Your monthly payment is based on the net purchase price of the vehicle, the loan term and the interest rate for the loan. Loan amount is based on the net purchase price of the vehicle (plus sales tax) or the vehicle price less any cash rebate, trade-in or down payment. If you have an outstanding balance on the vehicle you trade-in, that amount is added to the price of the vehicle you are purchasing.
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Vehicle manufacturers or dealers will often offer incentives to purchase a specific vehicle in the form of a low rate loan or a cash back incentive. While a low rate loan sounds attractive, you might be better off taking the cash back, using it to add to your down payment and reducing the loan amount for the vehicle. Evaluate which option is best. A lower loan amount will mean a lower monthly payment and you might find that the interest savings you’ll gain by the low rate loan is less than the cash back amount.
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The term of your vehicle loan can make a big difference in what your monthly payment looks like. It can also have significant impact on the amount of interest you’ll pay over the course of the loan. You pay interest each month on the outstanding balance of the vehicle loan, so the longer the term of the loan the more interest that you’ll pay until the loan is paid off.
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The purchase price of the vehicle you can afford is based on several factors, including the monthly payment you can afford to make, your down payment, net value of any vehicle you’ll be trading in and any rebates or cash back offers available from the dealer or manufacturer.
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As you determine which vehicle to buy and which loan terms to choose, the choices you make can have a big difference in terms of what your monthly payments will be and what the costs of the loan will be once the loan is paid off.
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As the price of gasoline continues to rise, the question often arises as to whether it makes financial sense to trade-in a ‘gas guzzler’ for a more fuel-efficient vehicle. There are many factors that go into that decision, including the cost of the new vehicle, the amount of miles you drive and the cost of fuel. You can calculate your monthly fuel savings based on your current miles per gallon, miles driven per month and cost of fuel. Then you can estimate how much you’ll save by purchasing a more fuel efficient vehicle and when you’ll breakeven on the fuel efficient vehicle purchase.
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Does it make better sense to buy or lease a new vehicle? That depends on a number of factors, such as the residual value of the car you intend to purchase, the amount of money you pay up front as a capitalized cost reduction and the cost of financing. A lease will usually be a more attractive option when compared to a vehicle purchase when measured over a comparable term. Keep in mind that with a lease, you will have to return the vehicle at the end of the lease term, whereas if you buy, you will own the vehicle and will be able to continue driving it after the term expires.
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Repayment of a mortgage loan requires that the borrower make a monthly payment back to the lender. That monthly payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance. Loan payment are amortized so that your monthly payment remains the same during the repayment period, but during that period, the percentage of the payment that goes towards principal will increase as the outstanding mortgage balance decreases. Mortgage payments can also include pre-payments of property taxes, homeowner’s insurance and monthly homeowner’s association dues into an escrow account, managed by your lender. When those items are due, your lender will make the payment to the tax authority, insurance company or homeowner’s association.
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Depending on how fast prices and rents rise and how long you stay in your home, you may be better off renting rather than buying. Factors that are part of the equation are the difference in monthly rent versus mortgage payment, home value appreciation, annual rent increases, the interest rate you will pay on your loan, your marginal tax rate and the yield you might receive on savings. When looking at these factors, consider the present value of each option. The one with the lower present value will be the better financial choice.
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One of the most important questions consumers will ask themselves is “how much money the sale of their home will yield?” That’s largely dependent on two things: the amount you still owe on the home and what you will have to pay your realtor for selling the home. If you have a second mortgage, or home equity loan, on the property you’ll have to pay that off when you sell the home. When you sell a home, you’ll also have to pay interest on your outstanding mortgage balance from the date of your last payment until the date of the sale. You’re also liable for property taxes up until the day you sell the home. At times, seller’s have additional expenses. Local governments will often require that you pay a transfer tax when the home is sold. Incidental closing costs may also nibble away at your proceeds.
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Your ability to obtain a loan for a new home purchase is based on a number of factors. Lenders typically make lending decisions based on three key ratios: (1) Loan-to-value ratio (LTV), which represents the ratio of the loan amount to the value of the home. Lenders ideally want to see an 80% LTV, meaning a 20% down payment is preferred; (2) Housing Ratio. which represents the percentage of your total income that goes towards housing expenses; and (3) Debt-to-Income Ratio, which represents your total debt payments, plus housing expenses as a percentage of your total income. Lenders will typically look at any of these ratios as constraints, meaning once any of these ratio limits is reached, the amount of the loan will be capped.
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When purchasing a home the mortgage you choose and the options you choose with it will have significant impact on how much your home costs you in the long run. Interest charges, origination fees, fees paid for a specific interest rate (formerly referred to as ‘points’) and settlement charges will often have the most impact. Of these, the interest rate you pay will matter most.
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Adjustable rate mortgages typically offer home buyers the advantage of having a lower mortgage payment during the initial period of the mortgage. Adjustable rate mortgages are typically offered on a 1, 3, 5 or 7 year basis. Once the initial period expires, the mortgage rate will reset at then current interest rate levels. Depending on the direction interest rates are taking, these resets can result in higher or lower monthly payments to the borrower. This adjustable rate mortgage analyzer will help you understand the implication of your adjustable rate terms by showing what your monthly payment will be under different scenarios.
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The decision to refinance a home mortgage can involve many factors. You might want to take cash out of your home at when you refinance to use for other purposes. But the most common purpose is to obtain a lower interest rate and lower monthly payments. In the latter case, the decision to refinance should be based on lowering the overall mortgage costs and breaking even on the refinance in a reasonable period of time.
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The amount of equity available for a home equity loan or home equity line of credit is determined by the loan-to-value ratio of the home and the ratio requirements of the lender. A loan-to-value ratio is calculated by taking total mortgage debt (including any second mortgages or existing home equity loans) and dividing it by the current, appraised value of the home. The size of a home equity loan or line of credit will also depend on the loan-to-value requirements of the lender. Higher loan-to-value requirements can result in larger home equity loans or lines of credit.
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Repayment of a home equity loan requires that the borrower make a monthly payment to the lender. That monthly payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance. Loan payments are amortized so that the monthly payment remains the same throughout the repayment period, but during that period, the percentage of the payment that goes towards principal will increase as the outstanding mortgage balance decreases.
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Repayment of a home equity line of credit requires that the borrower make a monthly payment to the lender. For some home equity lines of credit, borrowers can make interest-only payments for a defined period of time, after which a repayment period begins. Interest-only payments are based on the outstanding loan balance and interest rate. During the repayment period the payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance. Loan payments for the repayment period are amortized so that the monthly payment remains the same throughout the repayment period, but during that period, the percentage of the payment that goes towards principal will increase as the outstanding mortgage balance decreases.
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When making a major purchase, using a home equity loan or line of credit is an alternative to financing offers often provided by a seller or manufacturer. In such cases, buyers often have the option of taking the seller-provided financing offer or a rebate on their purchase. Taking the rebate and using the equity in your home may provide a better alternative to the seller financing.
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Home equity lines of credit often have more flexible repayment terms than a standard home equity loan. Home equity loan payments are typically fixed over the repayment period, while home equity lines of credit can offer interest-only payment terms or outstanding balances can be repaid using a variety of repayment strategies.
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Home equity loans can be used to consolidate account balances from multiple credit cards or installment loans into a single loan, while offering the added benefit of consolidating multiple payments into a single monthly payment. Using home equity for debt consolidation can be beneficial if the repayment period for paying off the home equity loan is shorter than it would be for your existing debts, or, if the interest paid over the repayment period is less than what you would pay without consolidating your debt.
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The length of time it will take to pay off a home equity loan or line of credit is largely driven by the interest rate being paid on the outstanding balance, how much you continue to use the line of credit and what monthly payment is made each month. Decreasing any additional spending and increasing monthly payments are an effective strategy for paying off the outstanding balance in a shorter time period.
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If you’re already a saver, you might ask yourself the question “what if I save more”? Increasing your existing savings rate by even 1% can yield big results. Save even more and the results are even better. The more you’re able to save and the longer you’re able to save it will open your savings up to the magic of compounding, or the ability to earn interest on your re-invested earned interest.
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How interest is calculated can have a great impact on the interest earned by your account and how your savings grow. Compound interest arises when interest is added to the principal and when the interest that has been added also earns interest. You’ll see your account balance grow more quickly with accounts that pay interest more frequently. The “Annual Percentage Yield” or APY is the effective annual rate of return once the effect of compounding interest is factored in.
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Saving for a college education requires advanced planning and knowledge of what the cost of a college education will be when your student begins his college experience. You’ll first need to know how long it will be before your student sets foot on campus, what the cost of that education is today and how much the cost will increase between now and then. You’ll need to know how many years of college you’ll be paying for, which is dependent on the degree program being pursued. Once you have that information, you’ll be able to know how much you’ll need to save. Putting together a plan will depend on what you currently have saved, how much you can save each month and the rate of return you’ll receive on those savings.
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Everybody wants to be a millionaire, but few have the savings discipline to get there. Your current savings, additional monthly savings and the rate of return you receive all go into saving to be a millionaire. But it may not stop there. If you want to have a million dollars worth of purchasing power, you have to factor in inflation into your savings plan. That means that depending on the amount of time it takes you to save a million dollars you might have to have saved even more in order to have a million worth of purchasing power.
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The future value of your savings plan is dependent on the starting balance, additional monthly savings and the rate of return you receive on those savings. For the most accurate valuation, you’ll have to to separate taxable accounts such as savings and CDs from your tax-deferred accounts such as 401(k)s and college 529 plans.
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Whether you’re trying to save for big screen television, new car or for a down payment on a new home, time, money and rate of return will all be determinant factors of when you’ll meet your savings goal.
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Its always a good idea to have savings tucked away for a rainy day. Emergencies such as legal or medical bills or loss of a job can all force you into ‘rainy day’ mode. Planning ahead can make these types of events easier to cope with. Determine how big your rainy day savings need to be by factoring in emergency spending needs and essential spending needs if your source of income is interrupted. Once you know what you’ll need, put together a plan based on your current savings, monthly savings and the number of months you want to take to build your rainy day fund.
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You’ve made it to retirement, or perhaps you’re just counting down the days until you retire. You’ve got money put away, but need to know how long it will last. There are a number of key factors that will determine that, including your monthly spending and other sources of income. The rate of return on your outstanding savings balance, the taxes you pay on withdrawals and the impact inflation has on your required monthly spending will all have significant impact as well.
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A 401(k) account available through your employer is one of the best methods for building retirement savings. There are two key advantages. First, any contributions made to your 401(k) now are tax deferred, so each year’s total taxable income will be lower. Second, some employers provide 401(k) match programs where they contribute to your 401(k) account. Depending on the program, employer contributions can range from 0% to 100% of your contributions.
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Contributions to a Traditional 401(k) plan are made on a pre-tax basis, resulting in a lower tax bill and higher take home pay. Contributions made to a Roth 401(k) are made on an after-tax basis, which means that taxes are paid on the amount contributed in the current year. The reverse is true once you are eligible to make 401(k) withdrawals. Withdrawals from Traditional 401(k) plans are taxable, while those made from a Roth 401(k) are not.
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What monthly income will your retirement savings provide? The number of years you’ll need it to last, the expected rate of return on your outstanding savings balance and the rate at which withdrawals from your savings account will be taxed, will all be determining factors.
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Spending money today has a retirement price tag on it. What you fail to put away today for your retirement will impact how much you have available to you when you’re ready to retire. That price tag will depend on how many years you are away from retirement and the rate of return you could receive on those funds over the savings period.
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The Social Security benefits you (and a spouse) will receive at retirement can be estimated based on your average annual income, your current age and your age when you retire. For a more accurate and detailed estimate, visit the Social Security Administration website at www.ssa.gov where benefits can be determined based upon your exact earnings history and the exact date of your retirement.
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Saving for retirement can be a challenging task. The starting point for any retirement planning is an understanding of what your retirement needs will be. Once you’ve done that, you’ll have a target to aim at and be able to put together a savings plan that will get you there. Defining your retirement need requires that you have a retirement age in mind and a basic understanding of what your spending needs will be during your retirement years. A simple approach for defining your retirement needs is based on using a percentage of your current income, adjusted for inflation between now and when you retire. You might also want to consider how your salary will change based on merit or cost of living increases. Your retirement savings plan will follow; driven largely by what you’ve saved to date and what you can save going forward each month. Don’t forget to factor in any pensions or social security payments that you’ll be entitled to receive during retirement.
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Debt consolidation loans allow consumers to transfer the account balances from multiple credit cards or installment loans into a single loan and to make a single monthly payment. For debt consolidation loans to be beneficial, the repayment period for paying off the consolidation loan should be shorter than what it would be for your existing debts without the loan. Secondly, the interest that you pay over the repayment period should be less than what you would pay with your existing repayment periods. In some cases, a debt consolidation loan may look attractive because it has a significantly lower monthly payment than what you are paying today, but it is likely the case that the lower payment is due to extending the repayment of the loan over a much longer repayment period.
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One popular strategy for accelerating the payoff of a loan is to make ‘bi-weekly’ payments. Under the bi-weekly plan, you’ll make payments to your lender every two weeks instead of monthly of half of your monthly payment. One important thing to note here is that this method will result in you making 26 payments each year, which are two more than you would make if you made a payment on the 1st day of the month and middle of the month, so you’ll have to budget accordingly. By making bi-weekly payments, you’ll comparatively make an extra monthly payment each year which will reduce your amount owed. By making payments every other week, you’ll also save a bit on interest charges for the outstanding loan balance that would normally still be there until the end of the month.
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Setting a goal for paying off a mortgage, auto loan, credit card or personal loan makes good financial sense. Some loans, such as mortgage or auto loans have defined repayment periods. Others do not. In order to reach a debt repayment goal, you’ll need to know what you need to pay each month. You also might want to compare it to your current repayment schedule to see how helpful reaching that goal might be.
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Like many credit card holders, there are times when you might have overdone it on the spending and are now facing the task of paying off your credit card balance. The length of time it will take is largely driven by the interest rate you’re paying on the outstanding balance, how much you continue to use the card and what you pay each month in terms of a monthly payment. A good rule of thumb is to try to pay off any card balance in 36 months, but you might want to see what it will take to pay off the balance in shorter or longer increments of time.
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If you’ve received a lump-sum payment from an inheritance, tax refund or commission off of a large sale, you might be wondering what the best use of that money is. One thing you should consider is paying off debt, whether it be a mortgage, auto loan or credit card debt. When you pay off debt, you’re receiving a guaranteed return on your money — you’re saving the interest you would otherwise be paying on the loan. Depending on the type of the loan, and especially for credit cards, that return might be greater than anything you could receive by investing the money. In addition to saving interest payment, you’ll also repay the loan sooner, freeing up extra cash at the end.
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At some point in time, you’re likely to receive an offer in the mail. Transfer an existing credit card balance to a new card and receive a promotional interest rate for a set number of months. Are these offers worth it? It depends on the promotional interest rate, the length of the promotional period, what the standard interest rate is once the promotional period expires and what the fee is to transfer your balance from one card to another. During the promotional period you might be paying a lower rate, or 0% depending on the offer. Are the interest savings greater than the balance transfer fee? Whether they’re a good deal or not also depends on how long it takes you to pay off the card balance once you transfer it to a new card.
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If you’re trying to pay down some debt, you might be wondering what the impact would be if you simply increased your monthly payment each month by just a little, or even a lot. When you increase your monthly payment, the amount of the increase gets applied directly to reducing the amount owed, or principle. Reducing the amount of money you owe will reduce your interest charges each month, as the interest rate will be applied only to the outstanding loan balance. An increase in your monthly payment will lessen the amount of interest charges you will pay over the repayment period and shorten the number of months it will take to pay off the loan.
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How many times have you asked yourself “where does our money go?” The first step is to categorize your spending into each specific category. If you’ve got multiple monthly bills under a category, you can use the worksheets linked to the right of the input field to enter each separately. Once you see where you’re spending your money it becomes easier to look at reducing spending in specific categories.
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Balancing a checkbook is easy. Start with the balance from your last checking account statement. Then subtract all checks that you’ve written that were not listed in this last statement, or any previous ones. Then add back all the deposits that you’ve made into your checking account. The result should be the amount you have in your checkbook as your current balance.
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Getting your spending under control and in line with your income is an essential element to building a strong financial future. Analyze your spending (including what you put on a credit card) each month to make sure you’re not spending more than you’re bringing in. Once you’ve got that under control, consider placing what ‘extra’ you have every month in savings. You’ll never know when you’ll need it and its better to take money out of a savings account to pay for unanticipated expenses rather than adding it to a credit card balance.
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Most people have a cup, jar or piggy bank full of change that you fill each day when you empty your pockets or clean out your purse. But how much do you have? Count it up and take a look!
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Having savings is important, especially when the savings are part of an emergency fund or a hedge against loss of income. But when you also have debt, in the form of an outstanding credit card balance or loan, you might want to consider whether you’re better off using the money you have in savings to pay down debt. Whether it makes sense or not is determined by the interest rate you’re earning on your savings versus the interest rate you’re being charged on your outstanding loan balance. The difference between earning interest and paying it should give you a good indication of where you can get the best return.
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Making the decision to return to work after staying at home with children, or leaving the workforce to stay at home is sometimes a difficult decision for parents. The financial aspects of that decision will be based on the elimination of expenses incurred while staying at home, examples of which are life and health insurance premiums that may be replaced by employer-provided plans. When looking at the benefits of working, income should be considered right along side of the ability to build a retirement fund through 401(k) contributions, the cost of health and life insurance and the expenses associated with being part of the work force.
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Determining how much money you’re worth is like having your own balance sheet. On the asset side are things you own: homes, cars, investments and personal property. On the liability side are your debts: what you owe on your home mortgage, outstanding loans and credit card balances. Over time, you want to be reducing your liabilities by paying down debt, and building your assets by saving and allowing your assets to work for you by earning interest or building value.
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We all understand that you cannot put a price tag on the value of human life. However, if you are a husband or wife, or a father or mother, your departure would leave a financial gap that could impact the financial health of your family. One component of that gap would be the money you would earn between now and the date of your retirement. When you begin looking at how much life insurance you will need, you will want to make sure that your policy adequately replaces any earnings that your family would miss out on, up until your retirement. The present value of those earnings represents the amount you would need today to replace all of your future earnings. Of course, it is best to work with a knowledgeable financial planner to get the most accurate life insurance assessment given your particular situation and needs.
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The purpose of life insurance is to replace your income in case you die so that the family that you are leaving behind can maintain their current lifestyle. How much you need is best decided by working with a qualified financial planner. Things to include your current assets and investments. How much do you currently have saved and how much earning power will be available for supporting your family in your absence? Compare that amount to your anticipated liabilities and expenses. Moreover, don’t forget to include items such as college tuition for your children or paying off your mortgage, in addition to your standard living expenses.
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As a parent or spouse, your most valuable financial asset may be your ability to work and earn a living. If you get injured, become disabled or suffer a severe illness and are unable to work, would you be able to maintain your current standard of living? Savings can disappear quickly, so disability insurance can provide the financial security you and your family will need if the unthinkable occurs. You’ll want to consider all of your monthly financial obligations and the amount of time you will be out of work in assessing your needs.
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As you or a loved one, grows older, long-term care might be required if you or they can no longer perform the essential daily tasks required to take care of oneself. This might also be the case if you have a child with special needs. Long term care costs can vary widely depending on the area of the country that you live in, and the level of care required. As you prepare to meet your financial obligations, you should understand what such long-term care may potentially cost over an extended period.
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There are three fundamental ways to meet your long-term care needs. Long-term care costs can be covered by long-term care insurance of by qualifying for Medicaid. Self-insuring is typically the other option. If you are interested in going down the self-insurance path, you’ll need to save the appropriate amount of money to meet your long-term care needs.
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You should be saving money in an IRA or 401k to help fund your retirement years. You can also use a Health Savings Account (HSA) to boost retirement savings earmarked to cover medical expenses in retirement. Health savings accounts are not technically retirement plans, but you can make pre-tax contributions and the money deposited in your HSA will grow tax-free. Moreover, unlike Flexible Spending Accounts, you can roll over your HSA funds from one year to the next, and into retirement. You can also withdraw HSA funds at any time to pay for current qualified medical expenses. So, as you grow your HSA account balance to meet your retirement needs, you’ll want to consider those current medical expenses in your planning.
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Health Savings Accounts (HSA) offer an opportunity for you to build tax-free savings to pay for current and future qualified medical expenses. Used in conjunction with a High Deductible Health Plan (HDHP) a high-deductible plan may cost less overall than making monthly premium payments to a traditional health plan and making co-payments when you require medical care. If you use the HSA/HDHP method, you’ll pay some of the initial medical costs out of your HSA, up until you meet your HDHP deductible. A traditional health plan would pay for most of those up front, after a more modest deductible. Which method is best for you depends on your medical care needs and the HSA/HDHP and Traditional Plan options available to you.
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