Your broker might not have your best interest in mind when they make recommendations to you.
In fact, brokers can legally put their interests ahead of yours.
Did you catch that?
Translated that means that your broker can get a speeding ticket for going 75 mph on the interstate, but won’t get punished for selling you a crap investment that makes them a bunch of money.
This is because most brokers operate under what’s called the suitability standard, which simply means the securities they recommend must be appropriate for you given your financial profile; however, many of the securities that can be considered suitable may be far from the best investment options available at a particular time.
How do you like them apples?
You may be surprised to learn that brokers working under the suitability standard are not legally obligated to find the best prices or the best investment options available at a particular time. As a result, your broker may offer you securities that provide lower returns and carry more significant risks than other alternatives as this may be more profitable for the broker. The suitability standard can apply to brokers that sell insurance, stocks, annuities, or other investment types.
1. Brokers Make Money Even if You Don’t.
This is because of the commissions-based compensation model presently used by many brokerage firms. Let’s say your broker convinces you to buy into XYZ stock at $50 per share. If the price subsequently increases to $60, than your broker may call you and advise you to buy more of the same security because of the 20% appreciation in price. This transaction would then generate a commission for your broker.
On the other hand, let’s say that the same investment in XYZ stock instead dropped to $40 per share. In this case the same broker might call you and still tell you to buy more of the same security because it is now less expensive than it once was and should therefore be considered a bargain. This transaction would also generate a commission for your broker.
Great for them. Not so much for you.
As you can see your broker’s success can have little relation to your own. This represents a misalignment of interests that may cause your broker to benefit at your expense.
2. High commissions are a good thing right?
Brokers may choose to offer you only those investments which pay the highest commissions. To illustrate this point let’s consider another example. Let’s say that investment 1 is the best investment for you, but it offers no commissions to your broker.
On the other hand investment 2 is a worse investment, which pays 5% commission. Under the suitability standard your broker is not obligated to offer you investment 1 and may instead sell you investment 2 in order to collect the commission on the transaction. This conflict of interest is currently permitted under the suitability standard, which is applicable to many brokerage firms.
Isn’t that special?
3. Looks good on paper.
Your broker may sell you an investments that is illiquid or highly risky. This is due to the fact that brokers are often associated with particular issuers of securities or certain investment companies.
As a result they may be limited to offering only the proprietary products sold by their affiliates even though other more attractive investment options may be available in the market. They may also be restricted to particular list of securities and may be compensated to offer one investment over another at any time.
One of the worst examples that I witnessed this was with a portfolio of a friends mom. Her broker had sold her what he called a “safe investment” which was a limited partnership. While some limited partnerships could be considered good investments, this particular one was Medical Capital Holdings.
What’s the big deal about that? Well, this particular limited partnership ended up being a fraud and most investors lost everything that they invested into it. What makes the story even worse, is that this particular broker thought it was “suitable” to put over 1/3 of her portfolio into it.
4. Their commissions can eat away your returns.
If you’re paying commissions on a per-trade basis, you may be spending more than you might expect.
For example, if you’re charged 2% per trade, then making just three trades per year could result in you paying 6% of your overall portfolio in commissions annually.
5. Alphabet jumbo soup.
Brokers may be using deceptive titles to give you the wrong impression about their compensation model and qualifications. Currently, the shear abundance of professional designations being used within the financial services industry is confusing even to the most experienced investors. However, understanding the differences between these titles could have a dramatic effect on your long-term investment results and overall satisfaction.
As an example, the term financial advisor is one of the most used terms in the industry; however, many of the individuals using this title are sales people looking to meet quotas by selling financial products. They may in some cases sell non-marketable securities, which include long-term commitments, excessive fees, and a high level of risk.
Titles with the word “senior” — Certified Senior Advisor (CSA) and Certified Senior Consultant (CSC), for instance — have come under a great deal of scrutiny. I get offers in the mail all the time to buy designations. Don’t let the alphabet soup impress you. The only one that should in the financial planning profession is the CFP® designation. Other notables are the CFA and CPA designation.
6. I have a sales quota.
I love when I get a statement from a competitor that is sponsored by a mutual fund or insurance company. The broker claims to them that they have their clients best interest at heart and can utilize all types of investment choices, except that they only investments I see are from that companies proprietary products.
Hmmm……now whose best interest is first? I assure you not the client.
7. My records clean….kind of
Your broker is not obligated to tell you if there’s anything on his or her record. And why they should they? It’s reported that 70% of prospective clients do not do a background check on the broker before hiring them.
Want to make sure that your broker doesn’t have a record like Bernie Madoff? Head over to FINRA BrokerCheck to see what’s on your brokers record.
8. It could be better somewhere else.
With a broker you’re dealing with a sales person who may or may not have your best interest in mind. On the other hand, registered investment advisors, also known as RIAs are firms which operate under the fiduciary standard, which means that they are legally obligated to put their client’s interests first at all times.
As an independent registered investment advisor, Alliance Wealth Management, LLC was founded as a welcome alternative to the traditional brokerage model so many investors have become accustom to. We are compensated only by management fees paid directly by our clients.
How do you pay you broker? If you don’t know, maybe it’s time to find out.
As economic clouds loom, mortgage lenders are making it harder for some borrowers to get some types of home loans. Along with that not-so-great news, however, comes a silver lining: There’s still plenty of opportunity for borrowers to qualify for mortgages.
Why mortgage lenders are extending less credit
Mortgage credit availability declined in April to its lowest level since January 2013, according to the Mortgage Bankers Association (MBA).
“The contraction was driven by reduced demand for loan programs such as certain adjustable-rate [mortgage] loans, cash-out and streamline refinances and those with lower credit score requirements,” says Joel Kan, MBA deputy chief economist.
Back in 2013, the U.S. housing market was emerging from the Great Recession, and lenders were still wary of handing out too many loans. They gradually loosened standards in the years that followed, then tightened up at the beginning of the pandemic. Notably, MBA’s index shows credit availability is even tighter now than it was during the uncertain time at the beginning of the pandemic.
There are a few reasons lenders have become less eager to extend credit:
The banking sector has hit a rough patch. Three of the largest bank failures in U.S. history took place this spring — Silicon Valley Bank and Signature Bank in March and First Republic Bank in May. None of the three were major players in the mortgage industry, but the headline-grabbing turmoil roiled lending markets all the same.
The economic outlook is uncertain. Hoping to cool inflation, the Federal Reserve has raised interest rates at 10 consecutive meetings. While the labor market’s still cruising along — employment growth surpassed expectations in April — the Fed’s tightening will eventually result in a slowdown. That typically means an increase in unemployment rates, and more defaults by borrowers, giving lenders reason to exercise caution.
The boom went bust. As mortgage rates plunged to all-time lows during the pandemic, Americans rushed to refinance and buy homes. When rates started rising in 2022, that activity slowed — and lenders that were hiring during the boom turned to layoffs during the bust. As a result, lenders now have less capacity to handle loan applications than before.
Niche loans are most affected
While this all sounds like a problem for mortgage borrowers, it’s possible many might not even notice the pullback.
An April survey by the Federal Reserve found the stricter standards don’t affect conventional conforming loans bought by Fannie Mae and Freddie Mac — the majority of mortgages originated in the U.S. — or loans issued through the Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) programs.
Instead, lenders are holding back on niche products such as subprime mortgages, home equity lines of credit (HELOCs) and non-qualified, or “non-QM” jumbo mortgages.
What tighter mortgage credit means for you
Rest assured, you still can qualify for a mortgage if you meet the lender’s credit and other approval criteria, including having sufficient employment history and income.
If you’re looking for a loan type affected by tighter availability, however, there are a few ways to boost your chances of getting what you need:
Boost that credit score as high as you can. “People with lower credit scores are having a harder time today,” says Melissa Cohn, regional vice president of William Raveis Mortgage in Delray Beach, Florida. Your credit score remains the single most important factor in determining your mortgage rate. While 740 used to be the goal to strive for, new rules from Fannie Mae and Freddie Mac have made 780 the threshold at which borrowers get the best rates. You can still get a mortgage with a credit score in the 600s, but it’ll cost you more — or might be harder to find altogether.
Make as much of a down payment as possible. More cash down translates to a lower loan-to-value (LTV) ratio — and a lower LTV means more lenders willing to extend you credit. You can still qualify with 3 percent down for a conventional loan or 3.5 percent down for an FHA loan, but you’ll pay higher fees, and mortgage insurance, to compensate for your lower upfront investment.
Don’t stretch your budget too far. If the loan you want means your mortgage payment would eat up a significant chunk of your monthly budget, a lender might reject your application, even if all your other financials check out. That’s not to say you absolutely won’t qualify — but you’ll help your case by keeping the mortgage payment in the range of 30 percent of your income. Keep in mind, too: If you want an adjustable-rate loan, many lenders only qualify borrowers based on a higher payment, rather than the initial low payment.
Build up your cash reserves well in advance. Lenders are getting stricter about the sources of your down payment and cash reserves. If you expect to use a gift from family to buy a home, put the money in the bank now, says Cohn. That “seasoning” time will make your loans look better to lenders.
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.
This episode is dedicated to exploring the motherhood pay gap and potential solutions.
Check out this episode on either of these platforms:
Our take
You might have heard about the gender pay gap — or the difference in earnings between men and women — but what about the “motherhood penalty”? According to a recent report from the Pew Research Center, the gender pay gap grows more pronounced during a time when adults are likely starting and building their families: between ages 35 and 44.
But what does that look like in real numbers? Calculations from the National Women’s Law Center show that women who work full time year-round make 84 cents for every dollar men make. Mothers make only 74 cents for every dollar fathers make, amounting to $17,000 less per year.
In this episode, we explore the financial hit women take when they become mothers. We speak to experts who help us understand not only what’s driving the gender pay gap but also why it’s so difficult for women to recover financially after they have kids. We also learn more about policy changes at the federal, state and employer levels — from pay transparency to paid leave — that can help to close the gender pay gap for all women, not just mothers.
To a large extent, simply having more knowledge can empower women to ask for more when accepting a job offer or negotiating a raise.
More about parenthood, pay equity and finance on NerdWallet:
Episode transcript
Sean Pyles: Happy Mother’s Day, Amanda.
Amanda Barroso: Thank you, Sean. I’m sitting here in my closet where I record all the podcasts, and my toddler is right outside the door. I’m feeling about 20 months pregnant with our second. So needless to say, I’m feeling very much like a mother right now.
Sean Pyles: You are channeling and embodying Mother’s Day right now.
Amanda Barroso: Yes. Yes.
Sean Pyles: So how are you celebrating your day?
Amanda Barroso: So aside from a delicious brunch cooked by my husband and some family time, I’m setting aside some time to chat with you about the gender pay gap and how it widens for women once they become moms.
Jasmine Tucker: So I think we really need a multipronged approach to this. We need stuff to happen at the employer level. We need stuff to happen at the state level. We need stuff to happen at the federal level.
Sean Pyles: Welcome to the NerdWallet Smart Money podcast. I’m Sean Pyles. I’m here with NerdWallet writer Amanda Barroso for a special Mother’s Day episode about the gender pay gap and the motherhood penalty women face. Welcome back to Smart Money, Amanda.
Amanda Barroso: Hey, Sean. I’m happy to be here with you. The gender pay gap probably isn’t the first thing that comes to mind when people think about Mother’s Day. They’re probably thinking about flowers, brunch, chocolate. But this is something that’s personal to me.
Aside from being a mother, I’ve been thinking about and researching this topic for a long time. So before I came to NerdWallet, I got my doctorate in women’s and gender studies and then worked in D.C. for about five years at nonprofits that researched this issue. So it’s been on my mind for a while.
Recently, one of my former colleagues at the Pew Research Center published a report about the just persistent and enduring nature of the gender pay gap, and it turns out that parenthood is part of what’s made this thing stick around for so many years. The thing about the gender pay gap, though, is typically women never really recover from it financially, especially once they become moms. So the topic is on my mind, especially as I prepare to have our second child in just a few months.
Sean Pyles: All right, so in this episode, you’re going to help us understand what the gender pay gap really is, why it’s worse for mothers and maybe even talk about some solutions to what can feel like an insurmountable problem.
Amanda Barroso: That is the goal, at least.
Sean Pyles: OK. Well, let’s start with the basics. Can you lay out for us what exactly the gender pay gap is?
Amanda Barroso: Sure. So simply put, the gender pay gap is the difference in earnings between women and men. Every year, researchers are updating their calculations. One source of data from the National Women’s Law Center shows that women who work full time and year-round typically make 84 cents for every dollar that men make. For moms, this drops to 74 cents for every dollar that fathers make. This amounts to a $17,000 loss in income every year.
Sean Pyles: $17,000. That’s enormous, Amanda. I mean, just think about all that a mom could do with that amount of money.
Amanda Barroso: Totally. I mean, it’s not pocket change for a Target run, that’s for sure. The reason that I wanted to make this podcast, actually, is because it was unclear to me what it is exactly about motherhood that penalizes women financially, but then on the flip side, rewards men who become fathers at the same time. In research, this is something called the fatherhood bonus. So I’m just thinking, what’s going on here?
Sean Pyles: OK, so just to make sure that I’m following you, there’s the motherhood penalty, and then there’s also the fatherhood bonus. These terms seem pretty self-explanatory, but can you give us a quick definition of each so that we’re all on the same page?
Amanda Barroso: So the motherhood penalty is the earnings hit that women take when they become mothers. Sometimes it’s because they have to step back or scale back from the workplace to become primary caregivers, and of course that impacts their overall earnings. But for men who become fathers, the data shows that they get a boost in their earnings, actually. And this may be because employers are more likely to see fathers as providers, offer them more hours, more opportunities, and the fathers can then take advantage of that because, surprise, they have someone at home taking care of the kids and the housework.
Sean Pyles: Got it. I think there may also be psychological and cultural pressures going on as well. A lot of dads may feel like it’s important to step up and work harder once they have a kid, or they’re afraid that if they do try to take time off and prioritize child care, that they’ll be judged harshly and their careers might suffer.
Amanda Barroso: Totally. So to understand the origins of the parental pay gap, I talked with Jasmine Tucker — she’s the vice president for research at the National Women’s Law Center — and that’s who you heard at the beginning of the episode.
Jasmine Tucker: So what we see in the data is that women face a wage gap right as they begin their careers, but it’s smaller. So people are just graduating college, people are just graduating high school and entering the workforce. Women are making 90 cents for every man’s dollar.
Amanda Barroso: So the playing field is more equal when young men and young women are first starting their careers because, you think about it, they’re both starting at entry-level positions at the lower end of the pay range. But then something starts to happen as they enter their 30s. And this is where you see that motherhood penalty and the fatherhood bonus emerge that we were talking about earlier, Sean.
So to understand this, I talked to Rakesh Kochhar — he’s a senior researcher at the Pew Research Center — and he’s the one who wrote the report that I mentioned earlier. So I wanted to learn a little more about this window of time and what exactly happens to mothers and fathers.
Rakesh Kochhar: The most significant increase in the pay gap happens around age 35 to 44. Beyond that, it pretty much stays steady, so it doesn’t rebound back to pre-parenthood days, but it stays widened. Parenthood widens it, and that widening does not go away.
Sean Pyles: OK. So what Rakesh is saying is that not only is there a gender pay gap, but that this gap widens between mothers and fathers between the ages of 35 to 44. So under one roof, you could have one parent reaping the benefits of this gap, while the other’s pay is suffering.
Amanda Barroso: And that gap never closes, even as women age. Plus, this data isn’t even factoring in same-sex households. I mean, another thing that we should also clarify from Rakesh’s work is his research shows that women with kids at home earn less than women without kids at home. And here’s where the fatherhood bonus really comes into play. Fathers earn more than other workers in general, including men without children.
Sean Pyles: And I know there’s a ton of data out there around the pay gap, but I want to zoom out. There are still a lot of people who don’t think the pay gap is well, real. Or they believe that women simply pick fields with lower wages, things like being a teacher or a service job, while men happen to choose jobs with higher earning power, like something in tech or banking or engineering.
Amanda Barroso: There’s obviously a lot more at play than men and women just simply choosing different jobs. The true meaning of occupational segregation takes into account how a particular group, so here we’re talking about men and women, how they’re overrepresented in a certain job, and this is often due to social forces and pressures or policies that create this division. It’s certainly more than just men and women just happen to choose these separate and distinct fields, right?
Sean Pyles: Yeah. Well, the other thing that critics of the gender pay gap dispute is the role of discrimination. Did the experts that you talked with get into that at all?
Amanda Barroso: Yeah. On the question of whether the pay gap is real or not, Jasmine was just like, “Look, here’s the data.”
Jasmine Tucker: We see a wage gap in 94% of occupations. We see a wage gap when you look at different education levels and especially women of color gaining higher education, like Black women and Latinas, they’re still losing millions of dollars over a career compared to white non-Hispanic men.
Sean Pyles: So Jasmine has the data to back up the wage gap, but what about the occupational segregation and discrimination question? Did she or Rakesh talk about that?
Amanda Barroso: So Rakesh was basically like, “Look, occupational segregation is a thing. It is an undeniable thing that happens, but so is discrimination.” But that last piece is just a little harder to precisely measure.
Rakesh Kochhar: Yes. So both are factors. One, as you noted, is easier to measure than the other. The easier one to pick up on is what are the types of jobs men and women do, or what are their occupations? And there are distinct differences that continue to linger. For example, women, much more so than men, are represented in education or health care jobs. Men, on the other hand, are more likely than women to be in STEM jobs or in managerial occupations and some other occupations. And the differences have narrowed over time. But this narrowing also halted around the turn of the century.
The other side of the equation you mentioned is discrimination. That is where an employer may treat men and women differently at the workplace or during the hiring process itself. Many experiments have revealed it as a likely factor. So there is evidence of discrimination, but precisely how much and where it happens, that’s harder to measure.
Sean Pyles: All right, I’m glad we cleared that up. But what I’m wondering about now is where does this pay gap come from? There are people behind the decisions to pay a mother one amount and a father a different amount. What’s actually driving the gender pay gap?
Amanda Barroso: You know, Sean, I asked Rakesh that exact question. Here’s what he said.
Rakesh Kochhar: In a survey we did accompanying this report, we find that women with children at home are much more likely than men to feel a great deal of pressure to focus on family needs. So partly a result of these pressures and perhaps partly by choice — it’s hard to sort out or disentangle these two forces.
What we see is that with the onset of motherhood, when about two-thirds of women ages 35 to 44 have children at home, we find that they tend to retreat from the labor force. Labor force participation decreases, and at the same time, women tend to work fewer hours on average per week.
So in effect, what this means is parenthood impacts the amount of workplace experience women acquire relative to the workplace experience that men are able to acquire. And men are seen to work harder because they actually increase the number of hours they work on average per week and they become more active in the labor force when they become fathers. So partly through a withdrawal on the part of women and partly through more engagement on the part of men, we see the gender pay gap widen around that time. And this increase happens most noticeably around ages 35 to 44.
Amanda Barroso: So, as Rakesh mentions, there are significant cultural forces involved here, but I wanted to hear a little more from Jasmine about how this plays out, especially around notions of who is a breadwinner.
Jasmine Tucker: What I think is at play are a couple of things. So first is outdated notions about who’s caring for families, who is dedicated to the work, who needs the money. And so if you think about dads in the workplace, you’re like, “Oh, well so-and-so just had a kid. We need to put him up for promotion because he’s supporting three people now instead of two,” whatever.
And I think that despite all of this evidence that shows that women are breadwinners in their families, either primary or co-breadwinners, there is this outdated notion that when women have kids, they become less dedicated to their work. And so they have to leave at 4 p.m. to go pick up kids. And so that means that they’re not dedicated to their work, forget that she’s answering emails or whatever she’s doing late at night after the kids are in bed. Child care is definitely playing a big role here. If child care is unaffordable and it’s making up large shares of women’s earnings, they might be more likely to leave the labor force.
Amanda Barroso: That point about child care really hits home, and it’s something that we’ve covered together on the podcast before, Sean. The other thing that she mentions are caregiving responsibilities, which when you think about it, they only multiply with each child that parents have, right?
Sean Pyles: And we know that women tend to take on more caregiving responsibilities than men, too. So women are being paid less for the same job and also having to shoulder more work around the home.
Amanda Barroso: Exactly. So this is what I wanted to know. Does the impact of the gender pay gap then intensify with every child? Here’s what they had to say. Let’s hear from Rakesh first.
Rakesh Kochhar: In the past, we did look at what happens to work effort depending on the number of children you have at home. And the more children you have, the greater the number of hours worked by men or fathers. And the shorter the workweek among women. So having more children definitely has more of an impact on engagement with the workforce on either side, negatively among women and positively, you might say, among men.
Amanda Barroso: So with the birth of each child, mothers are withdrawing from the workplace for one reason or another, while fathers are putting in more time. But what does this mean for actual earnings? Here’s what Jasmine said.
Jasmine Tucker: There are some studies that show there’s like a 7% drop in earnings, like per kid, that you have for women. But we see the opposite when it comes to men. When they have kids, their earnings tend to go up. And so I think over time this creates this divide that widens, right, it just continues to widen and get worse over time.
Amanda Barroso: So is it just a general issue with the imbalance of division of labor? So women are the ones who are assumed to be doing the caregiving. So they’re the ones leaving work early, and then it snowballs from there.
Jasmine Tucker: It all reinforces each other. We saw this in the pandemic. We saw more women leave the labor force than we saw men, and we saw women out for longer periods of time. So we know that early days, in 2020 and 2021, we saw lots of women remain out of the labor force because they were providing unpaid care for their children. And so if somebody needs to take time out of the labor force, who’s it going to be?
Amanda Barroso: Jasmine has a good point here. The pandemic really upended the working lives of many mothers across the U.S. because when you think about it, Sean, so much of that infrastructure that they relied on to be workers, was just no longer available. So things like child care, in-person schooling, after-school activities or weekend activities, things like that that made their working lives possible were just unavailable.
Sean Pyles: Well, what’s interesting is that in recent months, women have returned to work. In February 2023, the number of women in the workforce was higher than before the pandemic, but that was after a steep, sudden drop-off early in the pandemic and then a slow climb back up over the past three or so years. Do you think that that time away from work would have an impact on their earning potential?
Amanda Barroso: Exactly. But the thing is, once women leave the labor force, it’s really hard for economists to understand what it means for their future earnings, even if they return to work again at a future time. And this is something that Rakesh talks about in his report.
Rakesh Kochhar: Now in our data, we only observe the earnings of people who are working, who are employed. And if we look at just employed men and women, we are not anymore looking at women who have withdrawn from the labor force. Some will have withdrawn permanently, some will have withdrawn only for two, three months or four months, and some may be for two, three, four years until a child goes to kindergarten or elementary school. So there’s going to be a varying degree of losses felt by women.
And what we do not observe is this loss in potential earnings: What might have been the earnings of a woman who took, say, five years off from work? We also do not know what might have been the earnings of women who’ve permanently withdrawn because they decided for whatever reason to be at home to look after kids until they’re off to college, maybe, or never returned to the labor force. So there is some loss in the potential earnings of women, their lifetime earnings, that we are not able to observe.
Amanda Barroso: Rakesh points to a blind spot in collecting pay gap data on women, especially as they become mothers and exit the workforce for a time. And as Jasmine mentioned, the pandemic has been especially hard on mothers’ employment.
Jasmine Tucker: So I think early in the pandemic, there was a lot of worry about moms and women just generally leaving the labor force and what that would mean for their careers. We saw 20 million plus jobs just completely gone in two months time, from February to April 2020. And I think initially in the early days of the pandemic, there was, I think, a really scary moment of what’s going to happen to the wage gap? How is this going to impact it? How is this going to set women back?
And so I think the data from the Census Bureau over the last couple of years, it’s been hard to compare it to previous years. Because the labor market looks completely different than it did in 2019, which we would have to consider pre-pandemic.
So what we have seen since 2020 is some closure in the wage gap. And part of that is because we saw a lot of the jobs that were lost were low-paid jobs. So who was left right in the pool of people working full time and year-round were higher-paid workers. So we lost all of these women in low-paid jobs. And so that appeared to shrink the gap.
Sean Pyles: It seems like both the gender pay gap problem and the motherhood penalty that exacerbate it are really complex.
Amanda Barroso: I mean, there’s not a one-size-fits-all solution. I think Rakesh put it really nicely.
Rakesh Kochhar: So it’s that drilling down to individual choices and cultural pressures and family pressures and workplace issues. It’s very heterogeneous; it’s very diverse. It’s very difficult to perhaps eliminate with a sweeping policy.
Sean Pyles: All right, well, that does seem a tall order, but I also see a glimmer of hope in Rakesh’s answer. There are a number of different areas we can mine for solutions on an individual level, family level, culturally and in the workforce.
Amanda Barroso: I know it seems bleak, and in a lot of ways, these issues are so much bigger than an individual mother can solve on her own. Trust me, I feel the weight of this. I’m a mom, I am expecting another one, and I obviously care about my earnings. But you’re right; there are some things and some ways that we can move forward and continue to make progress in closing the gap from others. So I dug into this a little bit with Jasmine.
Jasmine Tucker: So I think we really need a multipronged approach to this. We need stuff to happen at the employer level. We need stuff to happen at the state level. We need stuff to happen at the federal level. So we could do things like pass equal pay bills, like the Paycheck Fairness Act at the federal level. There is right now a lot of momentum in state legislatures this year around pay, salary transparency bills, which is great because it essentially says if you’re posting a job, you have to provide a range in the salaries. The data shows that women underestimate the salary and men ask for the moon, which contributes to this.
Amanda Barroso: So what are some things that employers can be doing? It does seem like some of the issues here are revolving around how managers or HR or people in control are thinking about motherhood and fatherhood.
Jasmine Tucker: I think that there’s a lot that employers can be doing. They can be doing internal audits of how much are they paying people by race and by gender, and what does that look like? And doing some course-correction there. I think that they could be hiring more women and in particular women of color in C-suite positions and in other leadership roles, because if you have a workplace that only is made up of men and in particular white men, I don’t see how those workplaces are going to be family-friendly or actually meet the needs of moms in that workplace.
Amanda Barroso: Your earlier point about employers examining their own pay practices seems really important. And I don’t want to overlook your point about race, either. I mean, the calculations that you’ve done show that Black, Latina and Native women are making even less than that overall 84 cents per dollar figure that we talked about earlier. According to your data, Black women make 67 cents for every dollar, and Latina and Native women make 57 cents. And again, this is compared with white non-Hispanic men. And that’s just the overall number, not the number for moms of color. So that means their total annual losses are much higher.
Jasmine Tucker: Yeah. It’s life-changing money. It could be a down payment for a house; it could be an investment in your education so that you can move from your low-paid field to a higher-paid field. It could be savings toward a kid’s education fund. There, I think, are so many wealth-building opportunities that women and moms are missing out on because they’re being paid less.
Amanda Barroso: What other policies can be implemented or changed to help close the gender pay gap for moms?
Jasmine Tucker: The unionized workplace is good for women. We see wages go up; we see wage gaps decrease.
Amanda Barroso: Workplaces adopting family-friendly policies alone won’t fix the pay gap, though. Rakesh even points to other European countries where these policies are part of workers’ everyday lives already and found something interesting.
Rakesh Kochhar: When we look at Scandinavian countries, such as Denmark, where family-friendly policies are commonplace, you still see that parenthood drives an increase in the wage gap because men and women react differently to parenthood.
Amanda Barroso: This reaction to parenthood Rakesh talks about could point to a bunch of things. I think some of it’s likely a response to cultural and social pressures that fathers face, thinking about putting in more hours in the office, what that might mean, it might mean seeing your child less, added stress. There’s this financial piece of the fatherhood bonus that seems like a positive one, but still there are costs.
Sean Pyles: So we’ve talked about potential solutions at the state and federal levels, but there have to be things that parents can push for in their own workplaces.
Amanda Barroso: I think you’re exactly right, Sean. Look, OK, let’s look at NerdWallet, for example. The company does offer a really generous paid leave policy, around five months leave at 100% pay, which not only means that parents can bond and care for their newborn, but they also don’t have to dig into savings to cover time away from work. I mean financially, that’s huge, right? But in addition to that, all new job ads that NerdWallet puts out provide a salary range, which means that potential candidates have a leg up. So when they get asked that dreaded question that we’ve all been asked in a job interview, “What’s your desired salary?”, they have some information to work with, right? They’re not pulling a number out of the air.
So as of March 9, actually eight states have made salary transparency a requirement on job ads, and 15 states are considering similar legislation, and that’s according to the Center for American Progress. So I think that that’s a step in the right direction.
NerdWallet also recently started providing employees with the salary bands for their job title based on their title and location. So I can log in and see where I fall in that pay band, and when it comes time for review or negotiations, I just have a little more leverage. I have more information and knowledge that I can work with. I think these last two things are huge, especially for women. So studies have shown women tend to undervalue themselves. They ask for less in negotiations or when they’re starting a new job. And in this case, I think for women, knowledge is power.
Sean Pyles: And it just goes to show how big an impact one company’s policies can have on the way you can structure your life, your family, your ability to earn money. And it gets back to the fact that it’s a little unfortunate for many workers that they don’t have those benefits where they work. And we should state that Amanda was not told by NerdWallet to say any of that. It’s just a legit perk that’s made a big impact on her ability to balance motherhood and having a career. Is that right?
Amanda Barroso: That’s absolutely right. But the thing is, there are templates for this. There are companies who are employing some of these policies and measures, and we can learn from those things. I think a big thing is just talking about money, talking about these policies. You hear that your friend or your neighbor that they work at a place like NerdWallet, great. Let’s figure out how they’re doing it so I can bring that back to my employer and see what I can make happen for myself and my colleagues.
Sean Pyles: Exactly. Well, Amanda, thank you so much for coming on the Smart Money podcast to help us explore this really important topic. I appreciate it.
Amanda Barroso: I always love being here and talking about these things with you, Sean, and I am very much looking forward to enjoying that five-month paid leave and catching you on the flip side of that.
Sean Pyles: All right. Well, I’m expecting many baby pictures while you’re out.
Amanda Barroso: Absolutely.
Sean Pyles: And that’s all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected] Also visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you’re getting this podcast.
Amanda Barroso: This episode was produced by Sean Pyles and myself. Liz Weston helped with editing. Sheri Gordon helped with fact-checking, Kaely Montanan mixed our audio, and a big thank-you to the folks on the NerdWallet copy desk as always for their help.
Sean Pyles: Here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Amanda Barroso: And with that said, until next time, turn to the Nerds.
Accounting is the practice of tracking your business’s financial data and interpreting it into valuable insights. This allows you to generate crucial financial statements, such as a balance sheet, cash flow statement, and profit and loss report. It sounds simple, but in reality, a lot of behind-the-scenes work goes into accurately reporting on a business’s financial state.
Accounting requires meticulous record-keeping and financial transaction tracking year-round. Moreover, keeping accurate records helps ensure your business is prepared to file taxes, present information to investors or even apply for a loan.
Accounting basics
Recording financial transactions
For a small business, accounting involves tracking money flow in various forms, including operating expenses (e.g., marketing, utilities, rent), cost of goods sold, accounts receivable and sales. It also takes into account liabilities, such as accounts payable, business loans and taxes, and the value of your assets, such as cash and inventory.
Let’s say a client just paid their invoice online, or money was withdrawn from your checking account to pay a utility bill. Each transaction — money in or money out — gets recorded. Most business owners opt for small-business accounting software to help automate the process and reduce the likelihood of error.
Organizing financial transactions
A chart of accounts helps organize and make sense of all of a business’s recorded transactions. It’s essentially a list of financial accounts, and each time you record a transaction, you classify it under a particular account. Most accounts fall into five overarching account types: assets, liabilities, equity, expenses or revenue. Categorizing transactions accurately is critical for producing financial statements, which each pull information from specific accounts.
After you enter a transaction and categorize it under an account, your accounting software will create a journal entry behind the scenes. Most modern accounting software uses the double-entry accounting system, which requires two book entries — one debit and one credit — for every business transaction. These entries are summarized in the general ledger.
Running accounting reports
After recording and categorizing transactions, you can analyze the results by running reports. There are a few main financial statements that businesses rely on:
Income statement. Also called a profit and loss statement, the income statement consolidates data on revenue and expenses to show how profitable your business was over a specific period. It also shows how much it’s paid in expenses and taxes.
Balance sheet. The balance sheet takes your business’s assets (e.g., inventory, equipment and accounts receivable), liabilities (e.g., accounts payable or taxes owed) and equity into account.
Cash flow statement. As the name implies, this accounting report gives you an overview of your business’s cash flow. It breaks down how your business earns cash and what that cash is going toward. Ideally, your cash flow will be positive and indicate that you have enough cash to cover future liabilities.
Following accounting standards
GAAP accounting
The Financial Accounting Standards Board, an independent organization recognized by the federal government, established a set of standards called generally accepted accounting principles, or GAAP, that publicly traded companies must comply with. For example, a company has to reference specific time periods in reports and follow the same accounting method across time periods to ensure accurate comparisons. Though small businesses aren’t required to follow the same rules, doing so can help ensure a higher level of consistency.
How do small businesses use accounting?
You can use accounting to track cash flow and quantify your company’s financial health. In addition, accounting makes it possible to create financial projections to plan for the future and anticipate sales and expenses. Without accounting, it would be incredibly difficult to gauge your business’s performance and whether it’s on track to meet its goals and obligations.
What do accountants do?
Small businesses hire accountants to advise them on their financial situation and help file taxes. Aside from handling taxes and compliance issues, they can help you optimize budgets, spot opportunities to save, and even apply for business loans.
Whereas you might only periodically consult your accountant, a bookkeeper touches base more frequently and handles daily accounting tasks. Regardless of who you hire, knowing basic accounting principles can help you understand your business better and have more productive conversations with your financial team.
Frequently asked questions
What is a simple definition of accounting?
Accounting consists of tracking financial transactions and analyzing what they mean for your business.
How does accounting help small businesses?
Accounting helps you gauge where your small business stands financially, what it can afford at any given time, and where its money is coming from and going. In addition to this financial overview, proper accounting practices prepare your business to file taxes and produce financial statements needed for potential investors or business loan applications.
What do small-business owners need to know about accounting?
When running a small business, you should choose an accounting software product and consider hiring an accountant. Accounting software does a lot of the heavy lifting (such as keeping track of debits and credits) for you. However, it’s still important to understand basic accounting principles to know what’s happening behind the scenes. Business owners should be able to enter transactions, reconcile accounts and interpret financial statements accurately.
Do I need an accountant?
Accountants can help take some of the pressure off tax season by handling the preparation and filing for you. If your business can afford to hire an accountant, doing so could save you time and potentially even tax dollars.
This is Jeff Rose, goodfinancialcents.com. Welcome everybody! I have a little neat, exciting thing to share here. I was interviewed by Laura Adams a.k.a. The Money Girl. She is actually a contributor to the blog, goodfinancialcents.com so be sure to check for her articles. I had the pleasure of being interviewed by her for a little Skype interview that we did. This was our first attempt. We had a little static near the end but we are learning. I’m getting all my technical glitches out of the way. She interviewed me about interviewing a financial planner for your own services. At the end I shared some tips of the five mistakes to avoid when saving for retirement or financial planning. Be sure to check out the interview. Hope you enjoy. See you later.
LAURA: Hi everybody. This is Laura Adams from The Money Girl podcast and author of Money Girl: Smart Moves to Grow Rich. Today I am here with Jeff Rose. I am so excited to be interviewing him. He is a financial planner. He has a business that is called Alliance Wealth Management. I thought it might be a good idea to find out from Jeff what some of the typical questions are that he gets about financial planning. Jeff, why don’t you start out and just tell us what you do and what type of customers you have?
JEFF: Sure. I have been a financial planner for just over eight years or so and along the way I’ve helped many different types of clients. Being younger, I got started in the business when I was 24 so I had a lot of younger clients that just wanted to start saving for retirement, start saving for their kid’s college education. Also, I had a lot of the baby boomer generation that were approaching retirement and had a large nest egg like their 401K or their pensions that they’d been saving into their entire lives and now they had the biggest decision money wise to make in their lives what to do with it. They entrusted me to basically devise an income plan for them with that money so that they wouldn’t out live it. That is really where, I wouldn’t say my focus has turned, but just my clientele has turned that way through referrals and through all the different events that I do. Right now I service probably about 80% of the baby boomer plus generation. Most of these individuals I would say are people that know they need to be invested. They know they need to be in the market in some way just to keep up with the cost of living and to keep up with their desires in the golden years. They just don’t have the time and they really don’t trust themselves with that amount of money so they want to rely on an expert like myself. I say expert. I’m not trying to toot my own horn, but they want to rely on a professional to take care of them.
Who Needs a Financial Planner?
LAURA: Absolutely, yeah. I’m curious what your opinion might be about whether everyone needs a financial planner. Does everyone need one or are some people able to do it themselves?
JEFF: That is a great question. I actually just took a poll of my email newsletter because I was really curious. I just had a hunch. I talk to people all the time that don’t have a financial advisor. They’ve been doing it on their own or they are not doing anything at all. I really was just curious so I emailed my subscribers just curious to know the feedback. The questions I asked were: Do you have a financial advisor. Yes or no. Why or why not. Of all the people that responded there was only about 30% or so that had a financial advisor. That was kind of my hunch thinking that most people don’t. The most common reason was trust. They didn’t trust them. They maybe had some bad stories from friends or family members or they had a personal experience where they had a financial advisor that sold them something that shouldn’t have been sold to them, and they just didn’t trust that direction. Other people just didn’t know if they needed one yet. They didn’t feel like they had enough money to get started. I think in all those situations, maybe you don’t need a full-time financial planner to manage the investments on an ongoing basis, but I think it’s like a doctor relationship. You don’t need to go to the doctor every single day, but it’s always advisable to go in at least once a year to have your annual checkup. Why wouldn’t you do that with your financial life just to make sure that what you have in your 401K is where it needs to be. Make sure that whatever investments you’ve been doing in your own brokerage account are in the right funds, stocks, or ETFs. Make sure you have enough life insurance. I think everybody needs to have some type of advisor, maybe not an ongoing basis, but at least someone to checkup on and give them that annual checkup.
Different Types of Advisors
LAURA: Yeah, that’s a good way to put it. What are the different types of advisors that people might find out there if they go online and do a search for somebody? Tell us a little bit about the different types of advisors that people maybe would or wouldn’t want to use depending on their situation.
JEFF: It gets so confusing now because right now everybody is a financial advisor. Everybody has that title. They used to be a stock broker, investment advisor, insurance agent. Right now I talk to everybody and they say I’m a financial advisor. I’m like what does that really mean? The different types would be if you go to a financial advisor at an insurance company or insurance agency. It has just been my experience that they are just going to lead in with some type of insurance product. That could be an annuity. It could be some type of whole life or cash value life insurance. Personally I’m not a big fan. I don’t want to start harping down on that, but those are the ones that I would stay away initially. I’m not saying life insurance is bad. Just be conscious of what their pitching to you and what they are trying to put you into. If you go to any type of big brokerage firm it could be anywhere from a commissioned advisor where they are going to sell you a mutual fund or an ETF, and they are going to earn a commission off that product. They also could have a fee-based relationship or advisory relationship where you are paying an ongoing fee, a percentage of your total investments with them. Just make sure you are clear on that. Where the waters get muddy there is you might pay an ongoing fee for your account with the firm, but there also might be transaction charges within the account. There could be internal expenses within the investments that you own. The next thing you know you think you’re paying 1% and you’re really paying 2½% and that really starts eating away at your money and it’s hard for you to grow it. That’s why my heart goes out to the consumer because there is so many different ways. If you don’t ask the right questions, if you don’t know what to ask, you’re just basically at the mercy of this advisor. Just be abreast of that. The last one -we talked about doing the annual checkup- there are a lot of fee only advisors that basically just charge you by the hour. These are the folks that will just meet with you and analyze your situation and give you a game plan. I think maybe even a financial coach maybe would fall in that category of someone just giving them guidance on where they need to be.
LAURA: Great! So what type of advisor are you? Tell me a little bit about how you or your firm charges people. What’s a typical customer’s fee structure, or what compensation do you get for a typical customer?
JEFF: Sure. That’s a great question. Just to give you an insight, I worked for the big brokerage firm so I’ve been that direction. I know that structure. Then we left and we started an independent firm. When I became independent I had the ability to do commission, and I had the ability to do fee. I was doing that for about three years, and the conversations got so confusing because it depended on the client and their situation. I liked it because in some cases maybe a commission relationship was better for the client if they weren’t doing a lot of active trading. They just bought one thing every once in a while. The majority of my clients I did on the advisory relationship, the fee based where I was managing their portfolio helping derive income stream. Whenever I was having that conversation with people I was like here I’m doing this and here I’m doing this. I just got frustrated with it and really wanted to have a more stream lined presentation or approach when talking to people. Recently, I just created my own registered investment advisory firm where now it’s completely a fee-based relationship. The fee ranges anywhere from 1-1½% as my ongoing fee. That is all encompassing. There’s no more transactions charges. There’s no IRA fees. At this time that covers doing a financial plan for the client and updating that on an annual basis. Basically the client can call me, not preferably on the weekends, but they can call me whenever they need to if they have a question about anything. I help clients figure out how much they need to save for their kid’s college. I’ll take a look at their 401K. That’s not even part of what I’m managing, but I’m going to take a look at it for them just to make sure it’s where it needs to be.
The Big Misconception
LAURA: Excellent! That actually sounds like a pretty good deal compared to some of the fees that I’ve heard. As a registered investment advisor what type of responsibility do you have to the client? There’s a lot of confusion in the market place about what is a financial advisor’s responsibility versus a broker’s responsibility in terms of recommending a stock or an exchange-traded fund. I think it’s important that people get to know an advisor who can give them some level of responsibility versus just throwing out a stock here and there as a good pick that they think is hot right now.
JEFF: The big thing, the consumer may never understand this, I know the profession or our industry is trying to do a better job of making them understand, but basically the two key words here are suitability and fiduciary. With the previous relationship it was more of a suitability issue where I would take a look at a client’s situation and then I would recommend an investment that I felt was suitable for their needs. It may or may not have been the right thing, but that is what I felt based on the situation. Now as a registered advisor, as a fiduciary I am solely responsible for my client’s best interests. I have to make sure I am doing what is absolutely right for them and I am absorbing that role. Before I did an RIA I saw that word thrown out there a lot and know a lot of other RIAs were throwing it out there and I’m like what does that really mean. Now that I finally get it and grasp it it’s really important to me. When I talk to other attorneys and other professionals and you talk about the word fiduciary to them they get it. They understand what that means and that client-advisor relationship. There’s a tremendous level of respect for it.
Women and Investing
LAURA: Yeah, I come from the real-estate world years ago and fiduciary relationships with clients were very important in that industry as well. So yeah, I want to make sure everybody gets that. If you go to a broker, they may or may not have a responsibility to look out for your best interest basically, but a registered advisor (RA or RIA), that’s part of the title. That’s part of the designation, that they have a higher level of responsibility. I think that is a great designation to look for in an advisor.
Also Jeff, I wanted to ask you maybe a little bit about the differences you see in men and women that come to you. I get a lot of questions, different types of questions from men and women about finances and planning, and I am wondering if you see a big difference working with a couple or just a husband or just a wife. Is there a big difference in the way that men and women approach money and financial planning?
JEFF: Yeah, there is much more to it with women and financial challenges. Not to say it’s 100%, but it’s so funny when I look at my baby boomer generation of husbands and wives versus the Gen X generation of clients husbands and wives. In my baby boomer generation I have husbands that worked 10-12 hour days, and the wife was the homemaker where they basically have relied on the husband to make all the big money decisions. I always make sure I bring in both clients. She’s still a part of the equation because that is the root of happiness or unhappiness if we haven’t had the proper discussion. I want to make sure I want to understand what her thoughts and concerns are. For the most part they’ve relied completely on the husband. Whereas my Gen X I’m seeing more of the wives now having more of a say in the money matters. The experience I’ve had in my own office is where wives are now saying we need to do this, we need to do this. I think that sound good, that sounds good, but I see more of a leadership role than I have ever seen before, especially with the baby boomer generation. I think that is neat to see that.
LAURA: Yeah, it is. I do a lot of one on one coaching with folks and the majority of them are women who tend to be, like you said, taking more of a leadership role for whatever reason. Maybe they are going through a divorce or they’re just waking up and realizing hey, I need to be involved. I need to know what’s going on for my best interests. I think it’s great that younger women and younger couples are approaching money much differently than older generations, and it’s a really good thing.
JEFF: Another thing I will say I have noticed, and I think it is pretty well universal is that women generally tend to be more conservative in their investment tolerance. Even in that leadership role the husband wants to make 12-15% return whereas the wife generally is more on the conservative side, which could be good or bad. I just want to make sure we’re where we need to be. That’s another thing I have noticed is that women are generally more conservative.
LAURA: Yeah definitely. I think women have that bag-lady syndrome fear that we always hear. Sometimes women are really afraid of the consequences of poor planning. That’s a wonderful thing, but you can take that to an extreme where you don’t invest aggressively enough and therefore, you’re not going to hit your retirement goal. I think having a balance there between a man and a woman’s perspective really probably ends up helping overall if you blend both of those perspectives. That’s great if people work on money together.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.
Living frugally is all about a simple principle: Spending less than you earn. It may sound super easy, but putting that philosophy into practice can be a challenge.
You already know the advice about not signing up for every streaming platform under the sun and not having a fancy coffee every day. Fortunately, living a frugal life doesn’t have to feel like you must sacrifice your favorite things. By adopting some basic money-saving moves, you can stash cash without even thinking about it.
Being More Frugal in 5 Simple Steps
Here are five tips on how to be more frugal and save money — without giving up all the fun (and caffeine) in your life.
1. Reform Fixed Expenses
Regardless of what specific items might appear on a budget, they all come in two general varieties: fixed expenses vs. variable expenses.
Fixed expenses are, as the name suggests, those bills that are fixed and consistent each month, such as rent, insurance payments, and student loans. Variable expenses, on the other hand, are those whose amounts aren’t fixed… but that doesn’t mean all variable expenses are optional (or “discretionary”). For example, your electric bill probably varies from month to month, but you still know you’re going to have to pay it.
Let’s hone in on those fixed expenses first, though — because cutting down on regular, consistent costs can lead to regular, consistent savings. There are a variety of ways to do this, some more radical than others.
For example, moving to a less expensive neighborhood or splitting bills with a roommate might cut your rent in half; deciding to forgo a car can eliminate not only the car payment and insurance cost, but also variable expenses like parking, maintenance, and gas. These kinds of global lifestyle changes can take a lot of effort to set up at the start. However, the payoff is months or years of significant savings without too much ongoing effort.
💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.
However, there are plenty of ways to cut fixed expenses without making such seismic shifts to daily life. For instance, switching to a less expensive cell phone carrier can lower the monthly burden, as can ditching a gym membership in favor of hiking or cutting back on streaming service subscriptions. (Even those low per-month amounts can really add up when there are three or four of them!)
Recommended: Building a Line Item Budget
2. Gear Up Your Grocery Game
Groceries count as a variable expense, but they’re certainly not optional. That said, there’s an incredible margin for savings when it comes to stocking up on food each month.
So how to go about saving money on food and other grocery store items?
One easy way to start is to choose discount grocers and chains that are known for their low prices. Aldi, Trader Joe’s and WinCo, for example, all have well-founded reputations for their frugal choices, particularly when compared to upscale grocery chains like Whole Foods. Shopping at a cheaper store can take some of the footwork out of saving; you may be able to spend less on the exact same grocery list. But it’s also possible to take the project even further.
Coupon clipping might not be the most glamorous activity, but those deals can create substantial savings, particularly for practiced couponers. These days, apps like Ibotta and Checkout 51 make it easy to score savings on the items you’re already shopping for.
Additionally, aiming to make cheaper meals can stretch each grocery store dollar even further. Relying on inexpensive staples like rice, which can be dressed up and filled out in many different ways, can help keep both bellies and wallets full.
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3. Decide to Do It Yourself
Buying things is one thing. But maintaining them is a whole ‘nother can of worms — and it can be a downright expensive one. For instance, going in for an oil change vs. doing it yourself can be a pricey undertaking. And calling in a plumber when the sink or toilet is clogged can be expensive compared with going into DIY mode.
All of which is to say: honing some handiness skills could easily help save money over the course of a lifetime. And thanks to the fact that we live in the digital age, it’s relatively easy to become a Jack or Jill of all trades. YouTube is full of free video tutorials that can walk you through everything from fixing a dishwasher that won’t drain to rotating your own tires.
💡 Quick Tip: If you’re creating a budget, try the 50/30/20 budget rule. Allocate 50% of your after-tax income to the “needs” of life, like living expenses and debt. Spend 30% on wants, and then save the remaining 20% towards saving for your long-term goals.
Other high-cost services to consider DIYing: mani/pedis, facials, pet grooming, landscaping, moving, and more. Basically, anytime you could spend money on hiring a professional, think seriously about whether you actually need the help.
Recommended: Pros and Cons of Online and Mobile Banking
4. Enjoy Free Entertainment
While some events are worthy splurges — like a once-in-a-lifetime concert — it’s also important to consider all the free forms of entertainment at our fingertips. For example, your local library may offer streaming movies along with books and audiobooks (or try services connected to libraries, like Kanopy and Hoopla), and many museums offer cost-free admissions on specific days of the week or month.
Even the national parks offer free admission from time to time! Free national park entrance days vary slightly from year to year, but generally include the first day of National Park Week in mid-April and National Public Lands Day, which falls on the fourth Saturday in September, along with Veterans Day and the birthday of Martin Luther King, Jr.
5. Take Frugalism With You Wherever You Go
Speaking of national parks: Travel is another big ticket item as far as discretionary expenses are concerned. Seeing the world can be enriching — and it doesn’t have to strip away all your riches, either.
Finding ways to be a frugal traveler, such as choosing budget-friendly destinations and scoring the cheapest flights possible, can mean saving money without sacrificing this major life experience. You might even try a home swap or being a house-sitter in a foreign country to make your journey as affordable as possible.
💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.
What Does Frugal Mean for Your Money?
Adopting frugal habits and creating a savings plan can be ways to improve your financial health. Cutting back on day-to-day living expenses can mean more money set aside for retirement as well as major life milestones, like owning a home or having a baby.
One of the most important first steps toward frugality is getting organized, financially speaking. Having a budget and tracking your finances are valuable moves. How often to monitor your bank accounts is a personal decision, but a couple of times a week can help you see how your money is coming in and going out.
Living frugally can also mean more money goes towards realizing your long-term financial goals and building wealth. Whether that means saving for a child’s college education or for retirement, by cutting back on spending now, you can help assure a better future.
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UWM’s total origination volume also fell during the first quarter, down to $22.3 billion from $25.1 billion in the previous quarter. Purchase originations accounted for $19.2 billion – the highest Q1 purchase volume in UWM history, the nonbank noted. On the other hand, UWM saw a significant improvement in margins, up to 92 bps from … [Read more…]
Inside: Are you thinking about moving out? This guide will help you figure out how much money you need to save and where to find affordable housing. Will $5k be enough to move out?
Moving out for the first time is a huge milestone. It’s a chance to start fresh, create your own space, and live on your own terms.
But it can also be a daunting prospect, especially when you’re trying to figure out how much it will cost.
You want to know if $5,000 is enough to move out?
But there are a lot of factors to consider before making the decision to move out, and we’ve laid them all out for you in this ultimate guide.
So whether you’re just starting to think about moving out, or you’re ready to start packing your boxes, read on for everything you need to know about making the big move.
How much money do I need to move out?
Experts recommend having at least $6,000 to $12,000 saved up before moving out.
However, it’s possible to move out with as little as $5,000 if you focus on knowing how to live cheap and have a stable source of income.
However, if you don’t have a job before moving out, the need for a huge savings account is huge.
How much money should I have if I want to move out?
The minimum amount of money required to move out will depend on where you plan to live and your living expenses.
Shortly you will learn factors to include initial moving costs, rental deposit, and ongoing costs like rent, utilities, and food.
If you are looking to move out in an HCOL area, then you will need more than an LCOL city. At this point in your life, it is important to understand HCOL vs LCOL and how it affects your finances.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
What are the expenses you should consider when moving out?
Moving out on your own can be a daunting and expensive task.
There are many expenses to consider when budgeting for your new place especially when you are learning how to move out at 18.
This guide will help you estimate the cost of moving out and provide tips on how to save money.
1. Rent/Utilities
The cost of rent varies depending on the location and size of the apartment or home, with the median rental cost in the US being around $1700 per month.
Along with rent, utilities like electricity, gas, water, and internet can cost around $400 per month.
To save money on rent and utilities, consider finding roommates to split costs or negotiating with landlords for a lower rent.
Rent is your biggest expense when figuring out the ideal household budget percentages.
2. Rent Deposit
When renting an apartment, you will typically need to provide a rent deposit. This deposit is a sum of money paid upfront to the landlord to cover any damages or unpaid rent at the end of the lease.
The cost of a rent deposit can vary depending on the location and the landlord’s requirements, but it can range from $1,000 to $5,000 or one to three months of rent.
To save money on a rent deposit, consider looking for apartments with lower deposit requirements or negotiating with your landlord for a lower amount. A clean rental history will help you with this.
3. Moving Expenses
Moving out can be an expensive process, but with some planning and budgeting, you can keep costs under control.
When considering moving expenses, be sure to factor in the costs of moving truck, packing supplies, such as boxes and tape, as well as the cost of hiring movers
To save money on these expenses, try finding free packing materials on Buy Nothing groups or ask friends and family to help you move. You can also minimize your possessions and have less to move.
4. Renter’s Insurance
When moving out and renting a home or apartment, it’s important to consider getting a renter’s insurance policy to protect you from unforeseen events.
Home insurance, also known as renter’s insurance, is a special type of insurance policy that protects your property against losses or damage stemming from covered perils, including fires, storms, or theft. It can give you peace of mind and help you repair or replace your possessions in the event of unforeseen situations.
Insurance premiums are based on various factors, including where you live, how much you choose to insure, and your deductible. Your credit score and history may also affect your insurance rates.
5. Furniture and Appliances
When moving into a new home, it’s important to consider all the necessary expenses for furnishing the space. This includes appliances like a refrigerator, stove, oven, and microwave, as well as daily living items such as a mattress, table, and couches.
I remember when I moved into my first apartment by myself and there wasn’t a washer or dryer in the apartment. Just hookups. I had one of two choices: 1) rent from the management company for $35 a month or 2) buy new appliances with 0% interest for $35 a month. I choose option #2 and it saved me money in the long term.
To save money, consider buying used furniture from thrift stores or online marketplaces like Facebook Marketplace. You can also find plenty of free furniture if you are not picky.
By being thrifty and smart with your purchases, you can furnish your new home without breaking the bank.
6. Housewares
When moving out on a budget, it’s important to consider the essential housewares you’ll need to make your new place feel like home. Here’s a list of must-haves and their estimated costs:
By prioritizing these essential housewares, you can make your new place feel like home without breaking the bank.
Don’t forget to check out thrift stores and Facebook Marketplace for gently used furniture and household items. With a little creativity and resourcefulness, you can furnish your new home on a budget.
7. Internet and Phone Bills
The average cost of internet and phone plans varies depending on the provider and the plan you choose. However, you can expect to pay around $50 to $100 per month for internet and $40 to $80 per month for a mobile phone plan. In addition, there may be additional fees, such as equipment costs or activation fees, which can add up quickly.
To minimize these expenses, consider bundling services with one provider. Many companies offer discounts for bundling internet, phone, and cable services.
8. Credit Card Payments
If you thinking about moving out and are currently swaddled in debt, then you probably don’t have enough money to move out. If you have high-interest credit card debt, prioritize paying it off before moving out.
Automating savings on essential bills using Truebill can also help you manage your credit card payments while covering the costs of moving out.
Additionally, ensure that you have an emergency fund and enough money to stay a year to handle unexpected expenses.
Things may get harder if you have to pay for college without help from parents.
How to calculate your moving out budget
Moving out on your own requires careful planning and budgeting.
To calculate your moving-out budget, start by determining your monthly expenses once you move out. Make sure to include the factors discussed above.
Then, decide on your target move out date.
Now, figure out how many months you have to save.
For example, if your target move out date is in 6 months and you need to save $5,000 to cover your expenses, you’ll need to save about $833 per month.
Additionally, create an emergency fund to cover unexpected expenses such as medical bills or car repairs. Aim to save at least 3-6 months’ worth of expenses in your emergency fund.
By creating a detailed monthly budget and sticking to it, you can ensure that you can afford to live on your own and achieve your goal of moving out.
Tips and tricks on how to move out
So, you’re finally ready to move out and start your life as an independent adult.
But before you can start your new life, there are a few things you need to take care of first – like, you know, finding a place to live and figuring out how to pay for it.
Learn the lessons from those who did not move out with enough cash – like me.
Tip #1: Create a Budget and Stay Within Limits
Moving out with only $5000 can be challenging, but creating a budget and sticking to it can make the process much easier.
To start, subtract your monthly bills from your monthly income to determine your basic budget.
For instance, if you make $2500 per month and pay $1500 for rent and bills, you have $1000 left for living expenses.
Allocate $400 for groceries and other necessities, $200 for transportation, and $100 for utilities.
This leaves you with $300 for entertainment and other non-essential expenses.
To stay within your budget, consider using a budget binder to track your income and expenses.
Be mindful of living within your means and avoid overspending by resisting the temptation to spend your first paycheck on new household items or entertainment. Instead, opt for more affordable options such as walking around your new neighborhood or having a picnic in the park.
Tip #2: Reduce Expenses Where Possible
One of the hottest topics is becoming frugal green. To save money and the environment at the same time.
When it comes to furniture, try buying used or refurbished items or borrowing from friends and family. Additionally, cutting back on unnecessary expenses such as dining out and entertainment can free up more money.
By being resourceful and creative, it is possible to move out on a budget without sacrificing quality or comfort.
Remember to allocate 50% of your monthly pay towards necessary expenses, 30% towards things you want, and 20% for debt repayment and long-term savings.
Tip #3: Look for Low-Cost Rentals
Finding low-cost rentals can be a challenge, but there are several options available to those who are willing to be flexible and creative.
Renting a basement suite or studio apartment can be a more affordable option.
Consider couch surfing, subletting, or home-sharing arrangements.
Home-sharing can be particularly attractive as it allows you to pair up with an elderly homeowner who needs a little extra help in exchange for low rent.
Find a tiny home rental.
If you don’t mind sharing the space, you can also consider getting a roommate or looking into pod shares. Pod shares are co-living spaces where individuals rent a bed in a shared room, with access to other community spaces like a bathroom and kitchen.
Become a housesitter and be paid to move out. Learn more with Trusted Housesitters.
With a little bit of research and creativity, it is possible to find low-cost rentals that fit your budget and lifestyle. Remember to determine exactly how much you can spend on rent and be open to alternative housing solutions to help keep your costs at a minimum.
Tip #4: Look Into Getting Renters Insurance
When renting you are more than likely going to live closer to others, which means more things can go wrong. Don’t skip out on renter’s insurance, as it can provide the peace of mind and protection you need as a first-time renter.
Without renter’s insurance, unexpected disasters such as fires, storms, or theft can leave you with thousands of dollars in damages that you would have to pay out of pocket.
Renter’s insurance typically costs around $20 per month and can save you a lot of money in the long run. Some affordable options for renter’s insurance include Lemonade, State Farm, and Allstate.
It’s important to shop around and compare policies to find the best one for your needs and budget.
Tip #5: Plan for Emergencies and Unexpected Expenses
It is crucial to plan for emergencies and unexpected expenses.
Start by setting aside a minimum of $1000 for an emergency fund.
Ideally, you should aim to save at least three to six months of living expenses in a rainy day fund. Remember, having a contingency plan and emergency fund can provide peace of mind and protect you from financial hardship.
Tip #6: Start Saving for a Security Deposit
Remember to prioritize saving for a security deposit by setting a specific savings goal and putting aside a portion of your income each month before you move out!
With dedication and discipline, you can reach your goal and move out with confidence.
More than likely, if you are a good tenant, you should get your full security deposit back after your lease is over.
Tip #7: Start a Side Hustle
Starting a side hustle can be a great way to earn extra money while still maintaining your full-time job. You can earn extra income through various side hustles depending on your skills and interests.
The most common side hustles are online jobs, such as transcription, virtual assistance, proofreading, blogging, freelance writing, data entry, graphic design, and web design. These jobs are flexible and eliminate the need for driving anywhere, requiring only a laptop or computer and a good internet connection.
In fact, learning how to make money online for beginners is a trending topic.
As you start your side hustle, put in as much time as you have available to maximize your earnings. Remember that a side hustle is unlikely to replace the need for a real job, but it can provide a great way to earn extra money and pursue your passions.
Tip #8: Plan Ahead and Create a Timeline
When planning to move out on a budget, it’s important to create a realistic timeline.
Start by mapping out all the expenses you’ll need to cover, such as rent, utilities, food, and transportation. Along with how much money you have already saved for unknown expenses.
Stay organized by keeping a checklist of everything you need to do and when it needs to be done. Don’t rush the process – take your time and make sure you have everything in order before making the big move.
Remember the millionaire quote, failing to plan is planning to fail, so take the time to plan ahead and create a realistic timeline.
Is 10000 a good amount to move out with?
According to various sources, $10,000 is generally considered enough to cover moving out expenses and leave room for emergencies.
However, the actual cost of moving out can vary depending on location, rent prices, and cost of living.
Learn how to save 10000 in a year!
FAQ
There are a couple of different ways to save more money including:
Cut back on frivolous expenses like eating out and buying new clothes.
Sell anything you have that you don’t want or need on websites like Craigslist, Facebook Marketplace, Depop, or eBay.
Consider getting an extra part-time job or side hustle to increase your income.
When it comes to furnishings, be thrifty by asking friends and family if they have anything extra they’re getting rid of or checking out second-hand or discount stores.
Set saving goals and track your expenses using a spreadsheet. That will give you a clear picture of what is and is not possible.
Renter’s insurance is highly recommended, and in some cases, required by leases. It provides protection against unforeseen disasters such as fires, storms, or theft that can damage or destroy your possessions.
While it may seem like an unnecessary expense, it is usually affordable and can save you a lot of money compared to paying out of pocket for damages.
Not having renters insurance can leave you vulnerable to unexpected expenses and potential financial ruin.
You should not spend more on your rent payments than you are comfortable.
Just like with getting a mortgage, you should spend no more than 30% of your take-home pay on rent payments.
You don’t want to be stressed about finances, so you should set a realistic budget for rent that allows you to comfortably cover all of your expenses while still having some money left over for savings.
So, is 5000 enough to move out?
It really depends on your situation.
If you’re moving to a cheaper area and don’t have many expenses, you might be able to make it work.
However, if you’re moving to a more expensive city or have a lot of bills, you might need to save up more money.
When determining how much money is needed to move out, there are several factors to consider, which we covered above. These include where you plan to live, your living expenses, initial moving costs, ongoing costs, and emergency funds.
It’s essential to have a budget and do the math to determine the minimum amount required for a smooth transition to independent living on a tight budget.
Ultimately, it’s important to do your research and figure out what’s best for you.
Know someone else that needs this, too? Then, please share!!
Anybody that has tried to change their satellite or cable service knows how much of a pain in the butt it can be.
You’ll spend at minimum an hour on the phone and most likely by the end of it you’ll be so disgusted that even a hot shower won’t make you feel any better.
One of the biggest fears that investors have when starting with a new brokerage firm is what happens if you want to quit or break up with your financial advisor.
Are you going to be stuck in the same situation as trying to transfer your satellite service and are you going to be hit with massive amount of surrender fees?
Is this something that you worry about?
Let’s take a look how it works if you want to transfer your brokerage account.
If you’re in the process of hiring a new financial advisor or opening an online brokerage account, the first thing you want to do is ask,
“What happens if I ever want to leave? What type of cost or transfer out charges would I incur?”
If it’s really a concern of yours, I wouldn’t accept the explanation verbally. Get it in writing. Make sure you can see exactly how much you would pay if you had to pay anything at all.
Many people don’t realize how easy it is to actually transfer your brokerage account elsewhere. It’s easier than switching banks. It’s easier than dropping your cable. It’s easier than changing your cell phone provider. Yes, that easy!
The beautiful thing about transferring is that you actually don’t even have to talk to the institution that you’re currently with. Say,”What?” Yes, that’s right. You can actually transfer out without ever having to notify them that you’re leaving. How beautiful is that?
Brokerage Account Transfer Example
Let’s say for an example that you have a brokerage account with Edward Jones and you’ve been with them for four years. You’ve now decided that you want to work with XYZ Financial. Instead of contacting Edward Jones and telling them why you’re leaving, you would actually go to XYZ Financial, open the same type of brokerage account that you have opened at Edward Jones and then sign XYZ Financial’s transfer paperwork.
XYZ Financial’s back office should then contact Edward Jones’ back office and the transfer is all done for you. The reason that this is so simple is that most brokerage firms use an account transfer process called the automated customer account transfer service or ACAT.
The rules that govern the ACAT system require firms to complete various pages in the transfer process and in a very specific period of time window. If the transfer is made using the ACAT system, then the transfer should take no more than six business days.
Here’s brief description of the ACAT process directly from the SEC website:
Most account transfers between brokerage firms are made using the Automated Customer Account Transfer Service (or “ACATS”) system. The National Securities Clearing Corporation operates ACATS, and both the New York Stock Exchange and the National Association of Securities Dealers, Inc. require their member firms to use ACATS.
These rules require firms to complete various stages of the transfer process within a limited period of time. If the transfer is made through ACATS, and there are no problems, the transfer should take no more than six business days to complete from the time your new firm enters your form into ACATS.
There are situations where the accounts may not be able to utilize the ACAT system. In those cases, you can expect upward to two weeks for the transfer to take place. In the last couple years, I’ve only encountered a few situations where an account could not be transferred utilizing ACAT. Most likely, you won’t run into this situation.
Brokerage Transfer Out Fees
What about cost?
All brokerage firms are going to charge some type of transfer out fee.
That fee can range anywhere from $55 on up to $95, at least what I’ve seen.
It may also be more for an IRA. Another potential cost that you may incur is an IRA custodial fee.
I know some firms will charge you both for the transfer out fee and a prorated cost of the IRA custodial fee. I know in one case a client had to pay $115 to transfer out his IRA. Ouch!
The only other issues that may come up is depending what type of investments you hold. I’ve seen some mutual funds that aren’t able to be transferred “in-kind” so they have to be sold at the brokerage firm that you’re currently with before the account can transfer. In that case you would have to contact them to give them instructions to sell what can’t be transferred. If you want to avoid the phone, you can always draft a letter with your instructions to liquidate the investments and then transfer the account upon settlement of those funds.
Please also note that insurance or annuities are a whole other animal when it comes to transferring. It’s pretty simple to change the broker record on annuity accounts, but there also may be surrender charges on the actually policy itself. Be sure to verify with the insurance company before liquidating any annuity contracts.
VA loans are exclusive to veterans, active military personnel and their families. It’s a government-backed loan program designed to make homeownership more affordable for these individuals by offering flexible financing options with competitive interest rates. Additionally, VA loans do not require any down payment or private mortgage insurance (PMI). These loans serve as an important tool to help those who have served our country gain access to their dream of homeownership.
If you are an active-duty military personnel or a veteran, there are many VA loan lenders out there, including New American Funding. The company offers lower interest rate mortgages with excellent terms exclusive to service members and military spouses.
Read on for our review of New American’s VA loan offerings.
Best for Low-Credit Borrowers
New American Funding provides a range of benefits that make homeownership more accessible to U.S. service members, veterans and their spouses. As with all other VA loan programs, New American doesn’t require a down payment, and interest rates are usually lower than those of mortgages not guaranteed by the government. Credit score requirements are not published on New American’s website, but they do mention on their blog that VA loans are a good option for “buyers with less-than-perfect credit.”
Additionally, New American Funding doesn’t require any monthly mortgage insurance payments and has no prepayment penalty, meaning borrowers can refinance or sell without having to pay additional fees.
New American VA Loans Pros and Cons
Good for borrowers with challenged credit
Focuses on lending to minority groups
High BBB rating
Offers a closing guarantee
APR information and interest rates are not publicly accessible
Unavailable in Hawaii
Pros explained
An option for borrowers with challenged credit
New American Funding’s VA loan is ideal for service members and veterans looking to become homeowners without needing perfect credit or a large down payment. Even with a credit score of around 580, you can access a wide range of mortgage loans and low-interest VA loan rates. VA loans also come with a funding fee, which is a percentage of the loan amount that goes toward funding the VA Home Loan program. This fee helps VA lenders to take on customers with lower credit and no or low down payments.
Additionally, New American’s VA loan allows you to sell or refinance your home at any time with no penalty or restrictions on cash-out refinances, unlike conventional or FHA loans, which require you to have 20% equity left over after the refinance.
Heavy focus on lending to minority groups
New American Funding is committed to offering clients from all backgrounds a variety of mortgage products and services. Being the nation’s largest home loan company founded by a Latina, New American Funding is dedicated to hiring Hispanic personnel and helping minority groups.
This company lends with an emphasis on social responsibility, as special attention is paid to minority groups whose access to financing may be limited by traditional lenders. New American Funding also brings mortgage education to underserved communities and works with them to overcome income, credit score and race-based barriers to attain home loans. This includes the company’s Latino Focus initiative, which works to improve the experience of Hispanic clients when obtaining a home loan and its New American Dream initiative, which seeks to increase homeownership in African American communities.
As part of the company’s commitment to serving all communities, New American Funding offers FHA, VA and USDA loans designed specifically for first-time homebuyers. It also offers options for adjustable-rate mortgages, fixed-rate mortgages, jumbo loans and more.
BBB accredited with an A+ rating
The company has accreditation and an A+ rating from the Better Business Bureau. This is an indication that it meets all of the BBB’s high standards for operating with integrity and fairness. New American Funding maintains a 4.04 out of 5 stars from 606 customer ratings on BBB with an overwhelming number of customers giving the company a full 5-star rating.
Many of the negative reviews seem to be related to customers not being approved for a loan rather than issues with customer service. Even for these reviews, the company is quick to respond in a respectful and helpful manner.
Offers a closing guarantee
This guarantee is available for all VA mortgages processed with New American Funding. The borrower will receive a full refund of their loan origination fee if the loan fails to close within the specified timeline.
Cons explained
APR information and interest rates not publicly available
New American Funding does not provide publicly available information about its APR or interest rates. To get an accurate estimate on the cost of a loan, you must provide contact information for a quote.
Not available in Hawaii
New American Funding is not available in Hawaii. This means that military families seeking a mortgage loan in this state won’t be able to take advantage of the company’s services.
New American VA Loans Offerings
New American offers a wide range of VA Loans, including 30-year fixed-rate and adjustable mortgages. Below, we explore the types of mortgage loans offered at New American Funding to help you identify which loan is right for you.
VA streamline refinance loan
Also known as the Interest Rate Reduction Refinance Loan (IRRRL), the Streamline Refinance Loan provides an opportunity for veterans and active military members currently carrying VA home loans to take advantage of lower interest rates, reduce mortgage payments and increase overall savings.
If your home has increased in value or you owe less than 80% of its worth, you can refinance. Additionally, a VA Streamline Refinance loan can be done with no money out of pocket. This means you can cover all of the upfront costs of refinancing by rolling them into the total loan amount or adjusting the interest rate.
The IRRRL can also be used to refinance your mortgage from a fixed-rate loan to an adjustable-rate loan, from one type of adjustable-rate loan to another or to convert a non-VA loan into a VA loan.
The table below shows the typical refinance costs.
Refinancing requirements:
Average cost
Loan discount points
0 to 3% of your home loan amount
Appraisal fee
$300 – $500 (could be more for larger homes)
Inspection fee
$175 to $500
Title search and title insurance
$400 – $900
Survey fee
$150 – $500
Prepayment penalty
2% of the loan balance for the first two years and 1% of the loan balance for the third year
VA purchase loan
New American’s VA purchase loans are available to eligible military borrowers with no down payment required. This can be an ideal solution for those who may not have enough funds to cover a large upfront cost.
A purchase loan offers further benefits, such as no PMI requirement or prepayment penalty. With VA purchase loans, borrowers can also finance closing costs up to 4% of the purchase price and receive funds for improvements that enhance the home’s value or energy efficiency.
VA loan type
Loan amount
Interest rate
Annual percentage rate
30-year fixed VA purchase
$295,000
5.250%
5.717%
VA cash-out refinance
A VA cash-out refinance loan can be a great way to use the equity in your home.
With this type of loan, you get a new mortgage to convert some of your home equity into cash. This option may also provide tax benefits since it is typically considered a form of debt consolidation rather than income generation. For example, if you itemize your deductions, you may be able to deduct some of the mortgage interest paid on a VA cash-out refinance. This can result in a lower taxable income and a lower overall tax burden.
VA cash-out rates change daily based on market conditions. The following cash-out rates are current as of April 2023:
VA loan type
Interest rate
Annual percentage rate
30-year fixed VA cash-out
6.750%
7.103%
30-year fixed VA cash-out
6.990%
7.349%
VA energy-efficient mortgage (EEM)
VA loans for energy efficiency improvements can cover items such as storm and thermal windows, solar heating, cooling systems and heat pumps. These loans are not intended for non-permanent purchases such as appliances or window air conditioning units. VA loans can provide up to an additional $6,000 for qualifying energy efficiency improvements, helping you reduce monthly utility bills while improving the value of your home.
The following energy-efficient upgrades are eligible for the VA EEM Program:
Solar energy systems
Caulking, weather stripping and vapor barriers
Upgrades to furnace and heating systems
New thermostats
Upgraded insulation
Upgrades to windows and doors
Water heater upgrades and insulation
Heat pumps
VA Native American Direct Loan
The Native American Direct Loan (NADL) is a program for Native American veterans and their families that allows them access to the same financial advantages of conventional mortgages, including no down payment or monthly mortgage insurance.
Additionally, the NADL offers the ability to build or purchase a home on federal trust land and make repairs on an existing property. This provides Native Americans with more flexibility in choosing where they want to settle.
New American VA Loans Pricing
New American Funding VA loans offer fixed-rate mortgages with repayment options of 15, 20 and 30 years. The shorter the term, the lower the rate — however, your monthly payments will be higher. For adjustable rate loans, adjustable rate caps can be as low as 2% for initial adjustment periods and 5% for subsequent adjustments.
Borrower credit history is a major factor in determining your New American Funding loan rates. Loan and down payment amounts also affect mortgage rates. Larger loan amounts can result in higher interest rates due to increased risk to the lender. Lenders also consider your debt-to-income ratio.
If you’re a low-income borrower, you may be eligible for the Freddie Mac Refi Possible program, which includes a $500 credit toward your appraisal cost and five years of no interest.
The table below shows New American Funding’s VA loan rates:
VA loan type
Interest rate
Annual percentage rate
30-year fixed mortgage
5.250%
5.882%
15-year fixed mortgage
5.000%
5.645%
30-year VA cash-out refinancing
6.625%
6.978%
30-year fixed VA purchase loan
5.250%
5.717%
VA Native American direct loan
6%
6%
New American Funding Financial Stability
New American Funding has seen a recent shift in its Fitch Ratings outlook, a common measure of financial stability, from negative to stable. This upgrade reflects improvements the company has made to its management team and risk environment and investments in compliance management systems. As a result, New American Funding is now better positioned to ensure consumers and businesses access to reliable and secure mortgage services.
New American Funding Accessibility
Availability
Unlike some lenders that offer 24/7 live customer support, New American Funding is more limited. Customers can contact the company Monday through Friday from 8:00 a.m. until 9:00 p.m. CST or on Saturdays from 10:00 a.m. until 2:00 p.m. CST. You can also make payments through your account on New American Funding’s website.
Contact Information
You can reach customer support via phone at 1-800-893-5304 or by email: at [email protected].
You can also use New American’s branch locator tool to find a loan office near you. You can review your loan application status or your account through the online portal.
User experience
New American Funding’s online portal makes it easy to stay up-to-date on your loan application with real-time tracking. Additionally, you can access various New American Funding loan payment options through a secure online system.
You can also browse the company’s Mortgage Resource Center to find information about mortgage payment assistance programs, the latest mortgage news and tips for getting a good VA loan rate.
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New American Funding Customer Satisfaction
New American Funding mortgage reviews from customers significantly exceed industry standards for mortgage servicing satisfaction. New American Funding reviews have a 4.90 out of 5 in customer ratings on Zillow based on more than 8,800 reviews. Additionally, it scored 695 out of 1,000 in J.D. Power’s 2022 U.S. Mortgage Servicer Satisfaction Study — well above the industry average of 607.
New American VA Loans FAQ
What’s the difference between a VA loan and a conventional loan?
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A VA loan is a type of mortgage backed by the U.S. Department of Veterans Affairs and is available to qualifying veterans, their surviving spouses and active duty personnel. These loans offer competitive interest rates and no down payment requirements. They also don’t require private mortgage insurance. It’s important to note that a funding fee can be rolled into the loan amount or paid at closing.
In contrast, New American Funding’s conventional loan is not backed by the government and typically has stricter credit requirements than a VA loan. Additionally, these loans usually require a higher down payment and more expensive fees.
What are the benefits of a VA home loan?
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When you take out a VA loan from New American Funding, you can take advantage of the following benefits:
Up to 100% financing, even for those with less-than-perfect credit
No private mortgage insurance
Funding fees rolled into the loan
Quick loan closings
No down payment required
Lower interest rates
No monthly mortgage insurance premiums
No prepayment penalty
Reduced funding fees
What are the eligibility requirements for a New American VA loan?
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To be eligible for a New American VA loan, you must have a Certificate of Eligibility (COE) and sufficient income. To get a COE, you must be an active service member, veteran, National Guard, or Reserve member.
Spouses of veterans may apply for a VA home loan if they meet specific requirements. If a spouse’s partner is missing, is a prisoner of war or if remarriage has not occurred after a service-induced disability or death, they may qualify for a loan.
How do I apply for a New American VA loan?
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To apply for New American loans, you must:
Apply for a Certificate of Eligibility (COE) that verifies your eligibility status for a VA loan.
Work with a mortgage specialist to choose the best loan for your needs.
Apply for the loan, either online or with the support of New American’s specialists.
Your lender will then take care of the home appraisal process for you.
How we evaluated New American VA Loans
We looked into VA loans from 20 major mortgage lenders to find the best options for veterans and their families. We compared New American Funding mortgage loan reviews and evaluated rates, repayment options, fees, customer service, closing times and additional benefits.
Summary of Money’s New American VA Loans Review
Military service members, veterans and military families looking to qualify for a VA loan to buy a house may find New American Funding appealing. You can finance up to 100% of the home’s value and take advantage of quick closing times, even with a lower-than-average credit score.
On the other hand, New American Funding does not list its credit and income requirements online. Check out the best VA loans from top mortgage companies if you’re looking for a lender that provides in-person assistance or is more transparent about its rates and fees.