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RICHARD J BENEDETTO
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Jamestown NY 14701

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Home Financing

4 Steps to Regain Some Savings Self-Control

(TNS)—Opening a savings account is easy, but committing to savings? Now that can be hard.

From struggling to find places where you can reduce spending to falling into the temptation of instant retail gratification, saving money can be really challenging.

“You really have to know yourself and discipline yourself if you’re going to be an effective saver,” says Greg McBride, CFA, Bankrate’s chief financial analyst.

Learning to live on less may feel difficult initially, but it will pay off in the future.

Here are four steps to start exercising savings self-control today.

Pay your account out of your paycheck.
Automate your savings by having money moved to your savings account regularly, either through elections with your direct deposit if you receive a regular paycheck or by setting up a recurring transfer to your savings account.

Moving money directly to your savings account is a crucial first step in building a nest egg, McBride says.

“Paying yourself first clears the biggest hurdle for saving, which is simply not being in the habit of saving,” McBride says. “It takes care of saving money before you have a chance to spend it.”

Similar to putting money in your 401(k), the idea is that if it never touches your hand, you won’t miss it.

Avoid the temptation of transfers.
Moving money into your savings does you little good if you constantly raid the account.

To effectively grow a savings account, you have to restrict yourself from the temptation to transfer those funds to your checking account.

“If you’re going to build your savings, your deposits have to outnumber your withdrawals, not just in number but also in magnitude,” McBride says.

Do what it takes to control yourself. Perhaps the solution is as easy as naming that account based on a goal—”house down payment” or “Christmas money”—to make the connection of immediate gratification robbing your ultimate goal.

If that isn’t enough to stop you, put some distance between your checking and your savings. While there are often advantages of having your money at one institution, opening up a savings account a different bank might be what you need to stop you from spending money that is supposed to be away.

Once you’ve hit your emergency fund savings goal, you ought to consider a CD or even a CD ladder to pick up some yield and keep you from spending your money.

Put banking technology to work.
Banks and financial technology companies are obsessed right now with helping you save money, and each product seems to have its own bent.

There are ones that let you set rules, like adding $10 to your savings every time you buy a latte. Finn, the new mobile-only account Chase Bank is piloting in St. Louis for iOS users, is offering such features. The bank says it expects to launch it in additional cities and for Android users next year.

Others, like Simple and Moven, help you save for a specific goal or multiple goals at a time.

There are also some, like Digit, Chime and Acorns, that focus on moving small amounts of money into an account for you. This is similar to Bank of America’s popular Keep The Change Savings program, which puts the difference between your purchases and the nearest dollar in a savings account—$10.75 for lunch, 25 cents for savings, for example.

MoneyLion, another FinTech app, launched a virtual reality feature on the augmented reality platform of Apple’s iOS 11 release. MoneyLion customers with iPhones 6S and newer can now visualize their money as stacks on the phone. The rationale is that if you can see your money pile increasing, you’re less likely to spend it.

Suffice to say, there are a lot of savings options out there right now and you ought to do your research before committing to one. Ultimately, their effectiveness is dependent on your ability to not frivolously spend the money you’ve worked hard to save.

Save for the long term.
While you may want to enjoy the here and now, short-term spending can cost big time down the road.

“If you’re going to be a saver, it’s going to require some tough decisions,” McBride says. “It means passing up consumption today so that you can instead save for consumption in the future.”

McBride highlights that saving is not simply geared toward building up money to use in the event of emergencies.

“Americans are woefully under-saved for retirement,” McBride says.

McBride points to the increasing number of seniors who are unable to retire and the overwhelming amount of outstanding student debt as a reminder that consumers must save for long-term goals.

“You can build an emergency savings fund while building a retirement fund or a college fund at the same time,” McBride says. “You have to attack both at the same time in the same way by automating your contributions.”

©2017 Bankrate.com

Distributed by Tribune Content Agency, LLC

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What Are Mortgage Points? Should You Pay Them?

(TNS)—When people want to find out how much their mortgages cost, lenders often give them quotes that include loan rates and points.

What Is a Mortgage Point?
A mortgage point is a fee equal to 1 percent of the loan amount. A 30-year, $150,000 mortgage might have a rate of 7 percent but come with a charge of one mortgage point, or $1,500.

A lender can charge one, two or more mortgage points. There are two kinds of points:

  1. Discount points
  2. Origination points

Discount Points
These are actually prepaid interest on the mortgage loan. The more points you pay, the lower the interest rate on the loan and vice versa. Borrowers typically can pay anywhere from zero to three or four points, depending on how much they want to lower their rates. This kind of point is tax-deductible.

Origination Points
This is charged by the lender to cover the costs of making the loan. The origination fee is tax-deductible if it was used to obtain the mortgage and not to pay other closing costs. The IRS specifically states that if the fee is for items that would normally be itemized on a settlement statement, such as notary fees, preparation costs and inspection fees, it is not deductible.

How do you decide whether to pay mortgage points, and how many? That depends on a number of factors, such as:

  • How much money you have available to put down at closing
  • How long you plan on staying in your house

Points as prepaid interest reduce the interest rate—an advantage if you plan to stay in your home for a while—but if you need the lowest possible closing costs, choose the zero-point option on your loan program.

By the Numbers…
A lender might offer you a 30-year fixed mortgage of $165,000 at 6 percent interest with no points. The monthly mortgage principal and interest payment would be $989. If you pay two points at closing (that’s $3,300) you might be able to drop the interest rate down to 5.5 percent, with a monthly payment of $937. The savings difference would be $52 per month, but it would take 64 months to earn back the $3,300 spent upfront via lower payments. If you’re sure you will own the house for more than five years, you save money by paying the points.

©2017 Bankrate.com

Distributed by Tribune Content Agency, LLC

This article is intended for informational purposes only and should not be construed as professional advice. The opinions expressed in this article are those of the author and do not necessarily reflect the position of RISMedia.

For the latest real estate news and trends, bookmark RISMedia.com.

The post What Are Mortgage Points? Should You Pay Them? appeared first on RISMedia.

9 Ways to Save for a Down Payment

(TNS)—You’ve found the perfect house. Interest rates are still low. There’s just one thing standing between you and your dream home: a down payment.

Don’t abandon your homeownership dreams just yet. Here are nine ways to come up with the cash for your new home.

Pay Off Your Credit Cards
Paying bills will help in your hunt for down payment money. When you carry a credit card balance, the ever-accumulating interest charges mean more of your money goes to the card company each month. Keep that cash for yourself by cutting your debt load.

With the “avalanche” method, you prioritize your debts and pay the most on the one with the highest interest rate. Once that’s paid, shift your focus to the next highest rate and so on. You’ll get the most money-sucking credit card bills out of the way more quickly, freeing up more of your income to go toward building your savings.

Ladder CDs to Boost Savings
Once you have a few extra bucks, put it to work making more money for you. Certificates of deposit are low-risk and relatively accessible. But when interest rates are low, the return isn’t always what a saver hopes. You can maximize the earning power of CDs by opening different certificates at varying maturity dates.

For example, instead of buying one big CD, spread your money into three-month, six-month and one-year certificates. Known as laddering, this gives you flexibility to adjust your savings as rates change. Laddering allows you to lock in when rates are high and when rates are not so good. The process keeps you from being stuck for too long with low earnings.

Use Special Programs
There are many programs for homebuyers struggling to save for a down payment, especially for first-time homebuyers. Borrowers in a wide range of incomes, locales and professional groups may have access to aid from Fannie Mae and Freddie Mac, the government-sponsored offices that buy mortgages and package them as investments. Various nonprofit and community groups also lend a hand to buyers struggling to put money down on a home. And don’t forget about assistance from state agencies.

Tap Your IRA
If you’re looking to buy your first home, let the IRS help. Tax laws allow you to use up to $10,000 in IRA funds as a down payment if you’ve never owned a house. If you’re married and you both are first-time buyers, you each can pull from your retirement accounts, meaning a potential $20,000 down payment.

Even better is the IRS definition of “first-time homebuyer.” Technically, you don’t have to be purchasing your very first home. You qualify under the tax rules as long as you (or your spouse) did not own a principal residence at any time during the two years prior to the purchase of the new home. In these instances, Uncle Sam waives the penalty for early withdrawal, but you may owe tax on the money, depending on the type of IRA.

Get a Gift
Aunt Edna always liked you best. Take advantage of that favored family status and ask her to make a present of your down payment. Tax law allows gifts of several thousand dollars a year to be bestowed without tax consequences to either the giver or recipient. The gift-exclusion amount is $14,000 for 2017 and is adjusted annually for inflation.

The gift exclusion isn’t limited to relatives. The monetary present can be from anyone, so track down a well-off friend now.

Ask for a Raise
No luck finding a benefactor? Then maybe it’s time to ask your boss for more money. Just make sure you do your homework beforehand and base your request for a salary increase on your accomplishments rather than your needs.

Get a Second Job
Boss turned down your request for a raise? Moonlighting could help you earn the extra money. This option makes the most sense for those who are young and not yet fully established in their professional lives.

Look for Lost Money
Do you have any money stashed somewhere? Around $23.5 billion worth of matured savings bonds remains unredeemed, according to the Treasury Department, ignored by owners and not earning a penny of interest. Make sure your bonds and other investments are still adding to your net worth.

You could also have money languishing in an old bank account somewhere. You can file a claim with the Treasury to claim lost, stolen or destroyed savings bonds, or check the National Association of Unclaimed Property Administrators to see if you have any missing money.

Sell Unwanted Items
You likely have some used furniture you no longer use or old clothes that are no longer in style. Sell it to make a few more bucks to use for your down payment.

You can sell your items on sites like Craigslist, eBay, Facebook and Amazon to turn your trash into someone else’s treasure.

©2017 Bankrate.com

Distributed by Tribune Content Agency, LLC

For the latest real estate news and trends, bookmark RISMedia.com.

The post 9 Ways to Save for a Down Payment appeared first on RISMedia.

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