Save more, spend smarter, and make your money go further
After a year spent indoors, everyone wants to have a hot girl summer in 2021. But when your financial situation is still recovering from the pandemic, can you really afford to?
Whether you’re struggling to get by or just looking to save a few bucks, use these tips to go big this summer – without going over budget.
Cash in rewards points
Millions of Americans stocked up on toilet paper, hand sanitizer, and disinfectants during the pandemic. But many consumers inadvertently hoarded another item: credit card rewards points.
If you’re planning to reunite with high school friends or travel to a bachelorette party, cash in your points and miles to save on the trip. If you had to cancel a vacation due to the pandemic, redeem any remaining travel credit.
If you have more rewards points than you need, you may be able to redeem them for cash or as a statement credit on your card, which you can then use toward your trip.
Don’t have any rewards cards? Now may be a good time to sign up. Chase is currently offering a 100,000-point bonus for new cardholders who apply for the Chase Sapphire Preferred card, or a 60,000-point bonus for the Chase Sapphire Reserve card. Depending on where you’re going, that’s enough for a couple of flights or hotel stays.
Invite friends over for a swap
My new favorite tradition with friends is to host a swap. Everyone brings items they no longer need, and we take turns picking new-to-us items. Last time I got three dresses, a pair of Madewell overalls, a curling iron, and a dog bed.
You’re not limited to clothes at a swap. I encourage my friends to bring anything, including books, kitchenware, makeup and home decor. It’s a free way to get new items, and it encourages you to declutter your house.
Drink like a college student
Back in college, most people would have a couple drinks at home before venturing to the bars. If you’re going out with friends, consider starting with a drink or two at home.
Another money-saving trick is to eat a full meal before you go out, so you’re not tempted to grab pricey appetizers. If you’re getting drinks with your friends, limit yourself to basic cocktails instead of specialty cocktails, or stick to the draft list instead of buying a fancy bottle.
Create rules for yourself
Now that the world is opening up, it’s tempting to throw your budget away and treat yourself to everything you missed during the pandemic. Before doing that, set up some ground rules to keep yourself from going overboard.
For example, make a rule that if you’re getting dinner or brunch with friends, you won’t get take-out that week. These basic rules will help you spend less without having to give up what really matters.
Use a cash budget
Instead of bringing your credit card with you on a night out, only take the amount of cash you want to spend. You can still use your phone to order an Uber or Lyft, but you won’t have the temptation of a credit card. Decide how much you’re comfortable spending and only bring that amount.
Join a sports league
Group sports leagues like softball, soccer, or kickball are one of the most affordable ways to hang out with friends and get some exercise at the same time.
Most group leagues cost between $50 and $75 a person, depending on the sport, and usually last around six weeks. Sometimes you’ll even get a discount at a local bar where you can hang out afterwards.
Plan a budget-friendly trip
For the past few years, my college friends and I have met up every summer at my in-law’s lake house. The house is located near a small town in Indiana, only a few hour’s drive for most of us.
Instead of picking a more exotic locale, we prioritize saving money. It’s free to stay there, and we split the cost of groceries. I usually spend about $100 on gas, food, and drinks for a three-day trip.
If you’re considering a getaway with friends, get creative. Don’t automatically book a trip to Vegas or Miami. Pick a spot that’s close enough to drive, or near a popular airport where flights will be less expensive.
If you’re not lucky enough to have access to a family vacation home, look on Airbnb and VRBO for affordable destinations. Find a house with a stocked kitchen so you can cook most of your meals.
Pro tip: Use Mint’s free travel budget calculator to help you plan your next adventure.
Budget for it
When the world shut down last year, most of us got used to spending less on gas, bars, and new clothes. But as things start to open up, you may find your spending ramping back up.
Use this time to revise your budget and allocate money toward restaurants, rideshare services, and new outfits. As things return to normal, you may have to change your budget a few times before finding a happy balance. Give yourself some grace, as circumstances may change rapidly.
If you find budgeting for one month at a time difficult, give yourself a weekly allowance to use for non-essential purchases. Redirect some of your pandemic habits, like ordering take-out a few times a week, to your rediscovered social habits, like getting dinner with your friends.
Talk to your friends
While some consumers survived the pandemic without getting laid off, millions of Americans lost their jobs and remained unemployed for months. So while your friends may be ready to party, you might be focused on rebuilding your savings.
If you suffered financially during the pandemic, you may not be able to keep up with your friends this summer. Even though it may seem awkward to discuss your money problems openly, it’s better than making excuses.
If you lie about why you can’t hang out, your friends will think you’re avoiding them. But if you’re honest, they may accommodate you by suggesting budget-friendly activities. Give them the chance to understand, even if it means having an uncomfortable conversation. Who knows – one of them might be struggling as well, but too afraid to speak up.
Save more, spend smarter, and make your money go further
Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Conscious Coins. More from Zina Kumok
Gemini is a security-focused crypto exchange owned by the Winklevoss twins (of Facebook infamy), aimed at crypto newbies as well as institutional investors. Gemini is known for its robust security features, including an industry-first hot-wallet insurance program that covers theft of digital assets held in the Gemini digital wallet.
After Cameron and Tyler Winlkevoss made a fortune investing their Facebook lawsuit funds into Bitcoin, Gemini was founded in 2015 to help others invest in digital assets. Gemini has grown to offer over 90 cryptocurrencies, and caters to new investors with its simple-to-use platform and mobile app. Gemini also specializes in institutional investors, offering an over-the-counter trade desk, 24/7 support, and even portfolio management for large crypto investing clients.
Gemini Fees
Gemini allows users to sign up for a free account but, like most crypto exchanges, charges a fee for trading on the platform. Here is a breakdown of the fees on Gemini:
Type
Fees
ACH deposit
Free
Crypto deposit
Free
Debit card purchase
3.49% + trading fees
Wire transfer
Determined by bank
Crypto trades below $200
$0.99 to $2.99
Crypto trades above $200
1.49%
Gemini charges fairly high trading fees, especially for orders below $200. There are minimum fees charged on smaller transactions, which can amount to up to 10% of the purchase price (or more). Here’s are how fees are assessed on smaller transactions:
Less than $9: $0.99 fee
$10 to $24: $1.49
$25 to $49: $1.99
$50 to $200: $2.99
Over $200: 1.49% of order total
Debit card purchases are the worst offenders, charging a 3.49% surcharge in addition to the regular trading fees.
Gemini ActiveTrader Fees
Gemini has an advanced trading platform with much lower fees, designed for active traders and offering discounts for those that trade higher volumes per month.
Gemini ActiveTraders uses a maker-taker fee schedule. A maker is someone who places an order that gets placed in the order book to be matched at a later time, effectively “making” a market. A taker places an order that is matched immediately, “taking” the order off the books. Makers generally enjoy lower fees than takers.
Here’s a breakdown of the Gemini ActiveTrader fees:
30-Day Trading Volume (USD)
Taker Fee
Maker Fee
0
0.40%
0.20%
≥ $10,000
0.30%
0.10%
≥ $50,000
0.25%
0.10%
≥ $100,000
0.20%
0.08%
≥ $1,000,000
0.15%
0.05%
≥ $5,000,000
0.10%
0.03%
≥ $10,000,000
0.08%
0.02%
≥ $50,000,000
0.05%
0.00%
≥ $100,000,000
0.04%
0.00%
≥ $500,000,000
0.03%
0.00%
Key Features of Gemini
Gemini is a full-service crypto exchange, offering a wide range of services and features for both beginner and experienced crypto traders, as well as institutional investors. Here are a few of the key features offered on the Gemini platform:
Easy-To-Use Mobile App
Gemini offers an intuitive mobile app that makes it easy to buy, sell, and trade crypto on the go. The mobile app takes the same approach to simplified design as the regular Gemini platform, with easy-to-read price charts, a simplified order form, and even the ability to set up price alerts on your favorite cryptocurrency. And you can set up recurring purchases on a regular basis for investing in crypto over time.
The Gemini mobile app allows quick access to Gemini Earn for earning interest on deposited crypto, which pays out daily interest on your crypto holdings. Gemini Pay can be used on the app to make regular retail purchases with your Gemini account crypto balance. And you can also manage your Gemini Credit Card account directly from the Gemini mobile app.
Overall, the Gemini mobile app is one of the better crypto exchange apps on the market, and is ideal for beginner investors.
Gemini Earn
Gemini offers interest-bearing accounts that pay crypto rewards in exchange for lending your crypto out to borrowers. The Gemini Earn program pays out interest daily, up to 8% APY on certain cryptocurrencies.
Gemini offers interest on over 40 different cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), and USD Coin (USDC). Rates vary by coin, and coins are only lent out to vetted institutional investors.
Gemini ActiveTrader
Gemini offers an advanced trading platform for experienced crypto investors with a wide assortment of trading tools. With live order books, multiple order types, and customizable charting, traders can stay up-to-date on the market and place orders with ease.
ActiveTrader lists all crypto in trading pairs, giving you hundreds of trading options. Market, limit, and stop-loss orders are available, and multiple orders can be placed on the books at the same time.
Gemini also offers block trading (for larger orders), and a daily auction that allows you to set a maximum asset buy price and be matched with other sellers to trade.
Overall, Gemini ActiveTrader offers just enough tools for active traders, but doesn’t overwhelm intermediate traders who are still learning about active crypto trading.
Gemini Custody
Gemini offers secure custodial services for cryptocurrency, keeping assets in protected offline cold storage, and insuring balances kept in custodial accounts.
As one of the only regulated crypto exchanges by the New York Department of Financial Services, Gemini has become a go-to custody option for institutional customers and those wanting to protect large crypto balances. Gemini also offers its custody service to other crypto platforms as well, used as the cold storage solution for smaller exchanges.
Gemini Custody features $200 million in insurance coverage, instant liquidity for trading, same-day withdrawals, and 24/7 customer support. Each Custody client can access a dedicated account representative for assistance.
Gemini Wallet
The Gemini Wallet is used to securely store crypto, supporting all assets on the Gemini platform. It is one of the only crypto hot wallets that offers insurance against certain types of losses, such as from a security breach or hack, a fraudulent transfer, or employee theft.
The wallet is mainly used for transferring assets to and from the Gemini exchange, and it does not connect to decentralized applications.
Advantages of Gemini
Gemini is one of the most popular U.S.-based crypto exchanges for its security features and friendly user interface. With an intuitive mobile app, crypto insurance on custody accounts and the Gemini Wallet, as well as a low-fee advanced trading platform, Gemini offers quite a few advantages to crypto investors. Here are a few of them:
Intuitive Trading Platform. The Gemini platform makes it easy to buy and sell crypto, especially for beginners. You can quickly see the pricing of assets on the platform, check in on your portfolio, and view educational articles and current crypto news on the homepage.
Hot Wallet Insurance. A first in the industry, Gemini protects your digital assets with insurance on the Gemini hot wallet. This allows you to safely store your crypto in your custody, but with the added protection of insurance against theft or other types of losses in your wallet.
Easy-to-Use Mobile App. The mobile app is one of the simplest to use in the industry, making it easy to view your holdings and place orders. With a simplified trading view, built-in educational content, and the ability to trade on the go, the Gemini mobile app is one of the best available.
Advanced Trading Platform. Although Gemini is designed primarily for beginners, the advanced trading platform offers very low fees and a wide range of trading tools for active traders. With customizable charting, multiple order types, and the ability to place larger block orders, Gemini ActiveTraders is ideal for expert crypto investors.
Disadvantages of Gemini
Although Gemini offers great features for beginners and advanced traders alike, there are a few disadvantages to be aware of:
High Fees. Using the standard trading platform results in very high fees, especially for users placing small orders. With a minimum $0.99 fee on orders under $10, this could result in a 10% fee (or higher). Combine that with a 3.49% surcharge on debit card transactions, and investors placing small orders will be paying quite a bit more than most other exchanges.
Limited Crypto Selection. Although Gemini has added assets regularly for the past few years, the total supported list is around 90 cryptocurrencies, which is a much smaller collection than most other exchanges. Bitcoin, Ethereum, and other popular crypto are listed, but you may not be able to find some smaller up-and-coming crypto projects on this exchange. If you are looking for a larger selection, you may want to check out Coinbase or Crypto.com instead.
How Gemini Stacks Up
Gemini is a solid crypto exchange, especially for security-conscious investors who want the most protection for their digital assets. But how does it compare to another large crypto exchange in the U.S.?
Coinbase is the most popular exchange in the U.S. by far, with over 70 million active users and over $500 billion in quarterly trading volume. With a large number of tradable assets and well-designed user interface, Coinbase is one of the best exchanges on the market.
Gemini and Coinbase charge similar fees on their standard trading platforms — both quite high — while their advanced platforms offer discounted fees to high-volume traders. Both also offer institutional investor platforms and crypto secured storage options as well.
Overall, Coinbase and Gemini are both great options for beginners to start investing in crypto, but Gemini offers a more secure platform, whereas Coinbase offers more assets.
Gemini
Coinbase
Fees
Standard trading: 1.49% to 3.49%ActiveTrader: 0.00% to 0.40%
Standard trading: 1.49% to 3.99%Advanced trading: 0.00% to 0.50%
Number of Cryptocurrencies
90+
160+
Trading Features
Simple order form, advanced trading platform, mobile trading, crypto wallet, crypto custodial services
Simple and advanced charting, simple order form, mobile trading, recurring purchases
Security Features
Cold storage, two-factor authentication, FDIC insurance, crypto wallet insurance, user role management, whitelisting
Gemini offers some great features for crypto investors, including a super-simple mobile app for beginners, and an advanced trading platform for experienced crypto traders. With a focus on security, Gemini is the go-to custodian for institutional investors, as well as investors who want to insure their cryptocurrency.
Gemini fees are high for users who trade on the standard platforms, charging especially high fees for small purchases. That being said, using the advanced trading platform offers very low fees, with discounts available for high-volume traders.
In addition to a solid trading platform, Gemini offers a rewards credit card, as well as the ability to pay for retail purchases with your account balance using the Gemini Pay feature.
Overall, Gemini is ideal for beginner investors who want secure access to crypto investing, as well as institutional clients who want insurance on their digital assets.
GME is so 2021. Fine art is forever. And its 5-year returns are a heck of a lot better than this week’s meme stock. Invest in something real. Invest with Masterworks.
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Trains, local parks and even bars can all double as workspaces.
If you haven’t noticed, the world beyond your window has recently acquired a sheen of normalcy not experienced since the halcyon days of early-2020. Go roll your eyes at “The Batman” and you’re bound to scarf popcorn astride a legion of maskless neighbors. Head to your neighborhood dive, and you’re liable to recognize a few people by face, some of whom you literally haven’t seen in decades, or at least since mid-2021. It’s truly wild, this dance with nostalgia.
And yet.
And yet more than a few things (remember menus?) won’t revert to their pre-COVID ways any time soon, particularly those in which we work. For folks with the means and inclination to clock in via laptop, the benefits of remote work — no commute and greater flexibility to perform one’s professional and/or parental obligations — have been widely reported. Conventional wisdom suggests our new definition of work/life balance will long outlive the pandemic.
That’s why we thought we’d compile a brief list of places to work remotely to power you through the rest of 2022. If variety really is the spice of life, you’d be well-served to refresh your office setting every now and again.
1. Coffee shops
Let’s go ahead and get the obvious choice out of the way. After all, it’s more than plausible that every (sane) person you know loves a good coffee shop. Many cafés have the decency to open far too early, which lets us delude ourselves with thoughts of getting an early start tomorrow morning.
They also — duh — serve pastries and other savory breakfast staples. Some even sell doughnuts. And then, of course, there’s the reason we bother in the first place, the perennially-necessary caffeine itself, a drug not merely sanctioned but beloved, and the very fuel which makes possible the nascent growth in WFH policies. Combine these elements and you have a near-perfect work environment.
2. Bars and breweries
Here in Portland, you can’t pass a Heart Coffee or retail weed shop without also passing a brewery. It’s honestly one of the most compelling reasons to move here (not that all of us are suggesting you do so). What folks may not know is that beyond offering a rotating list of delectable concoctions and locally-hopped collabs, a good brewery makes a stellar office.
Think about it. Breweries gift us with spaciously-placed water stations and a variety of pub food, not to mention an array of long wooden tables and reliable Wi-Fi (often with kitschy network names!). Although unique, it’s definitely one of the best places to work remotely. Trust us: a laborer in modern-day America could do far worse than whichever brewery is nearest their home.
3. Parks
OK, hear us out on this one. Yes, the Wi-Fi in your local park is usually atrocious (and often non-existent). And sure, you’re not going to finish that project from atop whichever tree stump just ripped your shoelace, causing you to collapse in an awkward, moss-strewn heap. But before you dismiss the idea that these saintly spaces can, and often do, double as places of productivity, remember what you are likely to accomplish with a traipse through a public wood.
Our guess is that you’ll find inspiration in all that clean oxygen circling your senses, a little motivation tucked beneath the varied scents and burrows bordering your every step. Writers much smarter than yours truly have educated us on the many cognitive benefits of walking outside. We take them at your word, which is why this article was written (i.e., dictated) in a narrow tree hollow somewhere in Forest Park (pictured above).
4. Planes, trains and…well, just those two
Late last year, while in the throes of some such variant, I discovered that trains and airplanes are fine places to conduct business, so long as the project entails light, ideally Internet-free work. Experience has proven that railway travel through the countryside doesn’t provide the most reliable signals.
Except for the world whirring beyond or beneath your window, there’s little to distract you while working aboard a train or plane. Unwanted conversations are easily avoided thanks to handy pair of noise-canceling headphones. The fold-out trays in front of your seat double as effective enough desks, providing you don’t bend them to the other side of their limits. Plus, the overhead light helps those COVID-weary eyes better identify the maddening number of typos littering your work. With snacks at your service and multiple bathrooms in either direction, you may find that your best workdays are those spent barreling across or above the country.
5. Libraries and bookstores
Libraries and bookstores are an excellent choice for those looking for a new work environment. And they’re quieter than their coffee shop brethren. The Wi-Fi is strong and almost always free. In either case, one has at their disposal an immense collection of hard copy productivity boosters (i.e., books). On those rare days in which you feel like socializing with a coworker in person, it’s more than likely that your local library offers private conference rooms to help you brainstorm (i.e., doom-scroll and catch up).
If you go the bookstore route, it’s a safe bet you’ll have an espresso bar on site. One that may even feature a light collection of sugary treats and an unsettling amount of bottled kombucha. All of which is to say, one simply can’t go wrong when hauling their laptop to a library or bookstore. Within the comfy confines of a space dedicated to learning and curiosity, one immediately feels calmer, smarter and far more responsible than one might when working in, say, a bar or brewery (not that there’s anything wrong with that).
You do you
Daily life is shifting back into a gear we sort of, kind of recognize, but many things remain forever changed. If you’re one of those people who have no problem brandishing the term “digital nomad” in public, it’s time to embrace our new reality and find new places to work remotely. Much like the world beyond your laptop, this new work/life paradigm is your oyster. Go forth and Slack.
After searching for five years, Vanessa Hudgens found the perfect Georgian colonial estate in Los Feliz, Calif. to call home. Find out how the High School Musical star transported an old Hollywood home into her “French” and “vibey” dream house.
Nicknamed “The Little DeMille,” iconic Hollywood filmmaker Cecil B. DeMille built the stunning Los Feliz house for his mistress in 1922.
And now, the Princess Switch star, 32, is opening up the doors of the updated home to Architectural Digest for an exclusive tour.
From her DIY remodel in the kitchen, to her “obsession” with candlesticks and vintage books, to the “sexy” and “cave-like” bathroom, here’s the full scoop on Vanessa Hudgens’ luxe Los Angeles home.
An historic Hollywood home transformed into the perfect “escape”
According to Daily Mail, Hudgens purchased the luxurious Los Feliz home from Academy Award-winning actor Gary Oldman. After a 5-year house hunt, Hudgens bought the home in December 2018 for just under $5 million.
The 3,168 square foot Georgian colonial home retains many of its original features.
Sitting on a half-acre, the stunning estate includes three bedrooms and four bathrooms with a separate one-bed, one-bath guesthouse that sits over a detached two-car garage.
Nestled in the Hollywood Hills, the historic Los Feliz home provides the perfect escape for the Tick, Tick…Boom! actress.
“There were so many things about it that struck me,” Hudgens tells AD of her plush property.
She adds: “Walking through the gate and seeing this house covered in ivy, surrounded by olive trees, it was like I had been transported to France or Italy. It felt like such an escape.”
Photo credit: Jenna Peffley for Architectural Digest
Sisters unite! Ashley Tisdale helped Hudgens with the DIY decor
BFF to the rescue!
While Hudgens always “wanted an old home,” there’s no escaping the upkeep and renovations with an older building.
After purchasing the house three years ago, Hudgens enlisted the help of her High School Musical costar and good pal Ashley Tisdale.
“I got new marble, painted the cabinets, got new knobs and drawer pulls—I really wanted brass. My girlfriend Ashley Tisdale does interior design, and I got her advice on where to shop,” Hudgens says.
Photo credit: Jenna Peffley for Architectural Digest
Hudgens also hired Jake Arnold to help bring her overall vision together, including a vast collection of vintage books, colorful art pieces, the perfect lighting for all her house plants, and a wide selection of candlesticks.
“I wanted it to be casual, relaxed and cozy,” she says of the interior design, adding, “I’m a big fan of candlesticks, so you will notice them everywhere.”
The luxe Los Feliz pad also has this “big selling point”
Amid the big plants, abstract art and witchy books, Hudgens couldn’t help but gush about the home’s fabulous floors.
“Oh and the floors!” she boasts.
The herringbone wood parquets “were a big selling point for me when I saw this house,” she shares.
Made from 18th-century French oak taken from an old chapel in Europe, the floors were originally added by Oldman.
Photo credit: Jenna Peffley for Architectural Digest
Hudgens took on a pandemic project to improve her new home
Admitting that her kitchen looked “very different” when she moved in, the Powerless star remodeled it during the pandemic.
“I took it upon myself to have a project, and put it all together,” Hudgens says of the DIY project.
“I painted the cabinets, removed some cabinets, and put big oak beams for open shelving,” shares the actress.
Photo credit: Jenna Peffley for Architectural Digest
Including eccentric wallpaper featuring mushrooms and dragons, Hudgens decorated the breakfast nook with designs from the House of Hackney.
“I figured, Why not? I did what I like to call a facelift to it,” Hudgens says of her kitchen renovations.
The funky wallpaper rests above a custom booth, inspired from “the dopest place ever.”
“I had the booth made for this space,” says Hudgens. “I was really inspired by the restaurant Maison Premiere, this absinthe and oyster bar in New York. It’s the dopest place ever.”
The actress also added extra tile, made of Carrara marble, from the primary bath for the backsplash.
A look at the romantic, the sexy and the cave-like features throughout the plush property
Hudgens invites fans into her “romantic” dining room, which features an Italian chandelier from 1stdibs.
Admitting she doesn’t cook often, Hudgens says, “I’m normally a ‘Let’s get everyone over, have a drink or two, put on a playlist, and then we all figure out what we want to eat and I just order it’ type of host.”
Heading upstairs, the Grease: Live star shows off her bedroom that features feminine art and pops of orange.
“For some reason I just really fell in love with the idea of orange for my bedroom,” she shares.
Hudgens is all about body-positivity, and shows fans a nude painting in her bedroom. “I wanted the house to be super feminine, to celebrate women’s bodies, to be a kind of femme palace,” Hudgens says.
When in California, enjoy the sunshine! The beautiful backyard features a pool, pizza oven, fire pit and plenty of outdoor space for entertaining.
“I wanted a yard that felt like a park where I could run around with my friends, have space to play, and just feel safe,” Hudgens shares.
Saving the best for last, Hudgens shows off her Goth black bathroom which is one of her “favorite places in the house.”
Photo credit: Jenna Peffley for Architectural Digest
Featuring marble countertops, black walls and an egg-shaped tub, Hudgens went for a cave-like aesthetic in the primary bathroom.
“The bathroom is a sexy cave,” shares the actress.
See the luxurious LA home for yourself! From the ivy exterior, to the poolside murals, to the various Teen Choice Awards and the ghost-like painting of herself, check out the YouTube video for a full tour with the High School Musical star.
More celebrity homes
Zendaya Owns a $4 Million Home Fit for a Disney PrincessThe Story of Taylor Swift’s Holiday House — Home to “the Last Great American Dynasty” From a Prince to a King: A Look at Will Smith & Jada Pinkett Smith’s Real Estate Portfolio Everything We Know About Adam Levine’s House in Los Angeles
Save more, spend smarter, and make your money go further
While a handful of women have appeared on coins and special-edition bills throughout the years – Susan B. Anthony, Sacagawea and Helen Keller, for example – the number of women featured on U.S. currency is about to be significantly expanded.
Beginning in 2022 and continuing through 2025, the U.S. Mint will issue up to five new quarter designs each year featuring historically prominent women. Here are the women being honored in 2022.
Maya Angelou
Celebrated author and poet Maya Angelou is most well-known for her autobiography, “I Know Why the Caged Bird Sings.” The book was named as one of TIME Magazine’s 100 best and most influential non-fiction books.
A recipient of the Presidential Medal of Freedom, Angelou also worked with Dr. Martin Luther King as a coordinator for his organization, the Southern Christian Leadership Conference. She was also the first African-American woman to read an original poem at a presidential inauguration.
Dr. Sally Ride
The first American woman in space, astronaut Dr. Sally Ride inspired generations of girls to pursue careers in science and technology. Ride flew on the Space Shuttle Challenger in 1983 and 1984.
In 2013, President Barack Obama awarded her a posthumous Presidential Medal of Freedom. After her death, it was revealed that Ride was a lesbian, making her the first LGBTQ person to appear on a US quarter.
Wilma Mankiller
As the Principal Chief of the Cherokee, Wilma Mankiller is the first woman ever elected chief of a major Native American tribe. She oversaw the growth of the Cherokee nation from 68,000 members to 170,000.
Ms. Magazine named Wilma Woman of the year in 1987, President Bill Clinton awarded her the Presidential Medal of Freedom in 1998.
Nina Otero-Warren
One of the few Hispanic suffragists in history, Nina Otero-Warren helped publish suffragist literature in Spanish, encouraging Hispanic women to vote. She also served as chairman for the Board of Health in New Mexico, was a board member for the American Red Cross and was the Inspector of Indian Schools for Santa Fe County, overseeing the schools for Native American children.
Anna May Wong
As the first Chinese-American movie star in Hollywood, Anna May Wong paved the way for countless other Asian actors. She acted in Broadway plays and both American and European films. Anna was also a fashion icon and was once named the world’s best-dressed woman.
She appeared in movies and plays with acting legends like Laurence Olivier, Douglas Fairbanks and Marlene Dietrich. Though Hollywood remained a hostile environment for people of color during her time, Wong stood up against Chinese stereotypes and advocated for fairer portrayals.
Save more, spend smarter, and make your money go further
Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Conscious Coins. More from Zina Kumok
The mortgage industry is rife with jargon and acronyms, from LTV to DTI ratios. One term you’ll hear sooner or later is “conventional mortgage loan.”
It sounds boring, but it couldn’t be more important. Unless you’re a veteran, live in a rural area, or have poor credit, there’s a good chance you’ll need to apply for a conventional mortgage loan when buying your next house.
Which means you should know how conventional mortgages differ from other loan types.
What Is a Conventional Mortgage Loan?
A conventional loan is any mortgage loan not issued or guaranteed by the Federal Housing Administration (FHA), Department of Veterans’ Affairs (VA), or U.S. Department of Agriculture (USDA).
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Most conventional loans are backed by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). These government-sponsored enterprises guarantee the loans against default, which lowers the cost for borrowers by lowering the risk for lenders.
As a general rule, stronger borrowers tend to use these private conventional loans rather than FHA loans. The exception concerns well-qualified borrowers who qualify for subsidized VA or USDA loans due to prior military service or rural location.
How a Conventional Mortgage Loan Works
In a typical conventional loan scenario, you call up your local bank or credit union to take out a mortgage. After asking you some basic questions, the loan officer proposes a few different loan programs that fit your credit history, income, loan amount, and other borrowing needs.
These loan programs come from Fannie Mae or Freddie Mac. Each has specific underwriting requirements.
After choosing a loan option, you provide the lender with a filing cabinet’s worth of documents. Your file gets passed from the loan officer to a loan processor and then on to an underwriter who reviews the file.
After many additional requests for information and documents, the underwriter signs off on the file and clears it to close. You then spend hours signing a mountain of paperwork at closing. When you’re finished, you own a new home and a massive hand cramp.
But just because the quasi-governmental entities Fannie Mae and Freddie Mac back the loans doesn’t mean they issue them. Private lenders issue conventional loans, and usually sell them on the secondary market right after the loan closes. So even though you borrowed your loan from Friendly Neighborhood Bank, it immediately transfers to a giant corporation like Wells Fargo or Chase. You pay them for the next 15 to 30 years, not your neighborhood bank.
Most banks aren’t in the business of holding loans long-term because they don’t have the money to do so. They just want to earn the points and fees they charge for originating loans — then sell them off, rinse, and repeat.
That’s why lenders all follow the same loan programs from Fannie and Freddie: so they can sell predictable, guaranteed loans on the secondary market.
Conventional Loan Requirements
Conventional loans come in many loan programs, and each has its own specific requirements.
Still, all loan programs measure those requirements with a handful of the same criteria. You should understand these concepts before shopping around for a mortgage loan.
Credit Score
Each loan program comes with a minimum credit score. Generally speaking, you need a credit score of at least 620 to qualify for a conventional loan. But even if your score exceeds the loan program minimum, weaker credit scores mean more scrutiny from underwriters and greater odds that they decline your loan.
Mortgage lenders use the middle of the scores from the three main credit bureaus. The higher your credit score, the more — and better — loan programs you qualify for. That means lower interest rates, fees, down payments, and loan requirements.
So as you save up a down payment and prepare to take out a mortgage, work on improving your credit rating too.
Down Payment
If you have excellent credit, you can qualify for a conventional loan with a down payment as low as 3% of the purchase price. If you have weaker credit, or you’re buying a second home or investment property, plan on putting down 20% or more when buying a home.
In lender lingo, bankers talk about loan-to-value ratios (LTV) when describing loans and down payments. That’s the percentage of the property’s value that the lender approves you to borrow.
Each loan program comes with its own maximum LTV. For example, Fannie Mae’s HomeReady program offers up to 97% LTV for qualified borrowers. The remaining 3% comes from your down payment.
Debt-to-Income Ratio (DTI)
Your income also determines how much you can borrow.
Lenders allow you to borrow up to a maximum debt-to-income ratio: the percentage of your income that goes toward your mortgage payment and other debts. Specifically, they calculate two different DTI ratios: a front-end ratio and a back-end ratio.
The front-end ratio only features your housing-related costs. These include the principal and interest payment for your mortgage, property taxes, homeowners insurance, and condo- or homeowners association fees if applicable. To calculate the ratio, you take the sum of those housing expenses and divide them over your gross income. Conventional loans typically allow a maximum front-end ratio of 28%.
Your back-end ratio includes not just your housing costs, but also all your other debt obligations. That includes car payments, student loans, credit card minimum payments, and any other debts you owe each month. Conventional loans typically allow a back-end ratio up to 36%.
For example, if you earn $5,000 per month before taxes, expect your lender to cap your monthly payment at $1,400, including all housing expenses. Your monthly payment plus all your other debt payments couldn’t exceed $1,800.
The lender then works backward from that value to determine the maximum loan amount you can borrow, based on the interest rate you qualify for.
Loan Limits
In 2022, “conforming” loans allow up to $647,200 for single-family homes in most of the U.S. However, Fannie Mae and Freddie Mac allow up to $970,800 in areas with a high cost of living.
Properties with two to four units come with higher conforming loan limits:
Units
Standard Limit
Limit in High CoL Areas
1
$647,200
$970,800
2
$828,700
$1,243,050
3
$1,001,650
$1,502,475
4
$1,244,850
$1,867,275
You can still borrow conventional mortgages above those amounts, but they count as “jumbo” loans — more on the distinction between conforming and non-conforming loans shortly.
Private Mortgage Insurance (PMI)
If you borrow more than 80% LTV, you have to pay extra each month for private mortgage insurance (PMI).
Private mortgage insurance covers the lender, not you. It protects them against losses due to you defaulting on your loan. For example, if you default on your payments and the lender forecloses, leaving them with a loss of $50,000, they file a PMI claim and the insurance company pays them to cover most or all of that loss.
The good news is that you can apply to remove PMI from your monthly payment when you pay down your loan balance below 80% of the value of your home.
Types of Conventional Loans
While there are many conventional loan programs, there are several broad categories that conventional loans fall into.
Conforming Loan
Conforming loans fit into Fannie Mae or Freddie Mac loan programs, and also fall within their loan limits outlined above.
All conforming loans are conventional loans. But conventional loans also include jumbo loans, which exceed the conforming loan size limits.
Non-Conforming Loan
Not all conventional loans “conform” to Fannie or Freddie loan programs. The most common type of non-conforming — but still conventional — loan is jumbo loans.
Jumbo loans typically come with stricter requirements, especially for credit scores. They sometimes also charge higher interest rates. But lenders still buy and sell them on the secondary market.
Some banks do issue other types of conventional loans that don’t conform to Fannie or Freddie programs. In most cases, they keep these loans on their own books as portfolio loans, rather than selling them.
That makes these loans unique to each bank, rather than conforming to a nationwide loan program. For example, the bank might offer its own “renovation-perm” loan for fixer-uppers. This type of loan allows for a draw schedule during an initial renovation period, then switches over to a longer-term “permanent” mortgage.
Fixed-Rate Loan
The name speaks for itself: loans with fixed interest rates are called fixed-rate mortgages.
Rather than fluctuating over time, the interest rate remains constant for the entire life of the loan. That leaves your monthly payments consistent for the whole loan term, not including any changes in property taxes or insurance premiums.
Adjustable-Rate Mortgages (ARMs)
As an alternative to fixed-interest loans, you can instead take out an adjustable-rate mortgage. After a tempting introductory period with a fixed low interest rate, the interest rate adjusts periodically based on some benchmark rate, such as the Fed funds rate.
When your adjustable rate goes up, you become an easy target for lenders to approach you later with offers to refinance your mortgage. When you refinance, you pay a second round of closing fees. Plus, because of the way mortgage loans are structured, you’ll pay a disproportionate amount of your loan’s total interest during the first few years after refinancing.
Pros & Cons of Conventional Home Loans
Like everything else in life, conventional loans have advantages and disadvantages. They offer lots of choice and relatively low interest, among other upsides, but can be less flexible in some important ways.
Pros of Conventional Home Loans
As you explore your options for taking out a mortgage loan, consider the following benefits to conventional loans.
Low Interest. Borrowers with strong credit can usually find the best deal among conventional loans.
Removable PMI. You can apply to remove PMI from your monthly mortgage payments as soon as you pay down your principal balance below 80% of your home’s value. In fact, it disappears automatically when you reach 78% of your original home valuation.
No Loan Limits. Higher-income borrowers can borrow money to buy expensive homes that exceed the limits on government-backed mortgages.
Second Homes & Investment Properties Allowed. You can borrow a conventional loan to buy a second home or an investment property. Those types of properties aren’t eligible for the FHA, VA, or USDA loan programs.
No Program-Specific Fees. Some government-backed loan programs charge fees, such as FHA’s up-front mortgage insurance premium fee.
More Loan Choices. Government-backed loan programs tend to be more restrictive. Conventional loans allow plenty of options among loan programs, at least for qualified borrowers with high credit scores.
Cons of Conventional Home Loans
Make sure you also understand the downsides of conventional loans however, before committing to one for the next few decades.
Less Flexibility on Credit. Conventional mortgages represent private markets at work, with no direct government subsidies. That makes them a great choice for people who qualify for loans on their own merits but infeasible for borrowers with bad credit.
Less Flexibility on DTI. Likewise, conventional loans come with lower DTI limits than government loan programs.
Less Flexibility on Bankruptcies & Foreclosures. Conventional lenders prohibit bankruptcies and foreclosures within a certain number of years. Government loan programs may allow them sooner.
Conventional Mortgage vs. Government Loans
Government agency loans include FHA loans, VA loans, and USDA loans. All of these loans are taxpayer-subsidized and serve specific groups of people.
If you fall into one of those groups, you should consider government-backed loans instead of conventional mortgages.
Conventional Loan vs. VA Loan
One of the perks of serving in the armed forces is that you qualify for a subsidized VA loan. If you qualify for a VA loan, it usually makes sense to take it.
In particular, VA loans offer a famous 0% down payment option. They also come with no PMI, no prepayment penalty, and relatively lenient underwriting. Read more about the pros and cons of VA loans if you qualify for one.
Conventional Loan vs. FHA Loan
The Federal Housing Administration created FHA loans to help lower-income, lower-credit Americans achieve homeownership.
Most notably, FHA loans come with a generous 96.5% LTV for borrowers with credit scores as low as 580. That’s a 3.5% down payment. Even borrowers with credit scores between 500 to 579 qualify for just 10% down.
However, even with taxpayer subsidies, FHA loans come with some downsides. The underwriting is stringent, and you can’t remove the mortgage insurance premium from your monthly payments, even after paying your loan balance below 80% of your home value.
Consider the pros and cons of FHA loans carefully before proceeding, but know that if you don’t qualify for conventional loans, you might not have any other borrowing options.
Conventional Loan vs. USDA Loan
As you might have guessed, USDA loans are designed for rural communities.
Like VA loans, USDA loans have a famous 0% down payment option. They also allow plenty of wiggle room for imperfect credit scores, and even borrowers with scores under 580 sometimes qualify.
But they also come with geographical restrictions. You can only take out USDA loans in specific areas, generally far from big cities. Read up on USDA loans for more details.
Conventional Mortgage Loan FAQs
Mortgage loans are complex, and carry the weight of hundreds of thousands of dollars in getting your decision right. The most common questions about conventional loans include the following topics.
What Are the Interest Rates for Conventional Loan?
Interest rates change day to day based on both benchmark interest rates like the LIBOR and Fed funds rate. They can also change based on market conditions.
Market fluctuations aside, your own qualifications also impact your quoted interest rate. If your credit score is 800, you pay far less in interest than an otherwise similar borrower with a credit score of 650. Your job stability and assets also impact your quoted rate.
Finally, you can often secure a lower interest rate by negotiating. Shop around, find the best offers, and play lenders against one another to lock in the best rate.
What Documents Do You Need for a Conventional Loan?
At a minimum, you’ll need the following documents for a conventional loan:
Identification. This includes government-issued photo ID and possibly your Social Security card.
Proof of Income. For W2 employees, this typically means two months’ pay stubs and two years’ tax returns. Self-employed borrowers must submit detailed documentation from their business to prove their income.
Proof of Assets. This includes your bank statements, brokerage account statements, retirement account statements, real estate ownership documents, and other documentation supporting your net worth.
Proof of Debt Balances. You may also need to provide statements from other creditors, such as credit cards or student loans.
This is just the start. Expect your underwriter to ask you for additional documentation before you close.
What Credit Score Do You Need for a Conventional Loan?
At a bare minimum, you should have a credit score over 620. But expect more scrutiny if your score falls under 700 or if you have a previous bankruptcy or foreclosure on your record.
Improve your credit score as much as possible before applying for a mortgage loan.
How Much Is a Conventional Loan Down Payment?
Your down payment depends on the loan program. In turn, your options for loan programs depend on your credit history, income, and other factors such as the desired loan balance.
Expect to put down a minimum of 3%. More likely, you’ll need to put down 10 to 20%, and perhaps more still.
What Types of Property Can You Buy With a Conventional Loan?
You can use conventional loans to finance properties with up to four units. That includes not just primary residences but also second homes and investment properties.
Do You Need an Appraisal for a Conventional Loan?
Yes, all conventional loans require an appraisal. The lender will order the appraisal report from an appraiser they know and trust, and the appraisal usually requires payment up front from you.
Final Word
The higher your credit score, the more options you’ll have when you shop around for mortgages.
If you qualify for a VA loan or USDA loan, they may offer a lower interest rate or fees. But when the choice comes down to FHA loans or conventional loans, you’ll likely find a better deal among the latter — if you qualify for them.
Finally, price out both interest rates and closing costs when shopping around for the best mortgage. Don’t be afraid to negotiate on both.
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G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.
Do you ever wonder why it’s so hard to save money — even when you’ve cut the cable and the meals out, and you’ve never even had a latte habit?
One reason it’s so hard to save is that your fixed expenses — the ones that stay the same each month, like your rent or mortgage, car payment, property taxes and insurance premiums — tend to be your biggest bills. These aren’t exactly easy to reduce. Sure, you could lower your rent by moving to a smaller place, but moving itself is also expensive.
We don’t have a magic money-saving trick that will send your bank account balance soaring, but there are plenty of small ways you can scale back. And the little things do add up. Read on if you’re ready to start saving.
How to Start Saving: Set Your Goals First
We get that making a budget ranks right up there with a dentist appointment or trip to the DMV in terms of things you’d rather do. But it’s your essential first step when you want to start saving money.
Fortunately, the best budgeting apps make it easy to keep track of your spending and identify areas where you can cut back. Just be sure to comb through several months’ worth of expenses to get a true sense of where your money is going. Don’t forget about the expenses you don’t encounter every month, like holiday gifts and car registration.
If you don’t set goals, the only thing that budget will do is make you feel terrible about just how little money you’re saving. To get motivated to make saving a priority, spell out why you’re saving.
Think about the short-term goals you’re hoping to accomplish within the next year or two. Building an emergency fund for your family, making a down payment on a home or saving for a vacation may fit in here. Also consider your long-term goals, like putting more money in a 529 plan for your child or saving for retirement.
25 Tips for How to Save Money — Even When Times Are Tight
Here are 25 ideas for saving more money. The good news is that there’s no one thing you have to cut out. If it really matters to you, go ahead and keep spending on it. You can find other things to eliminate that won’t cause too much pain.
1. Time your purchases like a pro.
You may not be able to time a car repair or vet bill, but with discretionary purchases, knowing when to get the best deals can mean big savings. Need a TV? Wait until January, when last year’s models are discounted to make room for the new ones. Looking for new furniture? Retailers often clear out their stock around Independence Day, making July prime time for scoring cheap furniture.
Robin Hartill scored a free birthday sub she got from Jersey Mike’s Subs in St. Petersburg, Fla. Tina Russell/ The Penny Hoarder
2. Master the art of getting stuff for free.
Becoming a hermit isn’t the only way to save money. There are plenty of ways to get free stuff or have fun on the cheap. Some of our favorite ideas:
Use Facebook and Nextdoor. Before you shell out for things like furniture or baby gear, check out buy- nothing groups on platforms like Facebook and Nextdoor to see if one of your neighbors is looking to get rid of something similar.
Score free food by downloading an app. Plenty of restaurant chains offer freebies or BOGO deals for downloading their apps. You can always delete them after you take advantage if you don’t want temptation at your fingertips.
Get free stuff just for being born. You can score tons of birthday freebies if your big day is coming up — often not just on your actual birthday, but any time during your birth month.
Check out your local library for free entertainment. Your library card isn’t just a pass to check out books made from dead trees. Plenty of free library apps allow you to access ebooks, movies, music and more without paying a cent.
Swap goods or services with someone else. Learning how to barter can help you get what you need without spending money.
3. Smash your credit card debt once and for all.
The average APR for people who carry credit card debt is well over 16%. Your bank jumps for joy when you don’t pay off your balance because it’s getting rich off all that interest. Quit padding your bank’s coffers and break up with your credit card debt forever. Some tactics to try:
The debt snowball method, where you attack the smallest balance first.
The debt avalanche method, where you focus on the card with the highest interest rate.
A debt consolidation loan, where you merge your debts into a single payment. This is only a good option if you’re lowering your interest rates.
A balance-transfer credit card, where you transfer your balances to a card with a 0% promotional interest rate. That zero-interest period typically only lasts 12 to 18 months, though, so this approach is best if you don’t have tons of debt.
4. Flex interest rates to your advantage.
Although they may be on the rise, interest rates are still low, especially if you haven’t refinanced your mortgage in a number of years. One good rule of thumb: Refinance when you can lower your interest rate by 1 percentage point or more, since you’ll have to pay closing costs.
5. Lower your student loan payments.
If you’re struggling to pay off student loans, take advantage of the freeze on interest and payments during the forbearance period to talk to your servicers about whether an income-driven repayment plan is an option for your federal loans. These plans will stretch out your repayment over the standard 10-to-20 years — and if you still have a balance after 20 years, it will be forgiven, though you’ll still owe income taxes. If you have private student loans, check with your servicers about whether there’s a way to lower your debt payments.
To save time and money on eating out, Shane and Melissa Courtney prepare their lunches and dinners in their Tampa home. They shop at a local farmers market and use cheaper vegetables like cabbage. They also buy bulk items like rice noodles from Amazon. Chris Zuppa/The Penny Hoarder
6. Do meal prep. Don’t go overboard.
Grocery stores play all kinds of sneaky mind games with you, and you’re most vulnerable if you shop while you’re harried and hangry. A great way to combat their money-snatching tactics is to make a shopping list and devote a few hours to meal prep every week.
But don’t get too ambitious here. If you’re an UberEats addict whose pantry consists of three spices, you’re setting yourself up for failure if you plan to cook 21 meals a week. Start with a more reasonable goal, like making your own breakfast and lunch each day, plus dinner three nights a week.
Pro Tip
Only buy in bulk if you’re purchasing products that have a long shelf life or ingredients that you have enough freezer space to store for future recipes.
7. Squeeze every cent you can out of your employer.
We aren’t just talking about negotiating your salary and asking for a raise when you’ve earned it — though both are essential, albeit awkward. To build your long-term savings, make sure you’re not leaving free money on the table. Contribute enough to get your employer’s full retirement match if they offer a 401(k) plan. If you have a health savings account, take advantage of any matching contributions to that as well. You can use the money you save for your own expenses, your spouse’s or a dependent family member’s.
8. Got a raise? Congrats, but don’t spend it.
Do your tastes get fancier every time you get a raise? This phenomenon is called lifestyle inflation, and it’s a notorious savings killer. You don’t have to live like you’re on an entry-level salary forever, but make a plan for your future raises so your living expenses increase at a slower rate than your salary. For example, plan to save half of your next pay increase and sock the rest in savings.
9. Be skeptical when something seems like a deal.
Free shipping if you spend just another $11? Step away from the digital shopping cart. If you’re being coaxed into shelling out another few bucks for something that’s “free”… well, it really isn’t free.
Playing the credit card rewards game is another good example. Yes, you can score free airfare and cash back. But it’s only free if you don’t spend more to get those rewards, and if you pay your balance in full every month. Otherwise, you’ll shell out way more in interest than you’re getting in rewards.
Getty Images
10. Cancel automated purchases for non-necessities.
Curbing mindless spending isn’t just about cutting out late-night Amazon purchases and impulse grocery buys. You probably have monthly subscriptions and memberships that are draining your bank account each month for things you rarely, if ever, use.
One of the best ways to save money is to look carefully at gym memberships, streaming services, subscription boxes and anything else that you automatically pay for each month. If you haven’t used it in the past month, it probably belongs on the chopping block. Also be on the lookout for any free trials you forgot to cancel.
Pro Tip
Avoid storing your credit and debit card information on websites you frequently shop on. You’ll make it harder for yourself to spend mindlessly.
11. Find energy suckers that are driving up your electric bill.
No, we aren’t going to tell you to invest thousands of dollars on solar panels for your home as a way to save money on your electric bill. But there are a few inexpensive tricks that can help you save money on utilities. Simple things like regularly changing air filters and switching to more efficient light bulbs can make a big difference on energy costs.
12. Repair what’s broken instead of buying new.
Just because something’s broken doesn’t mean it’s destroyed. By learning some basic DIY techniques, you can make your lightly damaged goods like new again without shelling out for repairs. For instance, learning a few basic sewing stitches will help you repair your clothing for you and your family, even if you don’t have a sewing machine. There are plenty of ways to learn home repair skills for free online.
But for major repairs, know when to call a pro. It’s worth the cost when you’re repairing a big-ticket item or doing anything that could jeopardize your safety.
13. Save money on prescription drugs.
Whether you have health insurance or not, it often pays to do some detective work before filling your prescriptions. If you don’t have insurance, you can save up to 80% on generic medications and 40% on name-brand drugs through Amazon Pharmacy or find medications nearly at-cost at Mark Cuban’s Cost Plus Drug Company. Even if you have insurance, a prescription drug card could help you save money. You can ask your pharmacist to run the cost using your insurance and the card to find out which option is cheaper.
If a medication is expensive because you have to pay for it out of pocket or your insurance company puts it in a pricy tier, talk to your doctor or pharmacist. A lower-cost alternative may be available. For over-the-counter meds, always buy generic. The FDA requires generic drugs to be chemically identical to their more expensive name-brand counterparts.
14. Ditch your cell phone plan if you have a major carrier.
You don’t have to worry about spotty service when you switch to a discount cell phone plan. Most discount plans run on the network of one of the four major carriers, so the only thing you have to lose is your out-of-hand bill. Depending on the plan, you may have data restrictions. Some also require an unlocked device.
15. Find money you’ve long forgotten about.
Some money-saving strategies require a ridiculous amount of discipline. So here’s a super easy trick that could give you a quick savings boost in just three minutes. Find out if someone owes you money by searching your state’s unclaimed property website.
At least 1 in 10 Americans has missing money waiting to be claimed. You could find money from old security deposits or bank accounts, or even a life insurance policy you didn’t realize a loved one left you. The key to making a one-time windfall work for you is to use it purposefully. That can mean saving or investing your money, or putting it toward debt.
16. Get cash for switching banks.
Another way to get a quick cash infusion: Switch bank accounts. Some of the best bank promotions will give you $500 or more just for opening a new account. Just be sure to read the fine print, since a bank account with ridiculous fees or minimum balance requirements could cost you big.
17. Be strategic about your tax refund.
Some personal finance types will shame you for getting a big tax refund because you’re giving Uncle Sam an interest-free loan. We say, do whatever works for you. Opt to have less money withheld from your paycheck if you’ll actually save it or apply it toward debt. But if the idea of a giant tax refund motivates you, it’s OK to make the IRS play piggy bank. Just make a plan for how to spend your tax refund that will pay off in the long run. Some of our favorite ideas:
Put it in your savings account for an emergency or upcoming expense.
Pay down your highest-interest credit card.
Make an extra mortgage or car payment.
Give your Roth IRA a boost.
Put it in your child’s college fund.
Aileen Perilla/The Penny Hoarder
18. Travel by two wheels whenever possible.
Even if it’s not feasible to ditch your car, bike commuting a couple days a week can help you save money on obvious expenses, like gas and parking. But there’s a bonus here: When you’re on your bike, you can fit a lot less in your basket or backpack than you can in your car trunk. So if you have a habit of making extra trips to the grocery store or stopping for takeout on your way home, traveling by bike reduces the temptation.
19. Cancel the insurance you don’t need.
Insurance can seem like a money-sucker, because hopefully, you don’t need to use it very often. Having sufficient homeowner insurance or renters insurance, car insurance and medical insurance is one of the best ways to prevent an emergency from destroying your finances.
That said, some types of insurance are a waste of money. For example, you probably don’t need collision insurance or comprehensive insurance on a car that’s paid off if it’s older and one fender-bender away from scrapyard heaven. You may not want to shell out for accident insurance or critical illness insurance either, because the circumstances they’ll cover you for are so limited. Even life insurance may not be worth the cost if you’re single with no dependents.
Pro Tip
You can often get discounts on insurance by bundling your coverage. For example, you may save money by getting your car and renters insurance from the same company.
20. Do a no-spend challenge
Duh. It sounds so easy: To save money, just don’t spend it. But doing a no-spend challenge, where you commit to not spending any money over a certain period — be it a month, a week or even a single day — can help you reign in your spending.
Or you could try a modified version. Do a pantry challenge, where you avoid the grocery store and use the ingredients you have on hand to feed your family. Or build a capsule wardrobe, where you select a certain number of clothing items and make those your only wardrobe for the time frame of your choosing.
Students work on patients at the Dental Hygiene Clinic at St. Petersburg College in Pinellas Park, Fla. Chris Zuppa/The Penny Hoarder
21. Find discounted services at vocational schools
If you’re looking for ways to save money on expensive services, sometimes it pays to let a student practice on you. You can get services like beauty treatments, sonograms and massage therapy at steep discounts from local vocational schools. If you live near a university and you’re truly brave, you could even get low-cost dental work from a student dentist.
22. Get free or low-cost financial help
If you’re struggling to stick to your budget or keep your spending in check, it’s OK to ask for help. You don’t need to spend big bucks to work with a financial pro. Unlike financial planners and advisers, who often cater to people with a higher net worth, a financial counselor is trained to help regular people manage their money from day to day. Many offer their services at little to no cost through a bank, school or nonprofit, or they practice on their own and use a sliding scale based on your income.
23. Find ways to earn extra money.
There’s no way around this one: Even when you have a bare bones budget, sometimes saving money just isn’t possible. One reason is that your fixed costs, like your rent or mortgage, medical insurance and car payments are often your biggest expenses — and those are the hardest to lower.
If you’ve cut everything you can and still can’t save, it’s time to find ways to make extra money. Switching to a higher-paying job isn’t always realistic, but you can still take on a side hustle, find a work-from-home job you can do part time or make extra cash selling stuff online.
24. Find cheap ways to treat yourself.
Any successful savings plan has a little built-in flexibility so you can treat yourself from time to time. Rather than downing drinks at happy hour, buy yourself a good but cheap bottle of wine to enjoy at home. Have a DIY spa day using simple ingredients you probably have on hand. If you’ve been stuck at home for too long, you can refresh your home’s look without spending a dime.
25. Talk about your struggles and your successes.
One of the best ways to save money is to tell other people that you’re trying to save money. Doing so can help you prepare your friends and family for when they hear you say no to joining them when they suggest expensive plans.
But that’s not the only advantage. It’s easy to feel like you’re the only one who’s struggling to save money, especially when you scroll through Instagram. But you’re far from alone. Find other people who are trying to save money, either within your social circle or by connecting with a like-minded online community. You can swap tips for saving money and find encouragement when times are rough.
And when you reach your savings goals, no matter how big or small? Pay it forward. Talk about it. Let others know exactly how you managed to save money — and that they can do it, too.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. Send your tricky money questions to [email protected].
Often, the decision to take a pension annuity option over an available lump sum option rests on which option provides the greatest income. And that makes perfect sense if all of the other factors relating to this decision are excluded from the due diligence process.
But when considering all the factors that accompany this decision, whether to take a pension annuity option over an available lump sum option becomes more about control than it does the amount of the payment.
The Problems with Pensions
Today we are seeing fewer pensions than we did 20 years ago, and there is a reason for this downward trend. The truth is that pensions are facing systemic problems, which is why we see private sector companies replacing these defined benefit plans with defined contribution plans, such as 401(k)s.
There was a time when employees worked until they could no longer physically do their job, and when they retired they died shortly after. What we see today is employees retiring much sooner in the cycle and living longer, which translates to significantly higher pension costs that are simply unsustainable.
Speaking of sustainability, historically pensions have used 4.5% to 7.5% to calculate their projection of benefits and with interest rates far below this range, it goes a long way in improving the optics of the plans, but does very little to change their actual solvency.
Interest rates have been far below these percentages for decades and when you couple that fact with a projected 10-year benefit period you can see how the math appears great on paper. But the reality is that if someone retires in their 50s (which is most often the case when a pension is involved) and live well into their 70s and 80s, you can see that 10-year estimates are short of reality.
Nearly 1 million working and retired Americans are currently covered by pension plans that are in imminent danger of insolvency, according to a 2017 Daily News article.
So, what happens if a pension is unable to pay its promised benefits? According to The Heritage Foundation, the Pension Benefit Guaranty Corporation (PBGC), which is similar to the FDIC, found that for a promised benefit of $24,000 a year, they are insured only up to $12,870.
To compound the problem, this insurance has the same problem as the FDIC. The FDIC has billions in reserves but has exposure to trillions of dollars in banks accounts. The same issue exists within the PBGC. The promise of insurance benefits is not mathematically supported. If PBGC goes insolvent, that $12,870 promise is really only able to cover $1,500 under the insurance benefit.
The concern here is that when you retire and are relying on an annuity payment from a pension, you are placing a lot of trust in the pension calculations. And if the calculations are off, there is not enough insurance to recover the loss.
A Lump Sum Gives You More Control of Your Assets
I began this article by suggesting that the decision to take a pension annuity payment over an available lump sum option often rests on which option provides the greatest income. But when you add it all up, the decision to accept a lump sum offer is more about controlling and preserving your future income sources than it is the annuity payment you are promised from the pension.
Now, I am not suggesting that all pensions are destined to go broke, but there should be consideration for this possibility when structuring your income sources that are designed to sustain you for the rest of your life.
By accepting a lump sum from the pension, you gain the control over your income assets. Even if the income generated from the lump sum is less than the promised annuity payment from the pension, you gain control over the assets.
Even without the risk of a default, this lump sum option is a significant factor when you consider the following:
Your income needs can fluctuate in retirement, and the control of the assets backing your income gives you flexibility to meet your income needs.
You’re in a better position to take care of your spouse if you were to predecease them by owning the assets and leaving them behind for your spouse to continue to receive income.
Your heirs can be the beneficiary of the assets after you and your spouse pass when a pension is guaranteed to disinherits your heirs since it doesn’t pass to your children. In some cases, a child could receive a vested portion of the pension not already paid out.
You have access to the assets if there comes a time in your life when you may need cash, and having control over the assets grants you that option.
If You Must Go with an Annuity, Single-Life Option Gives You More Control
Of course, not all pensions have a lump sum option, which means you have no choice but to accept an annuity payment. If that is you, there are a few things to consider before selecting your irrevocable annuity option.
As with a lump sum, the idea is to move as much into your control as possible. It can be tempting to accept a reduced benefit to support a spouse or loved one after your passing, but this option only hands more control over to the pension.
A single-life annuity option is often your highest monthly benefit, and it is the quickest way to get the most from the pension in the shortest period of time. The downside to electing this option is that it can leave your spouse with an income shortage because payments would stop after your passing. That is why if you are married and choose to make this election, your spouse must sign off on that decision.
So, you have two options to protect your spouse:
You can buy insurance outside of the pension. With this option you would accept the single-life benefit, taking the highest annuity payment and then paying a premium to an insurance contract that would pay a lump sum to the surviving spouse or children if you predecease them. This approach also gives you the flexibility of canceling the policy if circumstances change and the benefit is no longer needed.
Or you can buy insurance through the pension. In this case you would go for a joint-and-survivor annuity, electing to take a reduced annuity payment in exchange for the benefit to continue to your spouse if you were to predecease them. Essentially, you are paying for the insurance with your lower benefit amount. It is worth mentioning that this benefit only has one beneficiary, so it would disinherit the children if you choose this option.
The Hidden Costs of a Joint-and-Survivor Benefit
One important factor when going with a joint-and-survivor annuity is the cost of buying the insurance through the pension. Of course, you have premiums in either scenario but when purchased within a pension there are unique circumstances that most people completely overlook. If your pension has a cost-of-living adjustment built into it, you should recognize that because a joint-and-survivor benefit is lower, it will receive a smaller cost-of-living increase than a single-life benefit would, which means that the difference between what the maximum benefit and the reduced benefit would be compounds over time. That translates to an ever-increasing cost for the insurance against inflation.
A quick example of this: Say you have a maximum benefit of $5,000 per month with a single-life annuity, and a reduced benefit $4,000 per month with a joint-and-survivor annuity. That leaves you with a monthly cost for the insurance of $1,000 per month. When you factor in a cost-of-living adjustment of 3%, that is 3% on the benefit being received. So 3% on $5,000 would be $150, whereas 3% on $4,000 would be $120, a difference of $30 per month. This income gap compounds over time. Projected out over 20 years, the gap grows to over $1,800 per month.
And if that wasn’t enough of a reason to not buy the insurance from the pension, consider the fact that the longer the pension recipient lives, the fewer years the spouse is receiving the insurance from the pension. When you think about this, buying the insurance from the pension means that you are accepting an arrangement where you are paying an ever-increasing monthly premium for a decreasing benefit.
And unlike a life insurance policy purchased outside of the pension system, this pension insurance for the spouse only extends to your spouse, unless you were to choose a child as the beneficiary.
Be Careful
Now, if you go with a single-life annuity and choose to purchase the insurance outside of the pension system, it is critical that the type of policy you purchase and the amount of insurance obtained are in alignment with what you need to protect your family. One misstep in this process can leave your policy at risk of lapsing or expiring, leaving your spouse vulnerable to a significant income gap.
To download my free guide that will take you through the process of determining benefits and the type of life insurance best suited for protecting the benefits, visit www.thepensionelectionguide.com.
Benefits and guarantees are based on the claims paying ability of the insurance company.
Securities offered through Kalos Capital Inc., Member FINRA/SIPC/MSRB and investment advisory services offered through Kalos Management Inc., an SEC registered Investment Advisor, both located at 11525 Park Wood Circle, Alpharetta, GA 30005. Kalos Capital Inc. and Kalos Management Inc. do not provide tax or legal advice. Skrobonja Financial Group LLC and Skrobonja Insurance Services LLC are not an affiliate or subsidiary of Kalos Capital Inc. or Kalos Management Inc.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Founder & President, Skrobonja Financial Group LLC
Brian Skrobonja is an author, blogger, podcaster and speaker. He is the founder of St. Louis Mo.-based wealth management firm Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 by Forbes. In 2017, 2019, 2020, 2021 and 2022 Brian was awarded Best Wealth Manager, in 2021 received Best in business and the Future 50 in 2018 from St. Louis Small Business.
Even if your real retirement is years away, you’ve already had some practice.
That came during the pandemic lockdown and into its aftermath, when many of us were tucked away at home, working remotely. Except for the part where you’re actually working and getting a full paycheck, this is similar to what life is like for many retirees.
So ask yourself: How did your spending fare on that retirement test drive?
Before you can determine how much you will need to save for a fulfilling retirement, you first need to know how much you will spend in retirement. You’ll also need to factor in soaring prices on everything from gas to groceries. Sure, inflation affects everyone, but it could hurt more in retirement when your income will probably be lower.
Financial planners have estimated that retirees need 80% or more of preretirement income to maintain their standard of living, though individual situations vary greatly. Another data point that correlates: According to the Bureau of Labor Statistics’ annual survey on consumer spending, the average retired household spends 25% less than the average working household each year.
That said, some items to do stand out in a retired household, including big-ticket expenses such as health care and travel. Here’s a look at 10 budget categories where retirees are likely to spend moreand some tips on keeping costs in check.
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You’ll Spend More on Travel in Retirement
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Most retirees put “travel” at the top of the list of things to do more of in their post-work years.
Maybe you plan to set off on a cruise or two. Or perhaps you simply want to pack up your car for weekend getaways with your grandkids. Either way, you may find yourself spending more on travel in retirement than you bargained for. The customer-starved travel industry is eager to get retirees back on the boat, bus, train – or into an RV.
While overall transportation expenses decline throughout retirement, many retirees take the kind of trips they could only dream about while working full time. For instance, compared with their working peers, retirees were choosing (at least, before the pandemic) longer cruises and cruises that visit more destinations, according to travel experts.
Deborah L. Meyer, a Certified Financial Planner and founder of fiduciary advisory firm WorthyNest, recommends a five-step plan for pre-retirees looking to turn these dreams into reality, :
Assign specific cost estimates to travel goals
Break the big savings goal into monthly or quarterly allocations to savings
Adjust income and expenses to make room for the regular savings
Don’t compromise on future goals (that is, beyond the trip)
Act on achieved goals
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You’ll Spend More on Health Care in Retirement
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It’s a blast to kick back and make big travel plans in retirement. Less fun: The reality that we spend more on medical care after we retire – and that those costs keep increasing as we age.
The Employee Benefit Research Institute found that the percentage of a household’s total spending on health care increases from 8% in preretirement households to up to 13% by the time a household is past the age of 85. A similar finding turns up in a survey by the Employee Benefit Research Council.
Unpredictable and costly new diagnoses and hospitalizations drive much of the increase inhealth care spending for the average retired household, but overall spending rises for general health needs, health insurance, prescription medication, medical supplies and medical services as well. As the National Council on Aging reports, 84% of people 65 and plus have at least one chronic condition.
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You’ll Spend More on Utilities in Retirement
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If you noticed your utility bills spike while you were working remotely, welcome to another reality of retirement.
The average retired household spends more each year on utilities than the average working household, according to the Urban Institute. Why? If retirees are home more often, they’re simply using utilities more. If you’ve seen a bump in your bills – gas, electric, water and sewer, cable and streaming services – think of it as a precursor. On the plus side, chances are you’ll have finished paying off your mortgage (or come pretty close) when you reach retirement age. That means you’ll be saving thousands each year.
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You’ll Spend More on Moving and Relocating in Retirement
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Empty-nesters tend to take flight in retirement. Downsizing that multi-bedroom home for smaller living quarters, and ones that may be more elderly friendly, is an obvious strategy that could save money in the long run. For the most part, that’s true. But the move-out process can set you back thousands of dollars.
Take it from experience. My wife and I recently moved into our “retirement” home and community. I put retirement is in quotes because we haven’t actually left our jobs. But the right house in the right city popped up on our radar at the right time and we went for it. Fortunately, we’re still working and were able to cover the thousands of dollars in related expenses:
Getting one home ready to sell
Listing our existing house
Buying a new home
Settlement and moving costs
Not to mention upgrading appliances, new lighting, window treatments, and all the other tweaks you’ll do to a new living space.
According to Mike Palmer, a certified financial planner with Ark Royal Wealth Management in North Carolina, downsizing in full retirement can present huge unexpected costs for some of his clients, particularly when they want to stay within urban areas. “I see a lot of folks thinking they’re going to walk away with $200,000 [by downsizing], but that’s rare. In most cases, it will be lateral,” he says. To avoid this, he recommends trying to move from an urban area to a more rural one.
It can be nearly impossible to predict every moving expense as it comes, but Squared Away can help: It offers a calculator that estimates what you’ll spend.
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You’ll Spend More on Fitness in Retirement
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Research indicates that retirement itself is a motivator to get fit. With a flexible schedule free of commuting and the stress of a busy work week, many retirees drop unhealthy habits and pick up healthier ones, raising their spending on gym memberships and fitness classes and equipment (a new bicycle, perhaps?)
Approximately 53% of retired Americans participate in physical activity and allocate about 13% of their annual spending to fitness and leisure activities. Because of this, Fung Global Retail & Technology says that the fitness industry is starting to cater to seniors as well, offering more specific (and pricey) gym options for aging populations. (See Gyms for Older Exercisers.)
Marguerita Cheng, the chief executive officer of Blue Ocean Global Wealth, says that fitness is one of the biggest new expenses she sees her retired clients take on. For her clients, she says, it is often the fear of declining health as they age that motivates them to take fitness seriously. Some of her clients put so much time and money into fitness that they schedule meetings with her around their yoga or spinning classes.
You may have a workaround to gym costs: Some Medicare Advantage plans have a free gym membership as part of their benefits.
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You’ll Spend More on Day-to-Day Expenses in Retirement
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As they transition into retirement, many people’s lives aren’t radically altered. They may still drive to meet with friends or associates, grab coffee from around the corner, or use their laptop do work from the comfort of their couch. What often does change after leaving the workforce, however, is who picks up the bill for a lot of the small stuff — lunches, parking, dinners, concert tickets. In short, so long, expensing!
“Small-business owners and professionals who retire are often surprised at how many of their expenses were picked up by their company,” says Bert Whitehead, president of Cambridge Connection, in Franklin, Mich. “It is a jolt when they discover how much it adds up to.”
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You’ll Spend More on Debt in Retirement
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Retirees are especially vulnerable to accumulating debt and subsequent interest. Although the average debt ballooned across all age groups between 1989 and today, older retirees were by far the hardest hit. According to a study from the National Council on Aging, the average debt held by people 65 and older keeps climbing. The total median debt for those 65 and up in 2016 (the latest year available) was $31,300. That’s 2½ times more than what it was in 2001.
Credit cards with high interest rates carry the greatest risk to retirement security. According to the research and advocacy group Demos, roughly half of those older than 50 reported using credit cards to pay medical expenses, as well as groceries, utilities and even rent.
If bills are beginning to pile up, don’t hesitate to ask for help. Focus on paying off the cards with the highest rates first, and consider consolidating your balances on a card offering a 0% interest rate if it will take more than a few months to pay off each card.
The National Council on Aging also offers tips for seniors to manage debt.
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You’ll Spend More on Charitable Giving in Retirement
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Americans age 65 and up, even with their reduced income, contribute almost 11% more to religious, educational, charitable and political organizations than people from 55 to 64. Retirees age 75 and older donate even more, on average.
Part of this phenomenon is psychological. Researchers have found that older adults take more pleasure in charitable donations than their younger counterparts. On the other hand, older retirees may have less control over their finances than they realize. A diminished capacity for financial decision-making in retirement is “extremely common,” says Daniel Marson, a neurology professor at the University of Alabama at Birmingham. “In fact, I might say it’s inevitable.”
While many retirees have no problem managing their money into old age, it never hurts to have a trusted family member keep an eye on things. Services such as EverSafe, for example, allow a designated family member to monitor a retiree’s finances and get alerts in case of excessive withdrawals, changes in spending patterns and other unusual activity—all without the retiree losing control of their money.
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You’ll Spend More on Reading in Retirement
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Before retirement, the average household spends $101 each year on reading. Yes, it’s a category tracked by the Bureau of Labor Statistics that includes the cost of books and audiobooks, as well as devices such as a Kindle. In retirement, the average household spends $173 each year, a 73% increase.
A greater number of subscriptions to newspapers, magazines and audiobook services—the result of a more flexible schedule—accounts for some of the increase.
How do you cut those expenses? Try your local library for free hardcover books, audiobooks, magazines and, increasingly, online access to streaming services.
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You’ll Spend More on Financial Planning in Retirement
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If you’re entering retirement with accumulated wealth, that’s great. You may have done so with guidance from a financial planner, but then again, maybe you’ve had good luck along with regular 401(k) contributions using some sort of robo-adviser service.
But remember, the more wealth you’ve collected, however, the more elbow grease it’ll take to manage that money and make it work for you. That’s where financial planners come in. Their services can be invaluable, but they’re not free. Depending on the management style you prefer, figuring out what to do with your money can become an expense in its own right.
Fee-only planners may charge a flat annual retainer (which could run a few thousand dollars or more), or they may charge on an hourly basis (often from $100 to $250 per hour), by the project (from $1,000 up to $10,000 for a comprehensive plan) or, if they’re managing your investments, as a percentage of assets (from about 0.5% to 1.25% of your investable assets). Or they may use some combination of those billing models.
In a recent survey of financial planning firms, Fidelity found that 23% of all clients were older than 70, and they held as much as 28% of total assets. According to AARP, retirees should continue to use financial planners to assist with relocating, with managing new medical expenses and to address changing financial needs.
An 8% rental property mortgage may have seemed like a great deal 15 years ago. But rates have dropped like a rock, and your investment property’s kitchen and bathroom have seen better days.
Should you sell and start over? Not if you’re willing to refinance your mortgage.
Borrowers refinance their mortgages all the time, for many reasons. While you shouldn’t do it lightly, given all the costs involved, it serves as a viable option in your property owner toolkit.
How to Refinance Rental and Investment Properties
If you’re ready for a change in your rental property mortgage, follow these steps to make it happen.
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1. Gather Your Documents
Like any mortgage, investment property loans come with huge paperwork requirements.
Plan on providing the following documents along with your initial loan application:
Government-issued photo ID
Property insurance declaration page
Current mortgage statement
Proof of income — typically two years’ tax returns or two months’ pay stubs, though some lenders don’t require income verification from investment property owners
Current bank account statements
Current brokerage account statements, including retirement accounts
Business profit and loss statements, if applicable
If the property is rented, a rental lease contract
LLC or other legal entity documents, including articles of organization, operating agreement, and EIN, if applicable
If required in the property’s jurisdiction, the rental property registration
Note that the requirements vary depending on the type of lender. If you approach a traditional mortgage lender — the kind that mostly writes mortgages for homeowners — expect them to ask for more paperwork. Expect the process to take longer as well.
Portfolio lenders, who keep the loans on their own books and often double as hard money lenders, require less documentation. In most cases, these lenders don’t require income documentation. Instead, they review the rent you collect and use a formula called Debt-Service Coverage Ratio (DSCR) to estimate your future cash flow.
Lenders calculate DSCR by dividing the monthly rent by the monthly principal, interest, taxes, insurance and association dues (PITIA). In general, they consider a DSCR above 1.2 as solid. Portfolio lenders use this metric rather than debt-to-income ratios (DTI).
2. Apply
Contact several lenders to start shopping around, comparing interest rates, points, and flat “junk” fees.
Bear in mind that most conventional mortgage loan programs allow a maximum of only four mortgages reporting on your credit history. That limits their usefulness for your first few properties, at most.
Portfolio lenders don’t typically place these caps, or report to the credit bureaus at all for that matter. In fact, they tend to lower their pricing for more experienced real estate investors. Check out Visio, Kiavi, and LendingOne as good examples of portfolio lenders.
While portfolio lenders often don’t require income documentation, they do still check your credit report. Pull your own credit report before applying, and get verbal pricing quotes when shopping around. Allow only your final choice lender to pull your credit report.
3. Lock In Your Interest Rate
Once you’ve chosen a lender, submit your full application with all documentation, and lock in your interest rate. The lender will then provide you with a written confirmation of your loan pricing, known as a Good Faith Estimate.
Your loan estimate is usually good for settlements within the next 30 days. Don’t give them any excuses to delay your loan beyond that 30-day window. Always respond to their requests for more documents immediately.
4. Go Through Underwriting
After you send your loan officer the completed loan application along with all the initial documents they requested, the loan officer typically orders an appraisal. Your loan file goes to a processor who organizes it and flags any missing information for the loan officer to ask you about.
When the appraisal and all other documentation is in your file, it goes to underwriting for risk review. Underwriters confirm that your loan represents an acceptable risk for the lender. Expect them to ask for additional documentation during the process and to review the property appraisal with a fine tooth comb.
If they feel comfortable with the loan’s risk profile, they approve it for settlement, and the loan officer contacts you to schedule a closing date.
5. Close on Your New Loan
As a real estate investor, you’ve sat through settlements before. And you know how cramped your hand gets by the hundredth signature.
Ask for a final settlement statement the day before closing. Review every single line carefully, particularly the fees. Do they align with the initial Good Faith Estimate document that the lender gave you? If not, what has changed? The new document should clearly spell out any deviations.
Also, double check that the title company didn’t collect money for property taxes or water bills that you already paid.
Mortgage Refinancing Requirements
To begin with, lenders cap the percentage of the property value that they lend you. They refer to this as loan-to-value ratio or LTV. If your property is worth $200,000, and they limit your LTV to 80%, that means the most they’ll lend you is $160,000.
For refinances, lenders determine property value based on the appraised value. For purchases, it’s the lower of either the purchase price or the appraised value.
Lenders also want to confirm you’ll still earn positive cash flow on the rental property, calculating DSCR.
Credit matters too, whether you borrow from a conventional lender or a portfolio lender. Expect higher minimum credit scores for investment property loans than for home mortgages. I know a few lenders who will go as low as 600 or 620, such as Civic Financial, but most require a minimum score of 660 or 680.
Finally, most lenders require you to have plenty of cash reserves at settlement. The industry standard is six months’ mortgage payments, although some lenders allow less, and a few require more.
Reasons to Refinance Your Rental Property
As a general rule, I discourage investors from refinancing their properties. It restarts your amortization schedule at Square 1, extends your debt horizon into the future, and costs you thousands of dollars in closing costs.
Still, there are times when it makes sense to refinance a rental property. Here are a few of the most common reasons why landlords refinance.
1. Lower Your Mortgage Rate
If you took out a mortgage when you had bad credit or when interest rates were far higher than today, you may now be able to refinance at a much lower rate. That could in turn boost your monthly cash flow or at least allow you to break even after pulling cash out of the property.
Calculate how long it would take you to recover the money you spent on closing costs with your interest savings. For example, if refinancing would cost you $4,000 in closing costs, and your new lower monthly payment saves you $100, it would take you 40 months to break even on the refinance.
Better yet, add together the entire life-of-loan interest for the mortgage refinance and all closing costs. Compare that number to the remaining interest due on your current mortgage. That’s the real apples-to-apples comparison, and you may just find that your current mortgage will cost you less in remaining interest than the combined interest and fees on a refinance.
2. Change Your Loan Term
If you initially bought your investment property with a 15-year mortgage, the property’s cash flow might not be as nice as anticipated. Most non-landlords don’t realize how many expenses landlords incur, from repairs and maintenance to vacancy rate to property management costs.
So, some landlords refinance their 15-year loan to a 30-year fixed mortgage to push their annual cash flow above water and stop losing money each year.
If you bought your property with a 30-year mortgage and are thinking about refinancing to a 15-year mortgage to pay it off faster, don’t. Just pay more each month toward your existing loan’s principal. You can also try these other tactics to pay off your mortgage early.
3. Convert an ARM into a Fixed-Rate Loan
Mortgage lenders prefer to lend adjustable-rate mortgages (ARMs) rather than fixed-interest loans. It gives them better protection against future changes in interest rates while creating an incentive for borrowers to refinance.
If you took out an ARM when you initially bought the property and the initially fixed interest rate is about to switch over to adjustable, consider refinancing to a fixed interest rate mortgage. Unless rates have fallen significantly since you bought the property, your new rate is likely to be higher than the old one.
4. Cash Out Home Equity
Investors often like to pull equity out of their properties and put it to use in other investments.
Most commonly, they pull out equity to put toward a down payment on a new investment property. That enables them to keep growing their real estate portfolios — and their monthly cash flow.
But property owners can also tap equity to fund renovations, either at the property being refinanced or another investment property. For that matter, they can put it toward some other type of investment, from stocks to real estate crowdfunding to real estate syndications. After all, if you can borrow money at 5% and invest it at 10% — the historical average of U.S. stock returns — it makes a winning strategy in the long run.
In fact, some investors cash out their equity rather than ever selling property. If you’ve already paid off the property in full, and you want an influx of cash, you could sell — but then you’d lose the asset. A cash-out refinance could be a more attractive alternative that allows you to keep the asset while earning monthly rental income.
5. Repay Investors
If you borrowed money from friends, family, or other private investors to fund your down payment, you’re likely to have a shorter repayment period than if you’d borrowed from a bank. When it comes time to pay them back, you might need to refinance the property to do so.
You can avoid this by funneling all of your monthly cash flow to these private investors before their loan is due. With diligence and a little luck, you can pay them back in full without having to spend thousands on refinancing.
Final Word
As you explore creative financing options for investment properties, don’t forget that you can use primary residence financing in house hacking.
For example, say you buy a fourplex and move into one unit while renting out the other three. You take out a conforming loan with a far lower interest rate than you’d pay on a rental property loan. You make a 3% to 10% down payment with a Fannie Mae or FHA loan, rather than a 20% to 30% down payment.
After one year, you can move out of the property without violating the terms of your mortgage. Then you can do it all over again, quickly building a leveraged portfolio of real estate investment properties.
Yes, you pay a little money in private mortgage insurance (PMI). But as soon as you reach 80% LTV on your mortgage balance, you can remove it.
Just beware that the mortgage limit still applies, so you can probably only do this with up to four properties. After that, you’ll need to use investment property mortgages to finance your rentals.
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G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.