So, how well do you know your money???????????
Here are some quick questions for you!!!
The answers are below!
1. Is it more important to fund your retirement or your children's education?
2. Credit cards are great for emergencies.
3. If it is on sale you should buy it!
4. A 30 year mortgage is more affordable.
5. Credit cards should always have a zero balance!
6. PMI is private mortgage insurance protecting the lender against default.
7. I need 1-3 months worth of expenses saved.
1. It is more important to fund your retirement. There is a 51% chance your children will not go to college, but there is a 100% chance that you will retire. As they say on the airplane, make sure to secure the oxygen mast to yourself first! You can't help someone if you can't breathe!
2. Credit cards are not great for emergencies! At an average 17% interest rate it is NOT better to use them UNLESS you can balance the balance off within the billing period to avoid interest charges!
3. If it is on sale and you have the CASH it is a great deal, but using credit when you will have to finance IS NOT a great deal!
4. A 30 year mortgage is NOT more affordable! Not only is the interest rate higher, but the interest is amortized over 30 years and front loaded: more interest at the beginning of the loan! A 15 year is MUCH more affordable, tends to have a lower interest rate, and builds equity significantly faster!
5. If you are trying to improve your credit score, then paying them off is not always beneficial. Using a maximum of 30% of the credit available and paying on a regular basis and keeping balances low is how you can improve your credit score. Carrying a number of cards with zero balance can actually harm you. You may want to only have one or two that you use on a regular basis - it is revolving credit so charge and pay!
6. TRUE: PMI - Private Mortgage Insurance - is insurance to protect the lender against default. Most loans require 20% down payment to avoid PMI (some are now at 10%). Financing 100% may help you purchase the home, but the faster you pay down the principal the sooner you can eliminate the PMI and reduce your monthly payments! Or save money for your downpayment, and do not forget to check into first time home buyer programs, grant programs, and down payment assistance programs. These are structured to help you purchase your new home!
7. FALSE: You actually will need 3-6 months worth of expenses saved. The reason is that if you are injured you will need to have funds to pay expenses for at least 3 months until short term disability insurance takes effect. If you do not have short term disability you will need 6 months in order to pay until Social Security is paid - which is NOT guaranteed and usually requires and attorney to help you qualify! So SAVE YOUR MONEY!
I hope this helps! Call if you have any questions!