite the bullet, take it all in, explore options, and begin to create a new money story.

My friend still had some equity in his refinanced house. But he admitted that he was flat out ignoring a personal loan from several years prior. And although he refused to actually look at what he needed to do to get out of this mess, he couldn?t stop mentioning it. It was the undying topic of conversation of the weekend. And it made me very sad. I was worried about him, and heartbroken that this issue was wasting the short time we had together.

?Listen,” I finally interjected. “I get it! I really do.”

But he didn?t want to hear that. He insisted that no one could possibly understand what he was going through. Sadly, he’s wrong. Truth is most people have money regrets and financial stress. And a fare amount of them refuse to look at the extent of the damage, which is precisely what they need to do, to get over money regrets once and for all.

Ignored debt is like a speeding train, downhill, without brakes.

I wanted to tell him how I’d been trapped in consumer debt working a shit job for a corrupt company for which I had to commute 4 hours a day. It was hell. I was stretched from paycheck to paycheck. I couldn?t afford to make a move. I couldn?t afford to quit. And if anything came up, an illness, an emergency, an unexpected expense, it had to go on the card – just digging me in deeper.

I wanted to tell him that when I finally pulled my head out of my ass and faced the fact that I was over 50, broke and in debt,?it was truly horrifying. But then came the acceptance. And then, and only then, came ideas. Once I knew exactly where I stood, I could determine which options were available to help me. And I could begin the long crawl out.

How to Transform Hopelessness Into Hope

If he knew how hopeless I had felt. How I struggled with paralysis for years until I finally got the courage to bite the bullet. How it all had driven me to a place so dark that I could no longer feel the peace of the rising moon above a body of water.?

And even though my friend wouldn’t have believed me, (because he was comparing his now to his past,) he is in a much better financial situation than I am. He has equity in a house. He owns several vehicles. He actually has more options than most. But his past was blinding him from moving forward. He’s just not ready to take that scary first step in getting over money regrets and moving on: ?

Step 1) Discovery

If you don?t know what the disease is, you cannot treat it. Period.

I?m not going to bullshit you, it?s not easy to pull up all of your accounts and write down how much you owe and the interest rate you?re paying. It?s harsh to compare the debt you are in to the balance in your bank account, the equity left in your house, or the balance of your retirement fund – ?to do the math.?

This is the part my friend can?t fathom. He doesn?t want to know how bad it is. And I understand this feeling. But everyday he looks aside, the compound interest on the errant loan is eating away all of his advantages. Ignored debt is like a speeding train, downhill, without brakes.

Know your strengths (assets). Know your weaknesses (liabilities).

I wanted so much to tell my friend to swallow his pride, look at his situation square in the face, and take a deep breathe. I wanted him to get that you can?t begin to move on from money regrets until you can actually quantify your current financial strengths and weaknesses. Knowledge is power when it comes to repairing your finances.

Step 2) Research Your Options

Once you know where you stand, it?s easier to see where you can go. Financial terminology may seem difficult at first, but it can be learned. All you need to do is get interested. Seriously, if you are reading this, you can Google anything you need to learn. You can find your options, and decide what plan of attack is gonna get you in better financial health.

Some of us have used our retirement for our children?s college tuition to try and save them from the disability of student loan debt. Others have made investments that didn?t pan out. Some have been leaching off of the equity in their house for years. Or we?ve been using credit cards as an income source to maintain a certain living standard.

Different Solutions for Different Problems

Everyone?s situation is going to be different. But what may be the same for a lot of us is that we can?t keep living like we have been and expect to get away with it in the long game. If you aren?t finding any options that can help you with your current situation, then you may need to take a deep look inside yourself and ask whether you need a lifestyle and/or a mindset change to create options.

In my case (dog paddling through the depths of minimum payment hell after spending all of my money on my kid’s education), I looked at the options available to me and ran different scenarios out in my mind.

I asked myself questions such as:

Step 3) Action?

After researching options available to me like balance transfer cards, consolidation loans, or picking up a part-time job, I finally settled on refinancing all of my consumer debt at a lower interest rate than any of my cards with a personal loan. One payment a month for 5 years. Fine. Done. No more stress.

I also eventually moved, changed my career, and completely changed my lifestyle to be able to live within the range of my budget. This flowed somewhat naturally, because once you get really interested in experimenting with how little you can get by on, you tend to equate saving with freedom. Your mind opens to creative ways to get out from underneath the constant pressure of debt.

After researching, make a plan and take action. It could be by refinancing something. It could be by liquidating assets. It could involve completely changing your lifestyle, where you live, where and how you work, or what you drive.

Once you get really interested in experimenting with how little you can get by on, you tend to equate savings with freedom.

The struggle of trying to ?keep something? going when you don?t have the money to do it is horribly stressful. I can?t tell you the relief it will give you to finally address your biggest stressors in the face, brainstorm the real options open to you, and then take action.

And you will start to notice a spillover into other areas of your life. There is something about accepting where we really are that is comforting and stable. The energy previously wasted on consistent financial stress and worry is now freed up and available for cool life stuff. Like chilling with an old mate by an old lake.

The Bottom Line

No matter how bad you think it is now, it could be worse. And if you do nothing, it will get worse. And you know what?s worse? You already know this…

If you are sitting around and complaining, it just means that it?s stressing you out. It?s stealing your life. Just like it stole that one beautiful night at the prehistoric lake from my friend, and inevitably, from the people around him, too.?

Find out where you are. Know your liabilities and assets (if you are lucky enough to have any.)?The pre-emptive strike for financial disaster is to stop the bleeding, start the healing, and be patient with yourself.

Discover, research, and take action. And remember to live and find joy in what is in front of you.

Related:? DIY Credit Card Debt:? A Guide to Permanent Debt Relief



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Why We Love Rules of Thumb…Even Though They Suck

For a lot of us, when things get complicated and we have big decisions to make, we secretly want someone to just tell us what to do. I never liked when my parents did this when I was a kid, but now? Please do! Someone?.anyone? Help!

When it comes to career advice, sustainable living, or any other complicated situation, we want a simple, quick answer from a source we trust. Managing our money is no different. It can feel incredibly daunting to make decisions about our financial well-being, especially when making a mistake can cost us. So the answer to this dilemma?

Rules of thumb for common money woes (and when to bend them)

Rules of thumb are everywhere. They’re simple, tweetable, and make for great tidbits you can share at your next cocktail party to convince your friends you know what you’re talking about. (I’m guilty of using them myself.) But they can also be problematic: Rules of thumb, by definition, are one-size-fits-all that don’t leave much wiggle room. There will inevitably be situations when they just don’t quite fit. And there will be other situations when they are outright wrong.

Their other downside? Rules of thumb rarely directly address the real questions we have about money. Am I really ready to buy a house? Should my partner and I combine our finances? Can I afford to take a vacation? What would it mean to quit my job and go freelance? Most personal finance decisions are truly personal. It’s all about what’s right for you and your particular situation. No rule of thumb can answer that.

Rules of thumb rarely directly address the real questions we have about money.

So should we start ignoring these catchy rules? Not quite.

Here a few examples that truly are worth paying attention to and some ideas on when you might want to bend the rules:

50/30/20 Budget:

Spend 50% of your income on needs (housing, bills, transportation to and from work), 30% on wants (dining out, shopping), and the remaining 20% on financial priorities (paying more towards your debt, starting an emergency fund, saving for long term goals).

When to bend the rule:

This is a neat little formula but many people may find that their current budget doesn’t fit into these boxes. Maybe you’re a new grad who moved to an expensive city and earn an entry level salary. Your needs would likely eat up far more than 50% of your budget. Maybe you’re planning to take a year long sabbatical to travel around the world. You may need to devote far more than 20% of your pay to this goal in order to make it happen.

If you don’t fit into this formula – it’s okay! Find your own balance that makes the most sense for you. Don’t feel guilty about making tradeoffs either. A cheaper apartment means more room for dinners out with friends. But for someone else who values nights at home in a comfortable living space far more, a higher rent may be just fine.

3-6 Month Emergency Fund:

Save the equivalent of 3-6 months of expenses in a savings account for emergencies.

When to bend the rule:

There are plenty of people who would sleep much better at night with 9 or even 12 months worth of spending money saved in their bank account. Some of them may have experienced a layoff followed by a long job hunt, others may have very lumpy income from freelancing gigs, and then there are those that are just plain conservative.

On the other hand, there are those who are more comfortable with taking on a little risk, some who need their extra cash to pay down high interest credit card debt, and some that have other safeguards in place like disability insurance, a high earning partner, or multiple passive income streams. These people may be comfortable with a much smaller emergency fund than most.

Think about your own personal situation and how much you would need to pay for an out of the ordinary medical bill, or to cover your expenses if you lost your job. No one can assign you the perfect number that would save you from any potential financial disaster. Always leave enough of a cash cushion to cover immediate needs in an emergency and have a plan for how you would cover extra costs should they come up.

Related:? Emergency Savings – Is It For Me?

20% Down on a Home:

Always put down at least 20% of the purchase price when buying a home.

When to bend the rule:

Coming up with a down payment is the biggest obstacle many people face when it comes to home ownership. A down payment of 20% has been the standard, however, it is in no way required, and for many it may be unrealistic. FHA loans require a down payment of at least 3.5%, some conventional loans require only 3%, and there are a number of other housing programs that require no down payment at all.

It’s important to know that a smaller down payment often comes with extra costs like a higher interest rate on your mortgage and private mortgage insurance. You will also have less equity in your home at first. On the flip side, less of a down payment means more money available to cover closing costs, pad your emergency fund, or invest for retirement. It can also mean you move into your dream home much sooner. The moral of the story here: there is no one right way to buy a house!

Rules of thumb can be a great jumping-off point for figuring our your finances, but ultimately the way you manage your money is up to you. There is no one-size-fits-all approach that’s going to work for every situation; so rather than try to conform to a rule of thumb, explore your options and decide what makes the most sense for you. Just because a simple rule won’t provide you with all the answers, don’t be intimidated to take action anyway. A dollar saved, paid towards debt, or invested is always better than nothing.

Related:? How to Save for a Home Down Payment

Photo by Scott Webb

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Why We Can’t Save

I used to have a list of excuses for not being able to save money. Now I know that most of them were bullshit. But it took me some time to realize this. From?what I’ve read, I?m not so different from most Americans. Something deeper is going on and we need to talk about it. There are reasons why we can?t save. They aren?t very comfortable to confront and we’re not supposed to talk about them. But check it out, we have to talk about them because it’s getting worse every year.?

  • The average credit card debt in America is around $8,000.
  • Over half of us don?t even have $1,000 bucks in the bank.
  • Just under half of us can?t even meet our monthly living expenses.

To be fair, there are a lot of Americans in extreme poverty and roughly 20% of Americans are on welfare. But what?s going on with the rest of us?

Ever asked your best friend these questions?

Why can?t we save and why aren?t we talking about it? When you think about it, money dictates damn near everything in our culture, but we can?t talk about it.?Don’t believe me? Try this the next time you’re hanging out with a friend over coffee or a beer, ask, ?Just curious, how much money have you saved so far? Do you have a retirement plan? What?s your salary anyway?? Nope. Wouldn?t fly, right? People aren?t supposed to ask questions like that. Money makes us uneasy. We all feel like we are going to be judged. We’ve internalized money as a measure of our worth and we won’t admit it.? ?

We can talk about our sex life, but not about our salaries.

It?s a cultural taboo. Somehow we have inherited this idea that we are only as good as the money we make. To discuss our salaries would also bring up issues of status and shame. Money is equated with power. Social power. Political power. Sexual power. We all want it. Or, at the very least, we don’t wanna feel like a loser if we don’t have it. So what happens if we are in debt, can?t seem to save money, and can’t talk about it? It becomes a secret, one we may be even partially keeping from ourselves.

What happens when we don’t talk about money.

The lack of transparency in our conversations about money is creating a lack of transparency within ourselves. We put on a front, yet worry deep inside. We stress out when we are paying the bills one minute, but don?t blink when we drop dollars on a new shiny thing. The irony is that the shame that we feel because of a lack of money stems from the same place as the shame we feel from feeling poor or powerless. Anyone who has had a bad day and then felt better after buying something knows what I?m talking about. This shame fuels the cycle and keeps us lying to ourselves. We have to shatter the illusion, so let’s talk about money. Let’s start with debt.

We’ve normalized debt…

Face it. America is a debtors? country. The government carries debt of around $18 trillion, and if we all went to the bank right now and tried to withdraw our money, we couldn’t because the banks lend money they don?t have. (fractional reserve banking) It?s crazy. We have normalized debt. We need a credit card to get a credit score. We need a credit score to get a student loan. We need a car loan to buy a car to go to work. And we need to take out a mortgage to ?buy? a house. And there we are, all set up to work forever to pay all of this off. This is all quite normal in our country. It is a systemic problem and it’s getting worse.

Are we all living beyond our means because we think we have to?

Our lifestyle is embedded in our culture and reinforced daily through advertising, media, television and everybody else. We upgrade our overpriced cell phone contract to get the new iPhone. This is normal. It’s normal to have a TV and pay an outrageous amount for television services. It’s normal to make room in our stretched budget for a crazy car payment. And it?s normal to have monthly subscriptions to Amazon Prime, and Netflix and all kinds of crap. And this is what we have to change. This can?t be normal anymore.

…in order to keep up with the Joneses.

The keeping up with the Joneses?mentality has been ridiculed and scoffed at for over a century in America, but we are all subject to it in very subliminal ways. You may find out?that the Joneses don’t live on your street but in your head. Listen, you are not your salary. You are not your bank account balance. You are not your credit score. You are not the clothes you wear nor the car you drive. There is absolutely no shame in changing your lifestyle. There is life beyond the latest iPhone. And you may be surprised to find, as I was, that it opens you up to an entirely new way of looking at things.

Money and life are complex.

Our relationship with money is extremely personal. Each and every person absolutely knows where their weakness with money lies. Every day in the media you can find a gazillion new articles yammering on about having a budget, having emergency savings, and saving for retirement. We all know we should do it. But we can’t. We can’t save and continue to spend our wages on the lifestyles we have set up for ourselves. These articles make the idea of changing your lifestyle sound easy. Bullshit, it isn’t at all. Talking about money causes tensions in relationships and families. If your partner can’t live without a big screen TV and his/her favorite shows, you know not to go there. It causes problems. If all your kid’s friends have the latest toy, it’s hard to say no, but what kind of a future are we handing our kids?

If nothing changes, nothing changes.

Our debt is climbing higher than our wages. We are leveraging our future for the things we think we need. But these things are not going to help us down the road. Let’s be real, these things will merely be replaced with other things adding to the problem. To break this cycle, we have to start a dialogue about money. And we have to start with ourselves. We can’t be afraid to explore our own attachments to the things that keep us in debt and ask ourselves what our lives would look like without them. This is going to bring up fear, boredom, and anxiety. But that’s ok because that is exactly what we need to explore. We need to ask ourselves “why?”

The reason we can’t save is that we keep setting ourselves up for failure. Our relationship with money is deeply ingrained in our psyche, and although we may have the best intentions by setting up extreme budgeting goals, we will fail over and over because we are not looking at the real problem. The real problem exists underneath the money. There is no quick fix for changing our relationship with money. The bridge from where you are now to where you want to go is a process, not a resolution. You have to support yourself with compassion and start small.

Start the conversation – with yourself.

Explore your own attachment to your habits. Try to cut one thing out of your life that you having been paying for. Put that money somewhere else and don’t touch it no matter what. Face the discomfort and walk through the feelings this brings up for you. If you do this, I promise you that you will begin to change in a small way. And you will feel better. You will have more self-confidence. After a while, you will get used to not having that one small thing. Move on to the next thing.

It is important to approach your personal relationship with money with compassion for yourself. You must remember that you are not the problem and you are not alone. Our culture is sick and suffering from a?mass delusion that has been embedded throughout our history. If you are stressing out about your debts, there is only one thing that you can do. Look at your lifestyle. Dare to be different. Be brave. Be a pioneer. If we break the silence with ourselves, perhaps we can start to break the silence with each other. We are in trouble, and we need to talk about it. Start with yourself. Start now.

The stories are real. Names have been changed.

Photo credit:?Anthony Garand?

Send us your story if you?ve been duped, on the road to financial recovery, conquered your finances, or want to give feedback. feedback@wellwallet.com



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How to Save for a Home Down Payment

Have you ever dreamed of owning your own home? Whether that be a condo in the city or a colonial in the burbs, even the most die-hard renters may find themselves peaking at online real estate listings every now and then, thinking of what life would be like. Sure, the housing crisis was scary, the stress of the home buying process is legendary, and the fact that there’s no landlord to call is a lot of responsibility but despite it all, the attraction is still there.

Taking charge of your financial future involves a lot more than simply opening a savings account or signing up for a budgeting app. It requires taking your dreams, translating them into concrete goals, and creating a plan to help you get there. So if buying a home is on your bucket list, it’s time to get started. And the best place to start: a down payment.

Down Payment Details

Unless you happen to be one of the lucky buyers who qualifies for special loan programs through organizations like the VA or USDA, every home purchase normally requires some sort of down payment. We typically hear about down payments of 20 percent of the purchase price of a home, but buyers have the option to put down more or less in order to secure their dream house. Most lenders require a downpayment of at least 3 percent depending on your credit history.

Making a down payment of less than 20 percent can be a big help to get you into a home sooner, but it comes with a catch. Actually, a few catches. In the eyes of a lender, a lower down payment increases the risk they will need to take on by giving you a mortgage. In order to compensate for this risk, you will likely pay a higher interest rate on the loan.

Your lender will also likely require private mortgage insurance (better known as PMI). This insurance policy is used to protect the lender in case you default on your loan. However, the monthly premiums will be paid by you, in addition to your mortgage payments. PMI rates vary, depending on the size of the down payment and the?loan, from around 0.3 percent to 1.15 percent of the original loan amount per year. The less you put down, the higher the PMI.

Kickstarting Your Savings

Now that you know more about the ins and outs of down payments, how do you actually start saving for one?

  • Determine how much house you can afford and how much down payment makes sense for you. Crunch the numbers using Zillow’s Affordability Calculator given your income and the amount of debt you have. Based on the prospective purchase price from an online calculator or the average price of homes in your area, calculate how much a 20, 10 or even 5 percent down payment would be. Which is the most reasonable for you? Also consider how this will affect the monthly payment on the loan (click on the “payment breakdown” tab in the Zillow calculator for details).
  • Get intimate with your budget. Light a candle, open a bottle of red wine, and get to know the ins and outs of where your money is going. Identify specific areas where you can cut back or eliminate spending all together to make room for extra saving. Of course consider small changes like downgrading to a cheaper gym membership or cutting out your daily Starbucks run, but also think about big moves. Selling your car and using public transit or moving to a cheaper apartment can get you into your home even sooner.?
  • Give yourself a reality check. Think about your current housing costs versus the prospective monthly payment on your dream home. For instance, you may be paying $1,500 in rent but think you’d like to buy a home whose monthly costs will be more like $2,500 each month. Aim to save the difference between the two. In this case, save an extra $1,000 monthly. Not only will you get comfortable with the budget necessary to afford the house you want, but, you’ll also be building your down payment as you go. If you’re not able to make this savings target on a consistent basis, then you may need to readjust your expectations of how much house you can afford.?

Even if you’re not 100 percent sold on home ownership, that’s okay. It’s a big decision and there’s no rush. No matter what you mother-in-law, best friend or realtor tell you, there is no perfect time to buy. But even if you’re still on the proverbial fence, preparing for the possibility of purchasing a home down the line is never a bad thing. Who ever regretted learning more about the home buying process, improving their credit score or saving something extra in their bank account?

Photo by Bernadette Gatsby

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