September 16, 2019

HOME AND WEALTH . . . Keep your home costs under control.

These days, most people are trying to control their expenses a little more tightly. Often they don’t realize how much they’re paying to live in their homes. So let’s take a look at that home budget and see if we can’t do a better job of staying on top of the costs. 

1. Your largest expense is probably your mortgage. These days mortgage rates are historically low, so you might be able to refinance and lower your monthly payment.   Contact me for a referral to a QUALITY lender who will let you know if this makes sense.

2. Another major expense is likely to be your homeowner’s insurance. Check in with your agent once a year to see if you’re getting the right coverage at the best price. 

3. Next look at your real estate taxes. The higher the assessed value of your property, the higher your real estate taxes.  So the next time you receive your King County notice of assessed value, contact me to help with your homework.  I will provide you with values of comparable homes in your neighborhood.

4. Recurring monthly expenses: 

  • If you pay for public water, public sewer  or a homeowners’ association, those are probably fixed expenses you can’t cut. 
  • But if you pay for private trash collection, snow removal, lawn and gardening services, periodically look around for cheaper rates. Even if  you’re happy with your current supplier, this information could help you get a better deal.
  • Phone, internet and cable TV services should be reviewed at least once a year to see if competitors offer better prices.
  • Energy costs. Oil companies should be reviewed once a year, before heating season begins. And if you think oil may be going up, pick a supplier who will lock in the price. In a growing number of areas, you can also find competing electric companies. Find out who has the best deal. If you heat and air condition with gas, ask your local gas company about special offers.

5. Maintenance and repairs. It is always cheaper to fix a problem as soon as it comes up, rather than letting it go. It costs very little to re-caulk around a bathtub, but if you ignore it, you could wind up replacing a wall. Put aside $500 to $1,000 a year to take care of minor repairs and maintenance.

6. Major improvements. If you have you heart set on updating a kitchen or bath, installing a deck, or even putting on a new addition, get a rough cost estimate and decide how many months from now you’d like to start. Divide the cost by the months and begin putting money away for it each month.

Your home is your biggest investment. But with a little effort you can make your home costs smaller.

CENTS AND SENSIBILITY

Creating a household budget is hardly a fun exercise, but it is necessary, especially in these economic times . . . it can also be an excellent family project to help every member understand your options.  Determining where monthly income goes can help rein in over-spending habits and create fiscally friendly ones.

To start, financial planners suggest you gather a year’s worth of bills and loan payments to create a complete picture of your expenses.  Make a list and assign each to a category (the Quicken computer program can be of amazing help with this aspect).  Be sure to note when your spending increases throughout the year, such as around holidays or annual vacations.

 Next, determine fixed and variable expenses.  Fixed expenses have little or no change each months (mortgage, car payments, cable bills).  Variable expenses change monthly (groceries, gas or personal expenses such as morning coffee runs),

 Once you have sorted your expenses and calculated a monthly average, figure out your total monthly income (all sources of revenue).  Ideally your expenses should not be greater than your income!  Your ultimate goal is to create a “zero-dollar budget” to see exactly where each dollar of your income goes.  The money left over should be put into savings accounts or used to pay down credit card debts.

 When you are through with this exercise, look for ways to build up your emergency fund.  Consider putting aside enough for three to six months’ living expenses.

CUT YOUR GROCERY BILL IN HALF . . .

Avoid These Common Shopping Mistakes.  Too often shoppers end up paying more than they need to.  Here are the most common shopping mistakes:

MISTAKE:  Assuming sale prices are attractive prices.  Supermarket sale circulars often contain some great deals – but they usually have items priced at or near their regular prices as well.

MISTAKE:  Shopping in the wrong department.  Cheese can cost twice as much in the deli or gourmet section as it does in the dairy section.  The brands may be different but the quality is usually as good.  Nut prices in the produce, snack and baking sections can differ.  Salsa is often more expensive in the snack aisle than in the condiments aisle.  Organic foods found in supermarket organic aisles usually are substantially more expensive than those shelved among nonorganic goods elsewhere.

MISTAKE:  Assuming items shelved on supermarket aisle endcaps and display islands are special deals.  For example, a display in the fruit section may have a sale price on strawberries but regular prices on shortcakes and whipped cream.

MISTAKE:  Not watching as prices are rung up at the register.  Watch the register readout carefully as items are scanned to catch mistakes as they happen.  Then skim your receipt for any mistakes you may have missed . . . preferably before leaving the store.

MISTAKE:  Assuming there is a one-coupon-per-item limit.  Most stores let shoppers use both a manufacturer’s coupon and a store coupon on the same item if both happen to be available.

MISTAKE:  Forgetting to peel of instant-use coupons from packages.

MISTAKE:  Thinking the largest-sized package will be the best deal.  Compare the per-ounce or per-unit prices listed on the shelf price tag.  If you have a coupon valid for any size, the smallest package is often the best deal.

MISTAKE:  Not adhering to the five-minute rule when buying prepared food.  If the preparation time involved is five minutes or less you may find it is worth it to do the preparation yourself.

Now that you have saved all of this money, it is time to make an additional contribution to the Buy A Home With Barbara Fund.  I am ready when you are!

ESTATE TAX RULES

Unless Congress changes the law as it stood on January 1, 2010, the estate tax will swing wildly over the next few years.

2009 Rules . . .

  • Estates are taxes at 45% on amounts greater than $3.5 million.
  • The value of assets is reset at the time of death.  That new value serves as the cost basis for figuring capital gains when heirs eventually sell the assets and pay taxes on those gains.

2010 Rules . . .

  • Estates are not taxed.
  • The value of assets is based on prices at which they are acquired by the person who dies.  That value then serves as the cost basis for figuring capital gains when heirs sell the assets and pay taxes (with an exclusion of $1.3 million or up to $4.3 million if the heir is a spouse who is a US citizen).

2011 Rules . . .

  • Estates are taxed at rates ranging from 41% on amounts greater than $1 million to 55% on amounts greater than $3 million.
  • 2009 rules on capital gains return.

IS IT TIME TO REFINANCE YOUR HOME?

Should you keep your adjustable-rate mortgage or refinance?  Generally, stay with the ARM if you plan to move before it adjusts or can handle a modest increase in payments.  Refinance to a fixed rate loan if you expect to stay for at least three years or if you owe more on your home than it is worth in today’s market AND you qualify for government assistance.  To see if you qualify for the government’s Home Affordable Refinance Program (HARP), go to http://makinghomeaffordable.gov and click on “Refinancing”.

IT IS TIME TO DO YOUR HOMEWORK

Are you aware of the current tax breaks for which you may qualify?  There are special 2009 benefits for energy saving home improvements (windows, heat and cooling source and appliances) . . . first-time home Buyers and move-up home Buyers . . . plug-in electric drive conversion kits . . . new vehicle sales tax.

Banks are in trouble.

With so many of the larger banks rushing to increase fees and interest and reduce your credit limits, some financial advisors are advising the consumers consider smaller, local community banks and credit unions to provide your services. 

When you consider making such a change, be sure to patronize only banks insured by the FDIC and credit unions covered by NCUA.

Below is a link to a scary but very informative list of the 545 banks in trouble nationwide.  This is an unofficial list of Problem Banks compiled only from public sources.  (NOTE: Columns are sortable – click on column header.) http://www.calculatedriskblog.com/2009/12/unofficial-problem-bank-list-545-banks.html