I was a deal seeker long before I ever became a mom. Why? Well, it began as a fun hobby. Scoring designer clothing at 90% off retail was just plain satisfying, and finding freebies in the mailbox always brightened my day.
But that all changed in 2002 when I found myself jobless and 7-1/2 months pregnant with my first child. My husband was a first year pipefitters’ apprentice earning about $9 an hour, and my high-paying job was our bread and butter. We managed for a few months on my severance and unemployment, but when we found out I was pregnant again only three months after our first boy was born, we knew that finding a job was not in the cards and that drastic measures were called for.
This was when I discovered the Grocery Game. I wish I could say it immediately transformed our finances, but I made every rookie mistake in the book. I didn’t truly understand how to use coupons, and I wound up purchasing only the cheapest items from the stores I shopped at. I was every coupon myth/misconception/excuse embodied in one. Perhaps you’re under many of the same false impressions:
Myth: Using coupons screams to the world that I’m broke.
Reality: At first I was a little embarrassed to hand over that huge stack of coupons at the checkout, but I quickly leaned there’s no reason to be ashamed of using coupons! On the contrary, coupon users are savvy shoppers looking to stretch their budgets. In fact, here’s an interesting fact: Consumers in the under-$25,000-per-year income bracket are the least likely to use coupons. The average coupon user is between the ages of 25-34 and earns between $25,000 and $100,000 per year.
Myth: I can’t find coupons for the items I purchase.
Reality: Unless you never need to purchase deodorant, toothbrushes, toothpaste, shampoo, soap, coffee, frozen veggies, yogurt, and on and on, I assure you that you can find a coupon for your purchase. And if you think finding these coupons is difficult, you’re wrong. I challenge you to flip through any Sunday newspaper coupon insert or do a quick printable coupon search and tell me that you don’t find at least a few coupons for products that you use regularly.
Myth: You can’t be brand loyal and save money.
Reality: I am very brand loyal in some cases. It’s true that throwing brand loyalty out the window may garner you bigger savings in the long run, but you can remain brand loyal and still save significantly. The key is to learn how to stockpile your favorite brands. When you can pair a coupon with a rock bottom price, buy enough to last you until the next big deals rolls around. This is when buying multiple Sunday papers really pays off, but if you need additional coupons, you might also consider purchasing them from a coupon clipping service.
J.D.’s note: I’m a recent convert to stockpiling, though I only do it for select items that I really really love. I haven’t managed to combine coupons with stockpiling yet, though.
Myth: Coupons cause you to buy things you might not purchase otherwise.
Reality: This was the biggest mistake I made starting out, but I quickly learned to be very deliberate in my purchases. That’s not to say that I never make purchases that I might not have otherwise, but that doesn’t directly translate into spending more money overall. Coupons are a fantastic way to try new products or brands at ultra low prices. They’re also a useful tool for helping others in need. Often you can purchase toiletries for free or even better than free by pairing a coupon with a loyalty program. Perhaps you don’t need these items yourself, but you could consider donating them to a church or shelter to bless those in need.
Myth: Buying generic is always cheaper.
Reality: If you have an immediate need for a product, store brands can certainly be cheaper. However, one of the key principles of saving with coupons is based on not only buying products when you need them, but on purchasing them when you can get them at the lowest price by pairing a coupon and sale. Name brands are almost always cheaper than their generic counterparts at some point, so by using the “buy ahead” principle, you can stock up on your favorite brands for much less than generic products.
Myth: I can save more shopping at warehouse clubs.
Reality: Shopping warehouse clubs definitely plays a role in my grocery budget, but I utilize our warehouse trips to stock up on meats, baking products, and occasionally produce. Buying these items in bulk saves our family money; however, many of the other prepackaged items can be found for much less per unit by using the buy ahead principle I mentioned previously. Plus warehouse clubs are inherently set up to entice consumers into picking up items on the spur of the moment, so unless you shop very carefully according to a list, chances are you may walk out having spent significantly more than you intended.
Myth: Clipping and organizing coupons is time consuming and not worth the effort.
Reality: It’s true that the amount saved with coupons may directly correlate with the amount of preparation done before a shopping trip; however, the time-to-savings ratio just might surprise you. Chances are there’s a blog that covers the coupon matchups for your favorite store out there, so all you have to do is prep your coupons and list. Clipping, filing, and preparing a shopping list may take you about an hour a week, but that hour of your time could net you a 50, 60, even 70% or more savings on your grocery bill. That’s like giving yourself an instant raise each week! And when you consider that it’s a task you could easily do while watching your favorite TV show, well, I’d say it’s time well spent.
Though it took a little effort, over the years I learned how to maximize my coupon usage. We’ve been through even tougher times since 2002, but through it all, coupons have remained a key tool in reducing our monthly budget. Do we need to use coupons these days? Perhaps not — there’s enough wiggle room in our finances that it’s not a must.
So why do we still use them? Simply because it frees up extra cash for things that we want. We now have no consumer debt outside of our mortgage, and we’ve increased the amount in our onlne savings account and have built a healthy emergency fund. We can take family vacations. We can pay cash for a new car. While I can’t attribute all of this solely to coupons — financial discipline and careful budgeting are obviously important factors as well — they definitely have a place in our money-saving arsenal.
Over the past couple of weeks, more than a few GRS readers have complained about the site’s tone. These folks are afraid that Get Rich Slowly is turning into a column that’s only about frugality and self-denial, one that is neglecting the “rich” part of the blog’s title. These concerns came to the fore in last week’s article about remembering to appreciate what I already have.
In that discussion, ObjectiveGeek wrote:
I want the best possible life for myself and my family. Maybe that means a dream house, or maybe that means the freedom to travel any and everywhere, but maybe that means both. I’d be proud of my dream home if I had earned the means to own it. I don’t think contentment is much of a virtue — it’s more of a guise for mediocrity.
Alex offered a similar sentiment:
I sometimes cringe when I see these kinds of articles. What is so wrong with wanting 5 bedrooms you may never use? What is sooooo bad about wanting a bigger house? If you have diligently saved, and planned, and you can truly afford those nice-ities in life, why not reach for them? Why not buy them?
Here’s the thing: I agree with both ObjectiveGeek and Alex. If Get Rich Slowly has been frugality-minded lately, that’s simply an accident of scheduling. While I believe that frugality is an important part of personal finance, GRS remains dedicated to the Big Picture, to all aspects of getting rich slowly.
There’s nothing wrong with wanting more, and there’s nothing wrong with reaching for nicer things in life if you’ve diligently planned and saved. I certainly don’t mean to imply that it’s bad to choose to buy things that will make you happier. But it’s important to find the proper balance between what you want and what you can afford.
How I Spent My Money in the Past
It used to be that I bought a lot of little Stuff:
I spent hundreds of dollars a month on books and magazines.
I had a lot of recurring expenses, such as my monthly cable bill and magazine subscriptions.
I bought a lot of limited-use tech gadgets, like voice recorders and expensive digital cameras.
I bought too many clothes. When Kris and I went through my closet recently, I was saddened to see so many items still with their tags on!
There was plenty more, of course. Basically, I bought what I wanted without thinking. If a friend had a new gazingus pin or thneed, I’d be inclined to buy a new gazingus pin or thneed, too. And when my income went up, my spending always went up. This is how I succumbed to the tyranny of Stuff.
It’s this kind of spending that I encourage you to question. I’m not saying, “Stop! Don’t spend on the things that make you happy.” I’m saying, “Hold on a second. Take some time to think about the money you’re spending — make sure it aligns with your priorities and goals. Don’t just buy a bunch of Stuff.” Buy based on your goals and values, not out of habit.
How I Spend My Money Today
What do I mean by this? Let’s take a look at how I’ve spent my money over the past couple of years. Each of the things I list below were purchased consciously, with money I already had, because I knew they’d make me happy.
Here’s a gallery of my recent major purchases:
My Mini Cooper, which I coveted for years before I was able to save enough to buy it with cash. I bought a five-year-old used car, and have been very happy with it. Meanwhile, I’m slowly saving for an eventual replacement Mini.
My nice furniture, for which Kris and I saved until we could combine a coupon (yes, really) with a colossal sale. We got this stuff at 50% off regular pricing. That has to be the best coupon I’ve ever used.
My comic books. I have a monthly budget for purchasing comic books (and comic strips) in collected editions. Before I dug out of debt, my comic spending was part of the problem; now, it’s part of the solution — it’s part of what makes all these smart choices seem worth it.
My bicycle. It was a tough decision whether I could afford (and justify) $900 on a new bike last summer, but I’m glad I did. I’ve been riding this thing constantly since I returned from Alaska, and it’s helping me drop the weight. Also helping me drop weight is…
My gym. I spend a lot of money to be a part of the local Crossfit gym. But I also derive a lot of value. Since joining in April, I’ve lost fifteen pounds. By the end of the summer, I’ll be fitter (and stronger!) than I’ve been in my adult life. To me, that’s money well spent.
My travel. Most of all, I’ve been spending on travel. Kris and I hope to be able to make one big trip every two years. (Maybe every year, if we’re diligent.) This year is an exception. I used part of my book advance to go to Belize in February, and later in 2010 we’ll travel to France and Italy.
Make no mistake: I live a rich life, for which I am tremendously grateful. But this rich life is largely a result of the choices I’ve made. I worked hard to dig out of debt and get where I am today. I’m fortunate to have found work that I love and am good at, and I’m lucky to be a winner in the “lottery of birth” — and I make sacrifices on the things that don’t matter to me so that I can indulge in the things that do.
I write about thrift and frugality a lot, but it’s only because I recognize their value in helping me obtain my goals.
Important: I make certain to have a full emergency fund, and to set aside my target amounts for retirement and taxes before I spend on the fun stuff. Again, it’s about managing priorities.
Conscious Spending
“I should write a post for Get Rich Slowly,” my wife told me the other day. “I could tell your readers all about how you’re not frugal.” She meant that unlike what some of you think, I’m not into self-denial. I do buy nice things for myself.
But here’s the difference between my current spending and my former profligate ways: I can afford everything I’m buying, and when I do buy, it’s a conscious decision. I’m not financing my lifestyle on debt, and I’m not buying things just to “keep up with the Joneses” or out of habit. My spending now reflects my priorities, my goals, my values.
Because I’m spending consciously and living within my means, I’m much happier than I was before. I can’t have everything I want — no $2.3 million home for me, for example — but I can have a few of the things that seem most important.
In a follow-up comment to my post last week, objectiveGeek wrote:
Of course having money for money’s sake is nearly pointless, but having money for what it represents (value, effort, innovation, hard work, success) and for what it provides (freedom, time, safety, opportunity — essentially life!) is the noblest of goals.
I think that’s correct. We’re all striving to get rich — quickly or slowly — because of what we believe money can bring to our lives. I just think it’s important to maintain balance, to remember that money and happiness aren’t always connected, and to acknowledge that the best way to achieve your financial goals is to make active, conscious choices about where and when you spend your money.
Maybe it’s time to officially add a fifteenth tenet to the Get Rich Slowly philosophy. Namely, you can have anything you want, but you can’t have everything you want.
One thing I’ve always been happy with is how me and Wes have always been very open about money.
No, we haven’t always done things the “normal way” (we combined finances YEARS ago and often receive flack for that), but in the end things worked out well for us. I think that’s because we make sure to be open about money.
I have witnessed many people around me make several money mistakes. I know people who have never once discussed a budget (even budgets that suck!) with their significant other, even though they are married. I also know others who have broken marriages/relationships because of secret debt, financial infidelity, and more.
No, life isn’t all about money, but money does play a big factor in a relationship.
I’m all for people doing their own thing in life, but, in general, the money behaviors below can lead to big mistakes when in a relationship. Money mistakes can lead to debt, delayed retirement, stress, heartache, and more.
Who wants all of that? Not me!
Below are financial mistakes that couples should try to avoid:
Assuming that merging finances is right for everyone.
Even though Wes and I have merged finances, I know plenty of others who have completely separate finances and wouldn’t have it any other way. As I always say “Everyone is different.”
There is no right or wrong way for anyone, and there are positives and negatives to combining or keeping everything separate. You should research the differences and see what is right for you and your relationship.
Just because you are in a relationship does not mean that everything needs to become one.
Not talking about money with your significant other.
If you are in a relationship, you should talk about money at least somewhat. And if you are married, in a serious relationship and/or have combined finances, then you DEFINITELY need to be talking about money.
You should discuss your credit scores, past money problems, any debt that the other person may have, how the monthly budget is going, and more. You should be able to openly talk about money with your significant other without it turning into stress or a money fight.
We talk about money all the time. Honestly, at first I think Wes hated it. Now he is used to it and we understand how to talk about money to each other without us starting to bicker at each other. We talk about what we can improve on, what changes need to be made, how our spending is doing, retirement, and more and these are talks that we actually enjoy having with each other.
Having only only person understand the financial situation that you two are in TOGETHER.
This is something that me and Wes are guilty of. I’ve always been in charge of our finances just because I have always been better with managing them. Also, training another person just seemed like added stress because we would probably often over check what we’ve done.
However, this is a huge problem that I am working on changing. We have many bills, retirement, cars, etc., and if something were to happen to me then Wes would be completely out of the loop and it would be very hard to manage on his own. Just clueing your loved one in can be helpful.
Before you laugh and think we are crazy for making this relationship money mistake, MOST couples are actually this exact same way – usually just one person handles all of the finances.
Also, it helps everyone stay on the same page. If one person is doing all the work then all of the financial burden can fall on them as well.
Keeping something money-related a secret from your significant other.
This is a tough one, but it’s something that I’ve seen pop up several times recently. Keeping something money-related a secret from your loved one can be a huge problem.
They can feel like they were left out, that you didn’t trust them, and/or that you are financially cheating.
Money secrets may include:
Secret debt.
Secret money saved.
Lying about how good or bad the family is financially doing.
And more, of course!
Completely throwing out the idea of getting a prenup.
Okay, so me and Wes don’t have a prenup, but we also combined our finances when we were young and had nothing. However, there are many instances where having a prenup may be a great idea for a couple. No, it doesn’t mean that you don’t trust the person you are in a relationship with.
The fact is that you never know what will happen later. What if YOU are the problem later on? It happens!
What financial mistakes have you seen or experienced?
If you are not in a relationship, what mistakes will you make sure to avoid?
Sometimes finances can seem like magic. Or, at the very least, a mystery. Especially when it comes to figuring out how much rent you can afford.
This is where budgeting comes in. Creating a monthly budget can help you understand how rental rates fit into your financial life.
Use these tips and resources to get a handle on your budget, understand how rental rates are determined, and figure out just how much you can comfortably afford to spend each month on rent.
The budget worksheet
Think of your budget not as a restrictive punishment that forces you to cut back, but as a document that allows you the freedom to spend what you need to spend and still meet your financial goals.
Your budget plan starts with knowing how much you make. Once you know how much income you have coming in each month, you can look at how much you have going out in expenses. Comparing those two basic figures is how you make a budget. Remember to be realistic and calculate not just your salary but your take home pay after all expenses are factored in.
It’s easiest to record your spending behavior and get everything straight when you use a budget worksheet. There are several online resources you might check out. Bankrate offers an online app where you can identify and input your expenses; Freddie Mac suggests tracking your income for two months using this PDF budget worksheet.
The rent figure
Rental rates are set according to what the market can bear. To set rates, property managers will consider what comparable apartment units rent for in the area. The price will go up if their units feature bonuses like convenient amenities, a prime location or recent renovations.
But how much should you spend on rent? While it’s common for financial experts to recommend spending around 25 to 35 percent of your income on rent, that figure may not be feasible. In some of the largest and most competitive rental markets — New York City, for example — you may have to spend more. Renters should be flexible and consider what other costs they may be willing to cut in order to get the right rental in the right place.
Watch for hidden costs
It would be nice if rent prices were the only expenses impacting a renter’s monthly budget. But in the real world, your monthly rent is just the first of several other obligations. Beyond the obvious bills such as utilities, cable and Internet, renting often includes hidden costs that can pop up and bite your finances if you aren’t prepared.
Before you even move in, you’ll want to factor in costs such as application fees, moving costs and security and pet deposits. You’ll also need to account for moving expenses and acquisition costs for new furniture or other household necessities.
But the trickiest expenses are the ones that don’t show up until after you’ve moved in. Did you get a parking ticket because the rental didn’t come with paid parking? What will it cost to use a laundromat if you have no in-unit washer and dryer (plus, how will you lug your dirty laundry back and forth)? Think hard and ask tough questions about what new costs your apartment may bring.
Make it all add up
Here’s the most important part: find a way to afford rent and cost of living, while keeping some spare change for your own happiness. Ideally, you want to allot enough funds for each of your fixed expenses, while also saving a little something for the future. To determine a rental rate you can afford means that rate has to fit within these guidelines. Your budget plan will help you figure out how all these expenses balance the spreadsheet of your financial life.
If you can make the numbers work in your city, allocating the ideal 25 to 35 percent of your budget to rental expenses will help you live within your means. The idea is that you’ll have money left over for other expenses, afterward — even some fun ones like vacations and the occasional adult beverage.
Average mortgage rates moved higher for all types of loans compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans jumped.
The Federal Reserve has lifted rates 10 times in a row, most recently at its May 3 meeting. Rates now are at a 15-year high, but the consensus is that inflation is finally cooling and the central bank might halt raising rates.
”Mortgage rates have settled into a new normal of around 6.5 percent on a 30-year fixed-rate loan,” says Lisa Sturtevant, chief economist at Bright MLS, a large multiple listing service in the Middle Atlantic region. ”With growing recession risks, we could see mortgage rates dip lower, but we will not be returning to the 3 percent level seen during the height of the pandemic.”
Rates as of June 14, 2023.
The rates listed above are averages based on the assumptions shown here. Actual rates available within the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, June 14th, 2023 at 7:30 a.m.
>>View historical mortgage rate movements
You can save thousands of dollars over the life of your mortgage by getting multiple offers. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.
“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
The average rate you’ll pay for a 30-year fixed mortgage is 7.04 percent, up 2 basis points over the last seven days. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 6.96 percent.
At the current average rate, you’ll pay principal and interest of $667.99 for every $100,000 you borrow. That’s an additional $1.34 per $100,000 compared to last week.
The 30-year mortgage is the most popular option for homeowners, and this type of loan has a number of advantages, including:
Lower monthly payment. The 30-year mortgage offers lower, more affordable payments spread over time compared with shorter-term mortgages.
Stability. With the 30-year, you lock in a consistent principal and interest payment. That predictability lets you plan your housing expenses for the long term. Keep in mind: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
Buying power. With lower payments, you can qualify for a larger loan amount and a more expensive home.
Flexibility. Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
Strategic use of debt. Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed-rate mortgage with a lower monthly payment can allow you to save more for retirement.
15-year mortgage moves up,+0.08%
The average 15-year fixed-mortgage rate is 6.46 percent, up 8 basis points over the last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost approximately $869 per $100,000 borrowed. The bigger payment may be a little more difficult to find room for in your monthly budget than a 30-year mortgage payment would, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.
5/1 ARM rate moves up, +0.03%
The average rate on a 5/1 adjustable rate mortgage is 6.09 percent, up 3 basis points from a week ago.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. To put it another way, the interest rate can change periodically throughout the life of the loan, unlike fixed-rate loans. These loan types are best for people who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.09 percent would cost about $605 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
Jumbo mortgage rate increases, +0.02%
The average rate you’ll pay for a jumbo mortgage is 7.05 percent, an increase of 2 basis points from a week ago. A month ago, the average rate was below that, at 7.01 percent.
At today’s average rate, you’ll pay principal and interest of $668.66 for every $100,000 you borrow. That’s an extra $1.34 compared with last week.
Summary: How mortgage interest rates have shifted over the past week
30-year fixed mortgage rate: 7.04%, up from 7.02% last week, +0.02
15-year fixed mortgage rate: 6.46%, up from 6.38% last week, +0.08
5/1 ARM mortgage rate: 6.09%, up from 6.06% last week, +0.03
Jumbo mortgage rate: 7.05%, up from 7.03% last week, +0.02
Interested in refinancing? See rates for home refinance
Current 30 year mortgage refinance rate trends upward, +0.05%
The average 30-year fixed-refinance rate is 7.16 percent, up 5 basis points compared with a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.05 percent.
At the current average rate, you’ll pay $676.08 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $3.37 higher.
Rate trends: Where are mortgage rates headed?
The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.
“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”
Comparing mortgage terms
The 30-year fixed-rate mortgage is the most popular option for homeowners, and this type of loan has a number of advantages, including:
Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.
That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:
Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.
Determining how much house you can afford
If you’re not sure how much of your income should go toward housing, follow the traditional 28/36 percent rule. Most financial advisers agree that people should spend no more than 28% of their gross income on housing (i.e., your mortgage payment or rent), and no more than 36% of their gross income on total debt, including mortgage payments, credit cards, student loans, medical bills and the like. Calculate how much house you can afford and determine your monthly payments.
Here’s everything you need to know about rising mortgage rates and whether they will fall in the future.
Why are mortgages going up?
Rising interest rates mean it costs more to borrow money from banks and other lenders, while people who save money in banks receive more interest for putting their money into accounts.
The Bank of England says it is increasing interest rates to bring inflation down but it takes time to work, usually up to two years.
The idea is that higher interest rates mean less money is being spent in the UK and that brings down the overall spending in the economy and slows price rises down.
As mortgages are a type of credit, they are affected by rising interest rates.
However, not all mortgages are affected. People who have a fixed-rate mortgage will be largely insulated from interest rate rises until the fixed rate comes to an end and a new one needs to be negotiated.
People on tracker mortgages are more susceptible to interest rate rises because they follow the base rates set by the Bank of England.
Many mortgage lenders already put up fixed-rate mortgages for new customers ahead of the interest rate, according to Rightmove’s mortgage expert Matt Smith.
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The property expert said the average interest rate for a five-year fixed 85% mortgage rose from 4.44% to 4.52% ahead of the BoE announcement. That works out at an extra £14 a month for someone purchasing a typical property and spreading the cost over 25 years.
Smith said people on tracker mortgages may be hit harder by the BoE’s decision to raise interest rates.
The Rightmove expert said: “Those on a tracker mortgage will be more disappointed with the news, as they may have thought that the base rate had peaked in March given some of the positive signs for the wider economy, and this is another cost they will need to factor into their monthly budget when the full rate rise is passed on.”
The rise in interest rates has seen the housing market slow down with the number of transactions and mortgage approvals declining in April 2023.
There were 82,120 property transactions in the UK in April, according to HMRC’s seasonally adjusted figures. That represented an 8% drop compared to March while also a quarter down on April 2022.
Mortgage approvals also plunged. There were 48,690 mortgages given the greenlight in the UK in April 2023 according to the Bank of England’s statistics. That figure is 5% lower than in March and more than a quarter lower than a year ago and levels seen between 2018 and 2019.
How high will mortgage rates go in the UK?
It’s impossible to say how high interest rates may go without the aid of a crystal ball but the Bank of England has given some indication of how it expects things to progress in the future.
The central bank has targeted getting inflation down to 2% by the end of 2024 – it is currently at a “higher than expected” 8.7%.
BoE forecasts predict that interest rates will peak at 4.75% at the end of 2023 before falling to around 3.5% by 2025.
But while inflation remains high, there is the possibility of interest rates rising to counteract it and that could mean a 13th consecutive monthly rise might be on the cards in June.
In fact, stubborn inflation rates mean rises could continue for a while yet.
Are mortgage rates coming down in 2023?
With interest rates set to remain high until inflation starts to fall, that could see mortgage rates continue on an upward trajectory.
Rightmove’s Smith said: “Looking ahead, if the Bank of England outlines a positive view on the prospect for inflation and base rates, we could see mortgage rates fall, as they have done after recent base rate decisions. But if the bank is more cautious, we can expect rates to continue their upward trend in the short term.”
However, the bad news for people paying off mortgages is that a lot of the pain could still be to come.
Think tank Resolution Foundation said two-thirds of the eventual £12 billion increase in annual mortgage costs across Britain may still yet to be passed on.
That’s because fixed-rate mortgages have become more popular in recent years – the think tank said fixed-rate deals accounted for £4 out of every £10 spent before the financial crisis but now £9 out of every £10 lent is at a fixed rate.
Mortgages that are at a fixed rate for five years also became the most popular product between 2016 and 2022, overtaking two-year fixed mortgages.
more mortgage pain to come,” said Simon Pittaway, a senior economist at Resolution Foundation.
In fact, inflation figures in April suggested rising interest rates will continue. Inflation in the year up to April was 8.7% and although that was down from the 10.1% recorded in March it was still higher than expected. Financial analysts had reportedly anticipated inflation to fall to 8.2%.
That led to predictions the Bank of England could raise rates to as high as 5.5% in a bid to control inflation.
Kellie Steed, Uswitch’s mortgages expert, said: “While many experts thought that the series of consecutive Bank of England base rate rises were ending, more recent analysis suggests that it will reach 5.5% by the end of the year, with no signs of rates beginning to fall until at least February 2024.
“It’s clear that both recent and anticipated future base rate lifts, as well as increased swap rates, have already been factored into many lender’s rate decisions, with Nationwide, Halifax, Santander, Virgin Money and Atom mortgages all pushing up their fixed rates over the past few days.”
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What support is available if you’re struggling to pay your mortgage?
Rising mortgage payments may not be something that every household can absorb, particularly with the wider cost of living crisis driving up other costs.
If you are struggling to pay your mortgage, the first thing you should do is contact your lender to discuss your options.
If you are receiving universal credit or other benefits, you may be able to get a Support for Mortgage Interest Loan to help you cover rising interest payments. This is from the Department for Work and Pensions (DWP) and you have to repay the loan when you sell the property.
Additional support is available in Scotland through the Home Owners’ Support Fund. This is based on two schemes – the Mortgage to Shared Equity scheme will see the Scottish Government buy a stake in a property to reduce the loan while the Mortgage to Rent scheme allows a social landlord to buy a property and rent it back.
Around one in seven mortgage holders who seek help from StepChange are in arrears on their mortgage, the debt charity said.
“The situation is becoming increasingly precarious for many people and widespread problem debt is a risk, particularly for financially vulnerable households,” said Vikki Brownridge, chief executive of StepChange in a call for firms to be “proactive” in supporting people who are struggling to pay.
“For anyone worried about housing costs and their ability to cover payments, it’s important to reach out for help as early as possible, whether that’s through contacting their lender, or a free debt advice charity like StepChange.”
If you are struggling to pay, support from StepChange and other debt charities is available or you can call the National Debtline on 0808 808 4000 or contact Citizens Advice for advice.
Do you have a story to tell or opinions to share about this? We want to hear from you. Get in touch and tell us more.
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People are constantly looking for ways to save money, but it can be difficult. If you’re like me, that uncertainty keeps you from taking action.
If this sounds familiar to you and your friends or family members who want the best way possible in saving some cash, then I have good news: there is a secret formula!
Money Saving Charts! A simple way to save more money. For many Money Bliss readers, it has changed their lives completely.
We have the most popular money saving challenges around!
If you are looking for a chart on how to save money, then you are in the right place.
Money saving charts are one of the ways that individuals can save money. There’s a wide variety of different types and each type has its own purpose, depending on what you want to achieve with your savings.
By using a money saving chart, you can easily track your progress, stay motivated overtime, and save more money overall.
What are Money Savings Charts?
Money savings charts are a great way to keep track of your money.
We have a slew of saving money charts to choose from here at Money Bliss! Use fun gel pens or highlighters for a colorful way to stay motivated.
They allow you to visually see how much money you are saving and help you stay on track with your goals.
Living below your means is a difficult task, especially if you are a one-income family. However, with careful planning and execution, it is possible to save money and increase your liquid net worth.
One way to do this is by using money saving charts. These charts allow you to track your progress and make adjustments as needed.
Why Use a Saving Money Chart?
One of the best ways to save money is by tracking your spending and savings. One way to do this is through a monthly budget, which can help you stay on track with your goals and avoid unnecessary spending.
A money saving chart will help you see where your money goes and how to spend it wisely.
This is a great way to visualize the data and make sure you aren’t wasting any money.
By seeing how much money you save each month, you can better understand where you can cut back, make informed financial decisions, and save more money.
What Can You Track With Money Savings Charts?
Money savings charts are used for tracking the progress of a specific goal or project.
They can be created in Excel, Google Sheets, or a simple printable to hang around the house.
A money saving chart is a great way to keep track of your progress.
It helps you stay motivated and inspired as you watch your net worth grow. Additionally, it’s easy to see yourself making progress when using a money saving chart – which can encourage you to save even more money!
#1 – Debt Payoff
Debt payoff is the process of paying off debt. The goal is to pay off your debt faster than the payoff date.
When you’re trying to pay off your debt, it’s important to track your progress. This will help you stay motivated and see success.
You can use a free debt payoff tracker or printables to help you out. With these tools, paying off your car loans, student loans, and more will be a breeze!
#2 – Emergency Fund
An emergency fund is an account where money can be stored for short-term financial emergencies. You should save $1,000 as a starter emergency fund. Figure out how much emergency fund you need.
A well-funded emergency fund is one of the smartest things you can do for yourself both financially and emotionally.
This money should be set aside in case of an unexpected expense, such as a car repair or medical bill if you don’t have sinking funds.
Use these charts to help you save for your emergency fund more quickly.
$3 – Car Fund
A car fund is money set aside to purchase a car. The goal is to pay for the car in full and not take out a car loan.
Just remember… a car is a depreciating asset, so you only should buy what you are willing to lose, but still have the safety features you want.
You can use this car fund tracker to save for anything related to a car, such as the cost of a new or used car, down payment, or ongoing maintenance. This tracker is simple and easy to use, and it’s also very cute!
#4 – Vacation Fund
It can be tough to save up for a vacation while you’re trying to live your everyday life, but it’s definitely not impossible.
One way to do it is by setting up a “vacation fund” and depositing a certain amount of money into it every month. That way, when the time comes to take that much-needed break, you’ll have the cash to cover it without breaking the bank.
The amount of money that can be deposited into the account can vary. Personally, we set aside a set amount each month to fund our love to travel!
#5 – House Down Payment or Home Improvement
This printable helps you save for anything on your house- including a down payment.
It is a pivotal moment in someone’s life and it is important to be financially ready for buying a house. Having this saving goal will help make the process easier.
If you are looking at remodeling or just wanting to set money aside for a furnace, this is a great way to keep you motivated (even if you are excited about the project or not).
#6 – Wedding Savings
Saving for a wedding can be a daunting task, but it’s important to remember that it will help avoid debt in the long run.
Creating and following a money saving chart can help you save for your dream wedding or any honeymoon you want to take. You will be able to see your progress and adjust your spending habits along the way.
There are many ways to save money for a wedding, and one easy way is to use a printable wedding savings chart.
#7 – Investments (401k, Roth IRA, etc.)
Saving for your future is one of the most important things you can do and the sooner you start, the better.
The money savings chart will help guide your investment goals so that you can save for a comfortable retirement.
You want to make sure to use a saving money chart each year for retirement. Then, it will help you save year after year and reach your goal faster.
#8 – Rainy Day Fund
A rainy day fund is a large sum of money saved specifically to cover unexpected expenses beyond just emergencies. This could be anything from job loss to a medical emergency.
Having a rainy day fund gives you peace of mind in knowing that you have the resources to take care of yourself and your loved ones in times of crisis.
The money in your rainy day fund should cover 3-6 months of expenses. At the bare minimum, you would need a $10,000 savings goal for your rainy day fund.
#9 – To Stop Working Early
This one can be a hotly debated topic, but if you don’t want to wait until retirement age to retire than you need to start setting money aside today in a joint brokerage account.
You need to start going your money through investments to pay for your future expenses.
This is part of the popular FIRE movement or I just want to don’t want to work anymore.
This is a longer term goal that will take you 3-10 years to complete depending on your hustle, but it is a great financial vision to strive towards.
#10 – Just Because
This one is my favorite! Because each of us is on our own journey and financial path.
Your saving goals are going to be different than mine. And that is okay!
The end goal is to be saving more than you were previously. So, comment below and let us know what you are saving for.
How to Use A Money Saving Chart
This money saving chart is a great tool for understanding where you are towards your goal.
More than likely, you want to place your chart in a very prominent place. Somewhere you need constant reminders to stay on track.
This chart is designed to help you save money.
Once you complete a square, line, or box, color in that section to show you finished it.
That way, you will steadily increase your savings over time!
Supplies Needed:
I truly believe tracking your savings goals come alive once you add some color. So, here are the supplies you need to get started.
Below are links to my favorite products 🙂
5 Tips to Help You Save More Money
There are a number of things you can do to help you save more money. Here are five tips to get you started:
1. Know Why You Are Saving
Remember, the best way to save money is when you have a purpose.
Make a list of your long-term financial goals and focus on achieving them first. This will give you something to work towards and stay motivated throughout the process!
2. Pay Yourself First
An easy way to start saving money is to pay yourself first.
Every time you get paid, put a small amount of your paycheck into savings before you spend it. By automatically transferring a fixed amount of money into savings or investments each month, you are guaranteeing you will hit your goals.
Then, you will always have money saved for emergencies and other important things.
It is not good to be tempted to spend the money sitting in your account. Move it to a savings or investment account and pay yourself first.
3. Set a Spending Limit:
It is important to set a spending limit for yourself and stick to it, even if you don’t want to.
If you are struggling financially, set a budget and make a plan to stick to it.
If you don’t, then you start a ridiculous cycle where you keep getting sucked back into spend-spend-spend, which leads to stressed-out, which leads to more spending.
The solution is to set a spending limit and stick with it.
4. Make Your Savings Automatic:
If you’re serious about saving money, you need to make it automatic.
That means that you have money automatically taken out of your paycheck and put into a savings account before you even see the cash. You can’t spend it if you never see it.
If a certain amount is taken out of your check each week, then you won’t even miss the money.
You can also set up an automatic transfer from your checking account to a savings account.
This is the best way to force yourself to save money and keep it out of sight, so you won’t miss it or spend it.
5. Make Saving Money Fun:
Saving money can be fun and it should be fun if you want to do it for the rest of your life!
One way to make saving money fun is to set up a savings challenge with friends.
Everyone puts in some money and at the end of the month, whoever has saved the most wins! You can also try to save money by playing games. For example, you can try to see how little money you can spend on a date or at the movies.
Top Fun Ways to Save Money:
6. Make Saving Money A Priority:
You can’t save money if you don’t make it a priority.
If saving money is important to you, then make time in your schedule for it.
Schedule savings just like you schedule meetings and other things. This is a planned date to move money and actually save!
If you want to save money, then make it a priority!
7. Increase Your Income
Increasing your income can be challenging.
However, it is more beneficial to increase the amount of money coming in rather than cutting more expenses.
You can also look into ways to make more money through side hustles or investments. Whatever route you choose, increasing your income can help improve your financial situation.
8. Track Spending:
There are a number of ways that you can increase your income without getting a second job. And many people enjoy this route, so your saving money tip.
You can start by evaluating your spending habits and looking for ways to cut back, like canceling unnecessary subscriptions or downgrading your cable plan.
It is important to track your spending in order to see where the money is going. You’ll be able to see what you’re spending on and then set a budget that includes only the essential expenses.
Avoid unnecessary expenses by being mindful of what you’re buying and where you’re spending your money.
9. Start Saving Early:
If you start saving early, it will be easier for you to save more money because you are in the habit of savings.
While we all cannot save at a young age, we can start now. That way you will have more saved up by the time you are older and ready to retire.
Saving money is very important in building up net worth.
With the help of compounding interest, you will reap the benefits of saving early.
10. Stay Positive
Last but not least, staying positive and motivated is key to saving money.
When you have a clear goal in mind and are determined to achieve it, it will be much easier to stick to your budget and save more money.
You have to stay motivated throughout your journey and staying positive will help your mindset and believe you can achieve anything!
Money Saving Chart Printable
There are many different ways to save money, and one great way to start is by using a printable money saving chart.
In our free resource library, you can find many free money saving charts printable to help get you started on your savings journey.
Above is an example of a chart that can be printed for saving money. Download your PDF copy.
Which Save Money Chart will You Use?
A savings chart plots out how much has been saved, thus allowing you to visualize how far you have come and have far you have left to reach your goal.
The whole concept of saving money is not a new idea, but you may want to break down your savings goals into smaller steps like cash goals, financial goals, and net worth goals.
More importantly, filling out this chart is a helpful way for personal finance to save money and gain more net worth.
The secret to saving money is in this easy step-by-step guide. What is the best way for you to save hundreds of dollars or even thousands? It’s all about planning and thinking ahead.
With this small guide in your hand, you’ll be able to save more than $100 a month and take the mystery out of saving money! Many of our readers save $10K in a year.
Start today and enjoy the benefits of living a richer life!
Know someone else that needs this, too? Then, please share!!
The mortgage industry has its own language, and in order to understand it, homebuyers need to learn different acronyms and jargon when shopping for a home loan. A typical home loan payment or mortgage payment involves a single payment, which is the sum of four different line items: the loan principal, interest, taxes, and insurance – also referred to as PITI.
Before you set your sights on a home, know if you can afford the costs by learning what PITI is and how it impacts your monthly mortgage payments.
What does PITI stand for?
PITI stands for the loan principal, interest amount, taxes, and insurance on your home – the four major elements that make up mortgage payments.
Homebuyers often underestimate the true cost of homeownership by failing to take into account property taxes and homeowners insurance. It’s crucial that you budget for all the components of your mortgage payment before purchasing a home.
What is PITI? The four components
Now that we know what PITI stands for, let’s break down each of the four components and analyze the individual elements that make up your monthly mortgage payment.
1) Principal
The mortgage principal is the loan amount before any interest is calculated. This is the base amount of your home purchase price minus any down payment you make.
We’ll use a hypothetical home purchase for reference; if you buy a home for $450,000 with a 20% down payment ($90,000), your mortgage principal amount will be $360,000.
Over your mortgage term, you pay substantially more than the original $360,000 to the lender in the form of loan interest. The principal is the base amount used for loan calculations to determine if they will extend a loan to you.
2) Interest
Your mortgage interest rate is what you pay the lender as part of your monthly mortgage payment to borrow the funds to purchase your home. The mortgage lender calculates interest as a percentage of your outstanding principal. If your principal loan is for $360,000 and your lender charges you an interest rate of 6%, this means that you will pay $21,600 (6% of $360,000) in interest for the first year of your mortgage.
Your mortgage interest and principal payments are itemized on a mortgage amortization table. The amortization charts show how much each mortgage payment pays down your principal and interest. When you first start making mortgage payments, most of your monthly payment goes toward interest instead of the principal.
This split shifts over time, and eventually, the amount you pay toward interest decreases, and more is paid toward the principal. As the principal amount of your loan decreases, you start to earn equity on your home. Equity is the portion of your home that you own outright. Your interest decreases as well, as you only pay interest on the principal amount you have not paid off.
For our example, you will pay $21,600 in interest over the first year of your $360,000 mortgage. By the time you have paid down $260,000 of that principal, your principal amount will be $100,000; at that point, you’ll pay interest of $6,000 annually (6% of $100,000).
3) Taxes
When you own your house, you pay taxes on the property to your local government to maintain roads, emergency services, police, firefighters, schools, and more. Buyers often overlook property taxes when estimating homeownership costs, but it is important to consider this recurring annual cost when you’re searching for your new home. Property taxes vary by location and are the most expensive tax homeowners pay. Taxes may be higher in a newer neighborhood or an area coveted by many homeowners. They are often less if you live just outside coveted neighborhoods and in rural areas.
The amount of property tax you pay is determined by the local property tax rate and the value of your home. A general guideline to estimate property taxes is to allocate approximately $1 for every $1,000 of your home’s value, paid on a monthly basis.For example, if your home is worth $450,000, you can expect to pay around $450 per month in property taxes or $5,400 per year.
As part of the home purchase process, most states require that you get an unbiased, official appraisal to estimate your taxes accurately. Your lender usually orders the home appraisal and includes the cost in their list of closing costs. After you close on your home purchase, keep in mind that your local government will regularly reassess properties every few years for tax purposes, which could lead to a change in your tax bill.
4) Insurance
The “insurance” component of PITI refers to homeowner’s insurance and, when it’s required, private mortgage insurance (PMI). Let’s discuss each of these concepts in more detail.
Private mortgage insurance (PMI)
Your PMI rates depend on how much of a down payment you made and your credit score. If you’re putting down less than 20% on a conventional loan, you’re required to pay for private mortgage insurance (PMI), which protects the lender if you default on your mortgage payments. Once you build at least 20% equity in your home — and your loan-to-value (LTV) ratio is 80% or less — you can get rid of PMI. For FHA loans, a similar mortgage insurance premium has to be paid throughout the life of the loan on any FHA-backed mortgage loan.
If your PMI comes in at a rate of 1%, here’s how you’d calculate a mortgage of $360,000: $360,000 x 1% = $3,600 per year; $3,600 ÷ 12 monthly payments = $300 per month.
Homeowners insurance
Most mortgage lenders require a homebuyer to purchase and maintain homeowners insurance over the entire loan term. Homeowners insurance covers you and the lender if something catastrophic happens to the home, and you need to rebuild or move. Most homeowners insurance policies cover your home in the event of a break-in, fire, or storm damage.
Most insurance companies require you to buy additional coverage for damage from earthquakes or flooding. You can also purchase insurance riders to cover items of significant value, such as an expensive musical instrument, art, or jewelry. If you buy a condominium, you’ll also pay a homeowners association fee. Your lender may consider your HOA fee your insurance as the HOA carries its own insurance that covers the building, and thus you may not need another policy.
Property insurance amounts can vary among different insurances. It’s wise to shop around after the seller accepts your purchase contract, and before you close on the property, to get a good idea of reasonable rates. Insurance companies consider these factors when calculating an insurance premium:
The home’s value
Whether you live in an urban area or a rural area
Whether you live in an area with high climate risk
How close your home is near a fire department or fire hydrant
Whether you have an insurance risk on your property, i.e., something could injure children, such as a trampoline, pool, or specific dog breed
How many insurance claims you make each year for other types of insurance
When estimating your homeowner’s insurance costs, it’s helpful to keep a general rule of thumb in mind. On average, you can anticipate paying approximately $3.50 per every $1,000 of your home’s value in annual homeowner’s insurance premiums. For instance, if your property is valued at $450,000, you can expect to pay around $1,575 per year for insurance coverage, which translates to roughly $131 per month.
How to calculate PITI
Before you start your search for a house, it’s a good idea to calculate PITI to determine your price range and help you find a mortgage option that will fit your budget. The exercise will make you a more rational home buyer and keep you from falling in love with a house outside your price range.
The simplest way to calculate PITI is by using an online monthly mortgage calculator. Redfin’s mortgage calculator includes the principal and interest, taxes, insurance, HOA, and PMI. You can also add in your location for more accurate estimates.
PITI and the 28% Rule
Your PITI gives you a rough idea of what purchase price range you can afford. One way to identify a purchase price within manageable limits is to use the housing expense ratio. To ensure your ongoing ability to make your mortgage payments, home finance experts typically recommend that your housing costs should be equal to or below 28% of your monthly household budget. If your PITI is more than 28% of your monthly budget, your lender may require you to pay for additional mortgage insurance.
In our example, you can estimate your housing expense ratio by dividing your PITI by your total monthly income. If your household income is $10,000 a month, your PITI will make up about 28% of your monthly budget, well within recommended guidelines. ($2,800/$10,000 = 28%.)
Keep in mind that PITI may just account for just some of your monthly expenses when owning a home. Depending on where you live and how you are paying for your home, there may be additional costs to consider. Additionally, the components that make up PITI are broadly defined here; there is often more complexity that goes into each part of PITI.
How PITI impacts loan approval
During the home buying process, it can be easy to trick yourself into thinking you can afford a more expensive home if you only look at your mortgage’s principal and interest cost without considering the total PITI with taxes and insurance.
For instance, let’s take a 30-year mortgage on a $450,000 property, assuming a property tax rate of 1.25% ($5,625 per year) and an annual homeowners insurance premium of $3,600. In this scenario, your monthly financial commitment would go beyond just the principal and interest amount, as you would need to allocate an additional $581 to cover taxes and insurance. Understanding and accounting for these factors will provide you with a comprehensive understanding of the actual costs involved in homeownership.
Here is a breakdown of the example discussed above.
Principal and Interest
PITI
Interest rate
7%
7%
20% down payment
$90,000
$90,000
Property taxes
N/A
$450
Homeowners insurance
N/A
$131
Private mortgage insurance
N/A
N/A
Monthly payment
$1,800
$2,381
How DTI factors in
The principal balance will factor into your debt-to-income (DTI) ratio. Your DTI ratio gives lenders an idea of how capable you are of managing money and the likelihood that you will consistently make your monthly payments. To determine your DTI, the lender uses your total minimum monthly debt obligation and divides it by your gross monthly income to arrive at a percentage. This calculation also includes payments on credit card accounts, auto loans, student loans, and other recurring debt payments. Lenders consider you a higher risk if your DTI ratio exceeds 43%, some lenders will allow a DTI as high as 50%.
Don’t overlook other housing costs
PITI is just one fundamental concept to understand before applying for a mortgage. As you consider how much house you can afford, you’ll also need to plan for additional costs typically associated with homeownership. These include HOA or condo fees, which can range from $100 to $1,000 per month, with an average of $200 to $300. Additionally, budgeting for repairs and maintenance is crucial, with a general guideline of saving 1% to 5% of your home’s value annually. For a newer $450,000 home, this would mean setting aside $4,500 to $22,500 per year. Utility bills for electricity, water, gas, sewer, cable, trash, and internet should also be factored in, and contacting the utility company or asking the seller or neighbors can help estimate these costs.
The bottom line on PITI
Buying a home is very exciting, but before signing your mortgage contract, know what payment amount you can afford based on PITI and other monthly costs. The more you understand the home buying and mortgage process and the total cost of homeownership, the easier it will be to finalize your purchase decision. Your home purchase represents an important milestone in your life – avoid confusion and uncertainty by gaining a solid understanding of PITI and the cost of homeownership.
If you want more financial discipline you are probably looking to curb impulsive spending, save money, or maybe just achieve financial stability.
Building self discipline your financial decisions is an important part of building wealth over the long run.
What’s Ahead:
Why is self discipline the key to becoming a good saver
Being a good saver requires self discipline since there is so much fun stuff to do and buy. You are exposed to more advertising than anyone in the history of the world, and the marketing companies know a lot about psychology and exactly how to get you to part with your money.
So it takes a lot of self discipline in order to fight those tactics and stay on course to meet your goals. You have to have a clear goal and know that meeting that goal is more important than anything you can buy.
It requires a lot of self discipline to overcome the temptation to delay gratification of spending money and to save it instead.
Steps to develop self discipline
Step 1: Set a goal – then break it down into regularly recurring actions
What exactly do you want to achieve? It could be to build a fully funded emergency fund, start investing, pay off your debt, or even achieve financial independence – or anything in between.
Write down exactly what your goal is and the date by which you want to achieve it. For example, you may want to pay off your credit card debt within one year.
Then break down exactly what actions you need to take on a regular basis. Make these actions as small and as regular as possible. A small daily action is better than a larger monthly action.
For example, if you owe $10,000 on your credit card you’ll need to pay $833.33 off each month. Is that doable? If your budget allows for that, great. If not, you’ll need to figure out what exactly you need to do make up the difference.
If your regular payment is $150 and you can pull an extra $200 per month from your monthly budget that means you’ll need to come up with an additional $484 per month. If you have time to walk dogs after work you may decide to pick up a dog walking client for a few walks per week. At $25 per walk you’d have to walk the dog 20 times per month to make up the $484 you need. If you picked up a client that needed the dog walked everyday after work, you’d have the full amount.
You now have a goal and an action plan to make that goal happen.
Here are a few examples of short, mid, and long-term goals, but feel free to fill in the blanks with your own personal financial goals.
Short-term goals
Saving money each month towards your emergency fund
Going out to dinner with friends twice a month
Small household projects (planting a small indoor garden, painting a room, etc.)
Mid-term goals
Saving for a weekend getaway
Paying cash for your next car
Paying off your credit card debt
Long-term goals
Down payment on a house
Paying off your student loans
Putting money away for retirement
Read more: How to prioritize and save for multiple goals at once
Step 2: Track your progress
You’ll want some way to visualize and track your progress. A lot of people find this extremely motivating.
Using the example of paying off your car above, you could make a thermostat and color in a section each time you make a payment, representing the amount of money you’ve paid off (or is left on the loan). Or cover a piece of paper with stars (or anything else) and color in a star every time you send in your payment, each star representing one payment or a set amount of money.
Hang your tracker on the fridge so you can see it every day to remind you of what you are working towards. Make it a little celebration each time you get to fill in more of your tracker.
You can also go digital with your goal tracking. Apps like Empower offer a few different services for investing and checking up on your financial health. But, in this instance, I’m referring to the free tools they offer to keep track of your net worth.
You can create an account with them without opening an investment account. The wealth management and planning tools are the ones that you will probably be most interested in to help determine where you are at currently.
You can connect all of your financial accounts within the tool. These will be things, such as:
Checking account
Savings account(s)
Investment account(s)
Student loan account(s)
Auto loan account
Mortgage account
Credit card(s)
Medical debt account(s)
Sometimes, it can be pretty scary to see what your actual net worth is vs. where you want to be.
But, I use this as a driving force to work harder every month to increase my overall net worth. Because the faster I can get my net worth up, the faster I can get to my long-term goals.
Step 3: Find your tribe
Find people in your life who are working towards similar goals. This will help build self discipline because you’ll have a community that is embodying the new behaviors you want to build.
If you meet regularly with others who are paying off debt, you’ll have more discipline to follow that same path. You’ll have someone to share your successes with and a friend who can help when you are struggling.
Contrast that to when your friends regularly encourage overspending. Just going out to have a meal or a drink with friends can end up costing $100 or more in some instances. Something that sounded so innocuous, has now completely derailed your goal.
This isn’t to say you need to replace your entire friend group – not at all. But it will be up to you set a budget for having fun and then stick to it.
For example, instead of having two-three drinks, only have one. Go out for lunch instead of dinner, or a matinee instead of a night movie.
All of these options still give you the freedom to hang out with your friends and enjoy your life, but it won’t cost you nearly as much. And when you stick to your budget, your future self will thank you for your discipline.
Read More: The Cost Of Friendship – How Your Friends Affect The Way
Tips to meet your financial goals
Determine your needs vs. your wants
Setting up your financial goals and a way to track them are the first steps. But staying on track can get tricky when life happens. This is where needs vs. wants come into play. There are things that all of us want to have. But these are the things that can throw us off track so fast it will make your head spin.
So keeping in mind if the item/service is a need or a want can help you have more financial disciplined. Just remember to think long and hard about any purchases before you pull the trigger. If it is a need, then go ahead and do it. But if the item is actually something you want instead, it’s usually best to hold off even for a bit to make sure you still really want it as much as you think you do.
Reduce, reuse, recycle
When it comes to purchasing wants, you have a few other options that can save you a ton of money. If there is an item that you are wanting to purchase, but it simply isn’t in the budget, what might be some other ways to achieve the same goal?
Reduce, reuse or recycle may just be the best option here. If you have things in your house that you can get rid of (and maybe even make some money off of their sale), then that is one way to get the potential want. Sell your old stuff and then use the proceeds to purchase the new want item.
Or, if you can reuse an item you have in your house already, paired with something else, in order to create a similar item, then why not do that? Sometimes, all a table or chair needs is a fresh coat of paint in order to feel like a completely new item. So get creative and think outside the box about things you already have at your disposal.
And if all else fails, recycle your old items. You may not make any money off of them, but you could potentially get a tax write-off. Plus, it declutters your space, which can make it feel like a completely new room. Sometimes, that is really all you need.
Make it automatic
No matter what you goal is you can probably automate at least some of it.
If you want to save more, schedule automatic transfers from your checking to your savings. If you want to pay off a certain amount of debt each month, set automatic payments to your accounts.
Having these transactions happen automatically will remove the friction that can be caused when you have to manually make that extra payment, or save that extra money. You can always go in and stop or change the automatic payment if you can’t swing it one month, but making it the default will cause it to happen more often than not.
Of course, don’t set yourself up for failure. Setting an automatic payment without a plan to make sure the money is available will cause more harm than good. Create a feasible plan and realistic goal, then set it up to run without any extra effort from you.
Read more: Put your money on autopilot
Put your emergency fund in a high yield savings account
If you are working on building your emergency fund – or already have a solid savings account – you’ll want to make sure you are getting the most interest possible. This will help grow your savings rate since you’ll be earning a little extra interest each month.
Interest rates on high-yield savings accounts are higher than they’ve been in years, and the difference between online accounts and those at your local bank are huge. So, while these high yield savings account rates may not be anywhere close to the average return you will get on investing your money, it’s still nice to make some interest on your savings.
The best high yield savings account, in my opinion, is the CIT Savings Builder.
Read more: How Much Should You Save Every Month?
CIT Bank Savings Builder
CIT Bank Savings Builder has a very competitive APY – compared to the pennies you get from a credit union account.
You only need $100 to open an account and they charge no maintenance fees. To earn the highest APY, you need to get your account up to $25,000, or you need to deposit at least $100 monthly. See details here.
The CIT Savings Builder has a completely online platform, so everything can be done directly from your smartphone, just to make life simpler. They are also FDIC insured up to $250,000 per account type.
CIT Bank. Member FDIC.
Summary
Overall, it is extremely easy for our money to flow through our fingers like water. This is why you have to be cognizant of what you have and where you want to be with your finances.
If you want to avoid debt, save more money, or invest for your future then it’s important to develop self discipline in your finances.
National mortgage rates were mostly lower compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed and jumbo loans moved lower, while rates for adjustable rate mortgages rose.
The Federal Reserve has lifted rates 10 times in a row, most recently at its May 3 meeting. Rates now are at a 15-year high, but the consensus is that inflation is finally cooling and the central bank might halt raising rates.
”Mortgage rates have settled into a new normal of around 6.5 percent on a 30-year fixed-rate loan,” says Lisa Sturtevant, chief economist at Bright MLS, a large multiple listing service in the Middle Atlantic region. ”With growing recession risks, we could see mortgage rates dip lower, but we will not be returning to the 3 percent level seen during the height of the pandemic.”
Rates last updated on June 7, 2023.
The rates listed above are marketplace averages based on the assumptions indicated here. Actual rates listed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, June 7th, 2023 at 7:30 a.m.
>>Check out historical mortgage interest rate trends, from the 70s to today
You can save thousands of dollars over the life of your mortgage by getting at least three rate quotes. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.
“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
Mortgage rates for home purchase
30-year mortgage rate dips, -0.11%
The average 30-year fixed-mortgage rate is 7.02 percent, down 11 basis points since the same time last week. A month ago, the average rate on a 30-year fixed mortgage was lower, at 6.89 percent.
At the current average rate, you’ll pay $666.65 per month in principal and interest for every $100,000 you borrow. That’s a decline of $7.41 from last week.
15-year fixed mortgage falls,-0.11%
The average rate you’ll pay for a 15-year fixed mortgage is 6.38 percent, down 11 basis points since the same time last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $865 per $100,000 borrowed. The bigger payment may be a little harder to find room for in your monthly budget than a 30-year mortgage payment would, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.
5/1 ARM rate rises, +0.02%
The average rate on a 5/1 adjustable rate mortgage is 6.06 percent, ticking up 2 basis points over the last 7 days.
Adjustable-rate mortgages, or ARMs, are home loans that come with a floating interest rate. In other words, the interest rate can change intermittently throughout the life of the loan, unlike fixed-rate mortgages. These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.06 percent would cost about $603 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
Jumbo mortgage interest rate moves down, -0.08%
The average rate for the benchmark jumbo mortgage is 7.03 percent, a decrease of 8 basis points over the last week. A month ago, the average rate was below that, at 6.93 percent.
At the average rate today for a jumbo loan, you’ll pay $667.32 per month in principal and interest for every $100,000 you borrow. That represents a decline of $5.39 over what it would have been last week.
Rate review: How mortgage rates have shifted
30-year fixed mortgage rate: 7.02%, down from 7.13% last week, -0.11
15-year fixed mortgage rate: 6.38%, down from 6.49% last week, -0.11
5/1 ARM mortgage rate: 6.06%, up from 6.04% last week, +0.02
Jumbo mortgage rate: 7.03%, down from 7.11% last week, -0.08
Refinance rates
30-year mortgage refinance drops, –0.08%
The average 30-year fixed-refinance rate is 7.11 percent, down 8 basis points over the last seven days. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.02 percent.
At the current average rate, you’ll pay $672.71 per month in principal and interest for every $100,000 you borrow. That’s down $5.40 from what it would have been last week.
Where mortgage rates are headed
The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.
“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”
Comparing different mortgage terms
The 30-year fixed-rate mortgage is the most popular loan for homeowners. This mortgage has a number of advantages. Among them:
Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.
That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:
Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.
How do mortgage rates affect homebuyers?
In a housing boom, low mortgage rates can present pros and cons for borrowers. One pro: Low rates give borrowers more buying power. A $300,000 loan at 4 percent equates to a monthly payment of $1,432. If rates fall to 3 percent, the payment plunges to $1,265.
However, that sort of decline also can help push up home prices — and values indeed have jumped in recent months.
Here’s an example to show how soaring home prices and plunging mortgage rates can have offsetting effects. Let’s say you chose not to buy a $300,000 home a year ago, when the 30-year mortgage rate was around 3.75 percent. Your 20 percent down payment would’ve been $60,000 and your monthly payment would’ve been $1,111.
The price of the same house has jumped to $335,000 today. However, you can get a 30-year mortgage at 3 percent. As a result, your monthly payment rises only slightly, to $1,130. However, you’ll have to come up with an extra $7,000 to make a 20 percent down payment.