Archives for May 23, 2018

Nearly 57% of American adults have savings of less than $1,000, while 39% have zero savings.

Following a few quintessential personal finance practices, however, can help you achieve a healthier financial profile.

Here are the seven key personal finance habits to form immediately:

Create a detailed budget: Budgeting is one of the oldest and most efficient tools of money management, and yet most Americans fail to follow a budget.

To keep a tab on your finances, you must know where your money is going each month. All you need to do to create a budget is to list your current monthly expenditures, keep a provision for one-time costs (such as annual insurance payments), then draw a comparison between what you earn and what you spend.

Automate your savings: When you restrict your access to your own money it is hard to spend it. If you have been consistently struggling to save money, a time-tested solution is to establish an automatic savings plan.

This will ensure that a certain amount of money gets filtered directly from your monthly paycheck into your employer’s 401(k) or the bank. This will turn you overnight from a compulsive spender into a compulsive saver.

Pay bills promptly: Making timely payment for all your monthly bills is an excellent practice, and not just because it saves you money by avoiding potential late fees. This practice will over time work silently to help you build and maintain solid credit.

Another advantage is that you will be using your money for essential payments first and not allow yourself to sit on cash that could be frittered away on less essential consumption. An ideal way would to be to use the auto pay options for your bills wherever possible to achieve more disciplined monthly spending.

Control impulses: Impulse shopping is the surest way to disrupt your monthly saving plans. As many as 85% of Americans indulge in some kind of impulse buying, and one in five say that they have spent $1,000 or more just on a whim.

If you want to become a disciplined shopper, create a self-imposed 24-hour rule for unusual or non-essential purchases. Sleep on it for 24 hours, and by the end of it, chances are you will have changed your mind about buying that item that you did not need in the first place.

Check credit periodically: A 2017 study showed that 16 percent of Americans never review their credit reports. That is a serious omission because one in five credit reports have errors. If you fail to take corrective steps it could pull down your score and make your borrowing more expensive in the future.

The three leading bureaus – Experian, Equifax, and TransUnion – provide a free credit card report annually. You can request your credit report and receive it online every four months to review it for errors. This good practice will keep you on top of your credit scores.

Create a contingency fund: According to personal finance professionals, you should create an emergency fund that will have you covered for at least six months of daily living costs.

In the event of an unexpected financial contingency, such as loss of job or a major car repair bill, you can dip into your fund rather than having to rely on expensive personal loans or credit cards. Large contingency funds appear intimidating at the outset, but you will soon get there in small, consistent steps.

File your own taxes: Taxes for most individuals are not too complicated. You may require an accountant to file your taxes only if you have a number of deductions to claim, rely on income from multiple sources, or have special tasks to accomplish, such as writing off a part of your office or home.

But most taxpayers will not have such requirements and they can file their own taxes with any user-friendly tax-prep software program. So instead of spending a substantial amount to use the services of a tax pro, consider filing your own taxes. It will only take you a few hours (or about 30 minutes), and you will master it if you do it once on your own.

Welcome to the 2018 home-buying market. Rising demand and an extremely tight supply of homes, especially in the critical starter-home market, make it difficult to realize your goal of home ownership.

In this buyer’s market, you’ll need two important things to land your dream home – more money and a higher credit score.

Data from the Joint Center for Housing Studies (JCHS) at Harvard University highlight the credit score issue. According to the 2017 JCHS study, “The State of the Nation’s Housing – 2017,” the median credit score for successful mortgage loan applications increased from a FICO score of 700 in 2005 to 732 in 2016. Lenders are still conservative in their risk assessments – aided in part by regulations put in place during the housing crisis.

In the pre-crisis market of 2005, around 10% of conventional first lien mortgages went to borrowers with a credit score below 620. That number fell to nearly zero by 2009, and as of 2016, it was still at 0.1%. Just over 3% of 2016 loans were issued within the 620-659 credit score range, while approximately 67% were issued to borrowers with credit scores of 740 or higher.

Along with your debt-to-income (DTI) ratio, your credit score is one of the most important metrics that lenders use to evaluate your ability to repay a mortgage loan. A good credit score can help you overcome a poor DTI.

According to the Wall Street Journal, Inside Mortgage Finance reports that in the fourth quarter of 2017, approximately 78% of loans with DTI ratios above 45% went to borrowers with credit scores of 700 or greater. A DTI of 45% is generally considered the upper limit for issuing conventional loans, but mortgage backer Fannie Mae changed the limit to 50% last year as long as other criteria are met. MoneyTips is happy to help you get free mortgage quotes from top lenders.

What can you do if your credit score isn’t sufficient? You can consider a Federal Housing Administration (FHA) loan that allows lower credit scores and a down payment of as low as 3.5%. If you qualify, the FHA will back your loan – reducing your risk to lenders.

Generally, the minimum FICO score for an FHA loan is 580, although it’s possible to go as low as 500 with extenuating circumstances. Some lenders will require a higher credit score in the 620-640 range to accept an FHA loan. For those who qualify, Veteran’s Administration (VA) loans are a similar alternative.

Your other option is to work on improving your credit score and building up a larger down payment over time. Control spending in a way that allows you to pay down your debts, make sure that you pay all your bills on time, and keep your credit card spending below 20% of your credit limit if possible. You’ll eventually meet your loan qualification target.

It’s not just about baseline qualification, but also about the quality of the loan offers. Jordan Goodman, the personal finance expert and author known as “America’s Money Answers Man,” advises, “Sometimes it makes sense to wait to get your credit score up to a higher level to be able to get a lower interest rate … when you are getting a mortgage, it’s a long-term commitment.” A fraction of a percentage point can mean thousands of dollars of interest savings over the life of a thirty-year loan.

In a buyer’s market, it’s all relative. You may have a suitable credit score to secure your preferred home – but are you competing with somebody who has an even better credit score?

You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.

Jimmy Fallon had seven successful seasons on NBC’s “Saturday Night Live” and now, as the host of “The Tonight Show,” he gets to sing satirical renditions of Beatles songs with Paul McCartney and dance alongside Michelle Obama. He’s also making an estimated $16 million a year.

For those who wish to follow in his footsteps, he has some advice. “Don’t do it for money — you’ll never make money,” he tells USA Today. “Do it because you like it and you like what you’re doing. And then, the secret is, you may end up making money. But don’t go into it thinking that you’re doing this for money.”

Before his career really took off, Fallon took improv classes at The Groundlings in Los Angeles. In his interview with USA Today, he recounts bombing his first audition with SNL because he was so nervous, but he was called back the following year.

“I took pictures of everything that I could with a throwaway camera that I got at a drugstore. I thought I might never step foot on NBC [property] again,” he says.

KEEP IT INTERESTING AND STAY CREATIVE AND KEEP DREAMING AND KEEP BELIEVING AND IT WILL ALL FALL INTO PLACE”

-Jimmy Fallon, host of “The Tonight Show”

Before that audition, he was repeatedly told not to worry when Lorne Michaels, the producer of SNL and “The Tonight Show,” didn’t laugh at any of his jokes. But when Fallon did an impression of Adam Sandler, Lorne did laugh and Fallon was offered the job.

Up to that point, trying to make it in the competitive world of comedy, Fallon says it wasn’t the promise of wealth that motivated him. “I never thought about money. Never, ever,” he says. He was focused on enjoying himself.

“Do it because it’s fun and it’s interesting for you,” he suggests. “And keep it interesting and stay creative and keep dreaming and keep believing and it will all fall into place.”

Fallon’s advice echoes what Apple CEO Tim Cook told students at the University of Glasgow in Scotland last year. “Don’t work for money — it will wear out fast, or you’ll never make enough and you will never be happy, one or the other,” he said.

Cook affirmed that working “in the service of other people” can also be a path to happiness and success, as long as that work intersects with your passion. “I would argue that, if you don’t find that intersection, you’re not going to be very happy in life,” he said.

That certainly seems to be a balance that Fallon has struck.

Before some of your favorite celebrities and business leaders achieved the success they have today, they were normal 20-somethings navigating their way through college. With very little money in the bank, they did what most broke college students do, which is apply for jobs to make ends meet.

While juggling schedules and school is no easy feat, the Georgetown University Center on Education and the Workforce, reports that 70 percent of college students today work while they are enrolled. In fact, roughly 40 percent of undergraduate students and 76 percent of graduates students work at least 30 hours a week.

Below are the surprising things six highly successful people did to make extra money during their time in school.

1. Sandra Bullock used to open for drag queens

On a recent episode of “The Ellen DeGeneres Show,” Sandra Bullock opened up about the job she held in college as a student at East Carolina University. “I used to open for drag queens in North Carolina by dancing,” she told DeGeneres during a game of “Burning Questions.”

Bullock graduated from college in 1987 with a bachelor of fine arts degree in drama.

2. Taraji P. Henson was a receptionist at the Pentagon

Oscar-nominated actress Taraji P. Henson started her college career at North Carolina A&T University before transferring to Howard University in Washington, D.C. In a Washington Post article, she revealed that during her time in school she worked as a receptionist at the Pentagon in the morning and as a singing and dancing waitress on “The Spirit of Washington” dinner cruise ship in the evening.

In addition to holding these two jobs, she told Allure that she also did hair in her apartment between classes and charged $20 a head. “Oh yeah, I knew how to hustle and make money,” she said. “We used to do wet sets … I bought a hooded dryer and I had my box of rollers.”

3. Cindy Crawford shucked corn

Before her modeling career took off, Cindy Crawford was a scholarship student who was studying chemical engineering at Northwestern University.

Throughout high school and into her first semester of college, she says she worked as a corn shucker to make some extra cash. In fact, she boasts about this experience in her Twitter bio, which still reads, “Unique skills include pie baking, corn shucking and surprisingly good at bowling.”

4. Kerry Washington was an RA

“Scandal” star Kerry Washington graduated from George Washington University with a double major in anthropology and sociology. To help with her housing expenses, Washington revealed on “Late Night with Seth Meyers” that she worked as a resident assistant in her dorm.

5. Mark Cuban gave disco lessons

Self-made billionaire Mark Cuban graduated from Indiana University in 1981 with a bachelor’s degree in business. According to The Pittsburgh Tribune-Review, he gave disco lessons to sorority girls for $25 an hour to help him make some extra cash.

During his senior year in 1981, he also opened up a pub in Bloomington, Indiana, called Motley’s. “It was definitely the best bar in town,” Cuban’s statistics professor Wayne Winston told The Pittsburgh Tribune-Review. “I don’t think I’ve had a student since who’s started a business while they were in school.”

6. Barbara Corcoran worked at an orphanage

Before graduating from St. Thomas Aquinas College in 1971, “Shark Tank” star Barbara Corcoran said she had worked 20 jobs, doing everything from selling hot dogs to being a housemother at an orphanage.

Out of all the jobs she held, she says that waitressing prepared her most for her success today.

“You learn more in waitressing than you can in any other job, and I had every kind of menial job you can imagine,” she said. “What’s great about being a waitress is you have your own territory. It’s your responsibility. It’s your table. It’s your counter. The sugar’s got to be filled. The ketchup’s got to be topped off.”