Wanna save some money? Who doesn’t?! In this day and time, you really need to look at all the ways that you can to save a buck. Here are a few for you to consider.
Mortgage rates are still very low. Yes, I know that somebody once told you that you need to eliminate debt and not have a mortgage. Well, that’s not the only bad advice that you ever got! Let me give you this piece of advice, and it’s not bogus either! Mortgage money is the cheapest money you will ever buy. That is a fact. If you have a mortgage, maybe it’s time to dig out your papers and see what your existing rate is. I will bet money that you can save right now by refinancing your mortgage.
Yes, I know that there are closing costs involved with a mortgage; but if you are going to stay in this house for the next few years, you will recoup these costs and also save on the interest payments. Some mortgage companies are offering mortgages with no points being charged. Now is the time to “shop the market” for the best deals available. It’s a competitive market.
You say, you have an adjustable rate mortgage and it has saved you some money? That’s fine, but maybe it’s time to see if the rate for a fixed rate mortgage is even cheaper than the adjustable rate that you currently have. It never hurts to check it out. If you haven’t noticed, rates are going up, up, up. Don’t wait until your rate is in the double-digit range.
If you have a home equity loan in addition to your regular mortgage, you might be able to combine the two and really save some money. I will repeat my original statement; “Mortgage money is the cheapest money you will ever buy.” Why? Think about it for a moment. Let’s assume that you have a mortgage with a 7 percent interest rate, and it’s a fixed rate that is guaranteed at that rate for 30 years. As you know, the interest for a home mortgage is still fully deductible. If you are in a combined tax rate of 30 percent, that 7 percent mortgage only costs you 4.9% after taxes. The combined tax rate is for both federal and state taxes. If your combined rate is 40 percent, then the cost for the 7 percent mortgage just went down to 4.2 percent.
Now you can see why I say it’s the cheapest money you will ever buy. Where else can you get long term dollars that cheap? It’s becoming rare to find any money that you buy that the interest is tax deductible. With that in mind, why on earth would you want to pay this off and eliminate a good tax deduction with such a cheap rate of interest? Interesting question isn’t it??
By the way, if you currently have a $100,000 mortgage on your house at 8.5 percent, your monthly payments are around $769.00 per month. If you re-finance to a 6 percent mortgage, the payment will go down to $600.00. That saves you $2,028 per year, which over the life of the mortgage is $60,840.00.
(If you were really nice, you would send some of that savings to me! After all, who gave you the idea?)
Ready to save some more bucks? Still got your savings in the local bank? Are they still paying you a rate that is currently below the inflation rate? Do you realize that low rate is still subject to income taxes? In other words, if they are giving you 2 percent and you are at a combined tax rate of 30 percent, your net rate is only 1.6 percent. Isn’t that wonderful? If you kept your money there long enough, it would all disappear! Oh well.…
Want to do better? Why not put your savings into a United States Savings Bond? The interest they are now paying is even higher than what you are getting at your bank and then you have to “share” it with Uncle Sam. No “sharing” with the interest on a Savings Bond until you cash it in. Go to www.savingsbonds.gov and check out the Series “I” bonds. The rate was adjusted on November 1, and the prediction was that it should be around four to 4½ percent. Keep in mind that is tax-free. You must keep the money in there for at least one year. If you cash them in before five years, they charge back the last three months of interest paid.
Money market accounts are now paying in the five-percent range, too. The interest is taxable but that is still more than double what your local banker is paying you. One that I would suggest is PayPal, which is part of Wells Fargo Bank. You can find them on line at www.paypal.com. By the way, almost every mutual fund family offers a money market account.
Do you have any loans or large credit card balances? Do you have any “credit” life or disability coverage on those loans? Unless you have one foot in the grave and the other on a banana peel, get rid of that junk! It is by far the most expensive coverage that anyone can buy. While we’re on the subject, they cannot make you keep the coverage as long as you have other coverage that you can use to cover the loan. Check ALL loans for this stuff, including your mortgage. They make more money on this coverage than they make on the loan.
Well, that is enough for this installment. I’ll be back again when you least expect me, with more ideas that can save you money. Incidentally, what are you planning to do with all this money that I am saving you???
Stanley B. Greenfield has been engaged in the fields of Financial Management and Insurance since 1962. He is a Registered Financial Consultant, and was awarded the designation of RHU, Registered Professional Disability and Health Insurance Underwriter, in 1979, as one of its Charter Members.
Mr. Greenfield also serves as a member of the Board of Directors of the Florida Chiropractic Foundation for Education and Research. You may reach him at [email protected], call 800-585-1555 or 904-513-2229 or visit his website, www.stanleygreenfield.com.