Category Archives: Personal Finance

3 Smart Reasons to Refinance Your Mortgage

After reaching historic lows, mortgage rates are once again on the rise. But homeowners who are looking to refinance can still get a great deal. A mortgage refinance can certainly help you keep more cash in your pocket but you need to weigh the pros and cons before you sign on the dotted line. If you’re wondering whether now’s the time to take out a new home loan, here are three reasons why it makes good financial sense.

1. You Want a Better Rate

Refinancing your mortgage at a lower rate is a no-brainer if you’re looking to save money. It can potentially shave thousands of dollars off your loan. Instead of throwing your hard-earned cash away on interest, you could use the money you’re saving to beef up your emergency fund, pad your retirement nest egg or pay for home improvements to increase your equity value.

If the main reason you want to refinance is to get a lower rate, you should run the numbers before you call your lender to make sure it’s really going to save you money. Taking out a new home loan typically involves paying for things like loan origination fees, appraisal fees, application fees and other charges which can eat up a significant chunk of your savings.

Generally, you should aim to get your rate dropped by at least one percentage point to get the most out of a refinance. Depending on how much you paid in closing costs, it could take several years of mortgage payments to reach the break even point so refinancing might not be worth it if you’re not planning to stay put for the long haul.

2. You Need to Convert an ARM

Prior to the collapse of the housing bubble, adjustable rate mortgages were a popular option with many homeowners and lenders alike. The problem with this type of loan is it’s easy to get lulled into a false sense of security when rates are low. The payments may seem manageable but if interest rates go up, you could be in for a rude awakening when the loan adjusts.

Converting an ARM to a fixed-rate loan makes sense if you’re looking for more stability in your finances. Locking in a fixed rate means your payments will stay the same, unless you decide to refinance later on. You might see more savings in the short-term with an adjustable rate loan but switching to a fixed-rate will benefit your bottom line in the long run.

3. You Want to Pay Off Your Home Faster

Traditional mortgage loans are designed to be paid off over a longer period of time, which means you’ll pay more in interest but your payments will be lower each month. If the idea of paying your home off over the course of a few decades doesn’t sound appealing, refinancing to a shorter mortgage term can help you pay it down faster.

Before you refinance your 30-year loan into a 15-year term, you need to consider the impact to your budget. Shortening your loan term means your monthly payments will be higher. So you need to make sure you’ll be able to afford it now and in the future. You should ask yourself whether you’d be able to make the payments if you lost your job or had to take time off from work because of a health crisis.

If you’re worried about the possibility of not being able to make the payments, you might want to consider refinancing to a lower rate with the same term and just prepaying your mortgage. Even making just one extra payment each year towards your principal can save you a significant amount of money. Plus you have more flexibility than you would with a shorter loan term.

The Bottom Line

There are plenty of reasons to refinance your home but not all of them are necessarily good. For example, refinancing to take the equity out of your home can be a good way to consolidate debt or pay for home repairs but it’s not without its drawbacks. Ultimately, you should think about what your long-term goals are for refinancing and how it will impact your overall financial picture before you pull the trigger.

Your Children Can Become Better Personal Finance Managers Than You Are

Personal financial management is not a subject that is taught in every school or college. This is something that nearly all of us face sooner or later. Our competence in dealing with personal finances has been largely dependent on personal experience as parents did not pay much attention to teaching their children how to manage their pocket money. GoBankingRates says that one-third of Americans have no retirement savings. People are increasingly aware of the need to manage their personal finances efficiently taking into account tough economic times.

Current Trends

Parents are now more inclined to explain the rules of personal financial management to their children than never before in order to prepare them for life as adults. But unfortunately, many parents do not know these rules themselves. What can be done to overcome this problem? The answer is very simple: IT solutions can be employed. We live in a time when each of us has a mobile device, and children start using such devices from a very early age: the website LittleThings.com claims that 90% of 2-year-olds use tablets and smartphones. So children are unlikely to feel uncomfortable when learning to manage their finances with the help of technology.

Which Solutions Can be Used?

Websites are the first educational resource that should be addressed. They represent a treasure trove of data on personal financial management. Their content is not limited to articles covering this topic. Such websites may contain a boatload of games and quizzes teaching children to manage their finances, videos, and more. Some of them specialize in a certain type of education materials (e.g. Financial Entertainment represents a financial games library).

Let’s take a look at the Practical Money Skills website by Visa.

This website is full of educational materials that can be used by adults and children. Parents can choose materials depending on preferences of a child and his/her needs. Articles are written in simple words and children can understand them easily. They can be read by parents or by children themselves.

Children like games and they can play online games there, and these games will teach them to manage finances. If children (teenagers in particular) need some extra training in making savings and assessing their financial choices, they can use calculators. For instance, teenagers planning to take a year off before starting college usually travel abroad. They have a limited budget, so planning a travel budget plays a very important role. The Travel Budgeting Calculator can show them how much they will spend on a trip.

What about comics? People of different ages like them. This website offers several comics to the visitors that introduce fundamental money management concepts to readers.

Some other materials found on this website are videos, infographics, lesson plans (for educators), etc.

What are Other Options?

Think of downloading a mobile app to your device. Custom financial software and mobile application developers do their best to deliver a killer product. There are many good financial apps that can be used by children.

Here are some of them:

1. Quest to Clean Up: chores, rewards, saving. The app can help parents to teach their children to save and earn money on things they want. Children see how much effort is required to get an item they would like to get. Parents can add task and chores (paid/unpaid) using this app and reward kids after a task is completed.

2. Yuby. This app can become the first financial instrument for children. It has the Chore List that reminds its small users what their chores are and how much money they can get for each task. Yuby shows children the sum of money they have at the moment and displays their financial activity. Children can also see how much money they need to get the stuff from the Wish List.

3. Thrive ‘n’ Shine. This is an educational adventure game that teaches high school students to manage their personal finance. The app enables users to create avatars they like. Players learn to balance their needs and wants and earn different rewards. There are section quizzes and final summative assessments in this game. Teachers (or parents) can track children’s progress using an online dashboard.

4. bankaroo. This app represents a virtual bank that teaches children about the value of money. Parents and children can make use of this app to keep track of money that children save or spend. It helps children to save for important goals. The app supports different languages and currencies. It has a paid (school) version, as well.

5. Lunch Tracker. The app teaches children to manage their saving habits by tracking spending on lunch. It contains money-saving tips. Users can see how much money they spend on dining out, eating at home or packing lunch. Children can also take the 30-day challenge to find out how much they save on a monthly basis.