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1031 Exchange Rules: How You Can Save Money When Selling a Property

1031 exchange rulesIt’s really nice to make a massive profit when you sell real estate.

But it’s not so nice when you have to fork over a huge chunk of those profits over to the IRS come tax time.

That’s the reality of selling real estate, particularly as it applies to investment properties. More specifically, capital gains taxes usually have to be paid on any gains – or profits – of a real estate deal. If you sell an investment property for a profit, odds are you’ll have to pay capital gains taxes on it.

Or do you?

Luckily for real estate investors, there’s this little thing called a “1031 exchange” that allows investors to avoid having to pay capital gains taxes when they sell their properties.

But it’s not so cut and dry. There are certain requirements that investors have to meet in order to take advantage of such a tax perk.

Let’s dive into 1031 exchange rules to see what they’re all about and how they can help you save tens of thousands of dollars when it comes time to sell any one of your investment properties.

What Are 1031 Exchange Rules?

Section 1031 of the IRS tax code allows investors to defer paying any capital gains taxes on the proceeds of the sale of real estate if the profits are put towards the purchase of a “like-kind” property.

Basically, like-kind means similar and can include just about any other type of real estate. That means you could realistically exchange an office building for a single family home.

But you wouldn’t be able to use the proceeds of the sale of real estate to be put towards buying a car. They’re not “like-kind.”

As long as the purchase of another investment property is done within a certain period of time, a 1031 exchange can be put into effect.

What Qualifies as a 1031 Exchange?

In order for you to be able to take advantage of a 1031 exchange, the property being sold must be an investment property. The transaction is not meant for homeowners who are buying and selling their primary residences. Both properties must be investments.

That said, homeowners who are selling their primary residences may also be subject to capital gains taxes if they don’t meet certain criteria. They can avoid paying up to $250,000 for single owners or $500,000 for married owners who have filed their taxes jointly. Still, 1031 exchanges are not meant for primary residences and are only meant for investment properties.

Further, the property that is being purchased needs to be worth more than the one that’s being sold. If you end up paying less for the new property, you’ll be paying taxes on the difference.

Types of 1031 Exchanges

There are three different ways that a 1031 exchange can take place:

  • Simultaneous exchange – This happens when a property is immediately exchanged for another.
  • Deferred exchange – This involves selling a property first then buying another property in its place after a certain amount of time using an exchange facilitator.
  • Reverse exchange – This occurs when the replacement property is bought first. with the help of an exchange titleholder. Then the current property is sold afterward.

It’s always important to use a qualified 1031 exchange facilitator for deferred or reverse 1031 exchanges. That’s because you’re not allowed to take possession of the proceeds of the sale before the exchange is complete.

There are even rules governing who can be an intermediary. For starters, you can’t use the same one that you used in the previous two years. You also can’t act as your own exchange facilitator.

Time is Ticking When it Comes to Finding a Replacement Property

In order to take advantage of 1031 exchanges, you can’t just take your time finding another property to purchase in its place. Instead, there is a certain amount of time that you have to find a like-kind property.

More specifically, you’ve got 45 days to identify a new property that you want to purchase. When you do, you’ll then have 180 days to complete the purchase.

A Maximum of Three 1031 Properties Can Be Identified

It’s pretty common for real estate investors to choose more than one piece of real estate that they have their eyes on. That’s because real estate deals typically take a long time to close, and any delays can creep up that would make them go past the 180-day mark.

By choosing more than one property, it’s more likely that at least one of the deals will go through. But only a maximum of three potential properties can be identified, as long as you close on one of them.

Further, any number of replacement properties can be identified as long as their combined market value doesn’t exceed 200% of the property being sold. For example, if you sell a property for $300,000, the combined market value of your next purchase can’t be more than $600,000.

How Are 1031 Exchanges Reported Come Tax Time?

You will have to pay the tax on the original profits of the sale of the property plus any additional gains since the purchase of the new property. A 1031 exchange is reported on IRS Form 8824 and submitted with your tax return for the year that the exchange took place.

Make sure you consult with a tax expert to ensure that all the rules are followed so the exchange doesn’t fall through.

For more information on 1031 exchanges, read more here.

Final Thoughts

1031 exchange rules are definitely complicated. That’s why it’s important to speak with an experienced tax associate to help you navigate all the ins and outs of 1031 exchanges.

These are handy tools that can help you save a ton of money. But you need to follow the rules closely in order to avoid getting dinged by the IRS.

Looking for more ways to save money? Be sure to visit our blog today!

Mom’s Money Guide: How to Begin Investing for Your Kids Futures

investing for kidsThe total cost for a 4-year degree will be more than $205,000 by the year 2030. That will be the year that kids born in 2012 turn 18 years old. If your kids are born later, expect a higher price tag.

The best investment for a child is one that starts as early as possible. Investing for kids now is how to build a fortune for your child’s future education.

Read on to learn all about the best investments for children and how you can get started.

529 Plans to Invest for Kids

All US states offer a 529 savings account. You can even enroll in 529 plans from other states. Make sure you look into the lifetime contribution limits on your plan, so you know how much you can put away.

Every year you are able to deposit funds up to the set annual limit without being dinged with a gift tax. For 2018, that limit is $14,000 for each child. However, if you and your spouse file a joint tax return, you can double that number per child.

If you have the money, you might want to make a large lump deposit now that is equal to 5 years’ worth of contributions. In other words, you could add $70,000 to your child’s 529 plan today if you wanted.

This is a good option if you have the cash and want your money to start growing as soon as possible. But that means that you won’t be able to add any other money until 5 years from now.

One of the best features of this type of investing for kids is that withdrawn money is not taxable if it is used for education. You can use the balance of your fund for any type of tuition including private school from kindergarten to grade 12. Check out these 5 tax refund tips to get the most out of your money.

The majority of 529 savings plans allow you to invest your contributions through mutual funds. You’ll be able to choose what you want to invest in this way. Yet, if you want to invest in other things besides mutual funds, you can do that as well with a 529 plan.

How to Open A 529 Savings Plan

The first (and hardest) part of getting a 529 plan is choosing one. There are over 100 plans available. This is the simplest way to stop delaying and get your plan up and running.

Choose between a savings or prepaid plan or get both.

Savings plans are similar to 401K plans. There is investing in stocks, bonds, as well as other securities.

Prepaid 529 plans are like pension plans. they grow at a guaranteed rate and are often limited to people who reside in that state.

You might decide to get both kinds of plans and divide your contributions between the 2 accounts.

Next, pick either the in-state or out-of-state plan. Often, it’s wiser to get the in-state savings plan if you have a state tax benefit. Use this state tax calculator to see how much your tax benefit is worth.

Finally, compare costs and investment options for the plan you are considering.

Don’t be overly concerned with past performance of a plan. Look for a plan with low costs. Websites like collegesavings.org can help you compare plans.

Don’t get hung up on trying to find the absolute best investment plan for your 529 savings plan. The most important thing is to open a plan and start saving right away. You can always switch to a different plan later on if you want to.

Now, let’s check out other investment plans for kids.

Retirement Accounts

It may feel strange to think about your child’s retirement when you’ve got a baby or toddler at home. Yet, the sooner you start saving for retirement, the better.

Besides, retirement accounts can be used to pay for college as well as other big life expenses. And no, you won’t have to pay taxes on your withdrawals as long as you take out your contributions and not earnings.

Let’s pretend that you have invested $2000 every year for the past 3 years. You can go ahead and take out $6000 without any penalties and without having to pay taxes.

As soon as your child begins working, he or she should have an individual retirement account. Let’s look at custodial individual retirement accounts, next.

Custodial Individual Retirement Account

Custodial IRA can be created in your child’s name. The funds in the account belong to the child but as the parent, you control the assets until the child is an adult.

The age when a child gains access to the account is either 18 or 21 depending on which state you live in. These accounts are often managed at a bank or brokerage.

There are 2 main custodial accounts that prominently used for saving for post-secondary education. They are the Uniform Gift to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA).

Both of these accounts are irrevocable. Don’t deposit any money into either of these that you might need in case of an emergency.

You won’t be able to get it back. Instead, check out stock loan rates to learn about how to get access to funds when you need them.

Both of these do not have contribution limits. They are subject to Kiddie tax as the child includes this account as income on his or her tax returns each year.

UGMAs include securities such as stocks and bonds. On the other hand, UTMAs may include physical property like real estate and fine art.

Grandparents and others can add money to these accounts as gifts. Keep in mind that the most one person can gift a child per year is $14,000.

Note that when the child is not a minor, he or she does not have to use the funds in these custodial accounts for education.

Certificate of Deposit Ladder (CD)

Now that we’ve looked at 2 types of investments that are subject to market fluctuations, let’s examine an investment plan that has less risk.

A CD ladder means buying several certificates of deposit, all with varying maturity dates and interest rates. When one CD matures, you divert that money into a new CD. You keep doing this until you want to use the money you’ve saved.

Since it’s easy to estimate your earnings, you are able to plan for the future with a good amount of certainty.

This option is great for people who want to play it safe or want to avoid having all their eggs in one basket. You won’t earn huge returns with this method, yet it is a long-term savings plan that works.

How to Open a Certificate of Deposit

Opening a CD is similar to opening a bank account. First, you need to choose an insured financial institution. That way, if the bank or credit union fails, their insurance protects you up to the maximum that is legally allowed.

Then, you choose a type of CD. There are many kinds to choose from.

After that, select your term length. The longer the term, the higher the interest rate you’ll earn. It’s in your best interest to select CDs that mature well in the future.

You will also need to choose how you want to collect your interest payments. You can get it monthly or once a year.

It’s best if you don’t rely on this payment as part of your income. Make sure you build a personal monthly budget that works for you.

The wise thing to do is to reinvest the interest into the CD to earn even more interest. Once the CD reaches the end of the term, you’ll get the amount you deposited plus the interest your CD accumulated.

You will need your SSN and other forms of identification to open up a CD (same as you would need when applying for a bank account or credit card).

Also, choose how you want to deposit money into the CD account. You can choose to mail a check or transfer the funds online or by phone.

Teach Children Financial Literacy

One of the best ways you can invest in your child’s future is to teach them how to manage their money wisely.

With the majority of Americans in debt, teaching kids about smart spending and being financially savvy is vital for the future of the country.

There are lots of great resources to help you teach your kids financial literacy including lots of resources about money on MyMoney.Gov

Instead of giving kids what they want, give them an allowance and help them learn how to save up for what they want. Or help them start earning money by doing chores, dog sitting, raking yards and babysitting.

Even though as a parent you want to give your kids every advantage, it is important for them to learn how to take responsibility for their financial freedom in their youth for a bright future.

Final thoughts on Investing for Kids

Thanks for reading! We hope you found this article on investing for kids’ future helpful. Remember, the sooner you get started, the better.

Now, take a look at these 3 expert money saver tips you need in your life.

Styles Good For Miles: The Benefits Of Having A Small Wardrobe

small wardrobe

Would you be surprised to learn that the apparel industry is one of the most dominant industries in America?

The U.S. apparel industry today is a 12 billion dollar business, and the average family spends $1700 a year strictly on clothing.

There’s certainly no denying that times are-a-changing when it comes to the amount of clothing one has in possession. In the 1930’s, the average American woman owned nine outfits. Today that number is closer to 30.

While the world keeps telling us that we need more, more more, we’re beginning to think we want less, less, less.

Being a fashionista with a small wardrobe may sound like an oxymoron. However, downsizing your closet can save you money and actually better your sense of style.

Spring is the perfect time to minimize your wardrobe. Today we are outlining six of the best benefits of having a small wardrobe:

It Saves You Money

There’s no denying that downsizing your closet can save you some serious money.

Because you are being conscious about spending money on clothing, it saves you from purchasing items on a limb for reasons such as a sale or the item coming in multiple colors or patterns.

This doesn’t mean we have to eliminate shopping from our lives. It just means that we need to find companies that don’t break the bank yet still provide quality items.

Finding affordable, yet still, quality companies such as Fairweather helps to keep shopping exciting while helping to manage your wardrobe and your wallet.

Next time you consider purchasing a clothing item, ask yourself:

  • How does this item make me feel?
  • Do I have similar items already in my closet?
  • Can I see myself confidently wearing this item in a few years?
  • Will spending this money evoke feelings of anxiety with my bank account?
  • Do I feel my most confident in this outfit?

If you find yourself humming and hawing over your answer, it’s probably best to move on.

It Helps to Reduce Your Carbon Footprint

As much as we’d like to ignore this fact, there’s no denying that the fashion industry is one of the most polluting industries in the world.

The yearly production of garments consumes a massive amount of natural resources and significantly contributes to the emission of greenhouse gases.

This one is plain and simple: when you focus more of your energy on minimalism and less on consumerism, fewer items are disposed of in our landfills. Choosing to buy less clothing eventually leads to minimizing demand and production of clothing.

Simple? Yes. Effective. Extremely.

When we think back to the clothes we’ve purchased throughout the season, it’s no surprise that a handful of these items have yet to be worn and remain unseen in the back of our closet.

And, so, we ask ourselves: Why do we continue to build our clothing inventory and purchase items that we really don’t need?

It Maximizes Space

Desperate closets call for desperate measure.

For all of those city dwellers operating out of a shoebox apartment, this one is for you. And, New York City urbanites we’re especially looking at you.

The fact of the matter is, small apartments equal small closets.

If you plan to continue living that urban dream, you’re going to have to adjust your clothing inventory and reduce your wardrobe.

The result? A closet that isn’t bursting at the seams, doesn’t stress you out and might actually have a little extra wiggle room.

You’ll also notice you begin to purchase less of the same item time and time again. While before it may have been a task to keep track of your inventory, your new minimalist wardrobe allows you to easily see and keep track of all of your items.

What does this mean? Less “where did those pants go” moments.

It Saves You Time and Stress

Think of minimizing your wardrobe like decluttering your home.

Once you rid yourself of the items that no longer bear use or bring you happiness, you’ll begin to notice your stress levels decreasing. By simply having fewer options to choose from an agonize over, outfit selection becomes a quick, painless and entirely less frustrating process.

How do we begin?

Challenge yourself to get rid of any wardrobe items meeting these criteria:

  • You don’t feel confident in it
  • You have not worn it for three months
  • It does not currently fit you
  • You’re keeping it because it was expensive
  • You are holding onto it for sentimental reasons

As soon as your closet is only comprised of items you love and actually enjoy wearing, you’re going to wonder why you ever held on these past items. You’ll also notice that you begin to appreciate more the clothing that you do keep.

You’ll be Noticeably More Creative

Continuing to increase our wardrobe rids us of the need for creativity.

Why endlessly browse through your closet when you could just buy a new dress? While this temptation is hard to deny, it’s important to remind ourselves that new is not always better.

Having a small wardrobe to choose from, you’ll naturally become more creative and experimental in curating outfits. Slowly but surely, you’ll begin to notice you are pairing together items you never thought twice about before. And, guess what? It works.

While we once may have bought an entirely new outfit for an upcoming occasion, we are now experimenting with how to make our favorite little black dress a little more new and inventive.

Ready to Kickstart Your Small Wardrobe?

We know, we know -this whole wardrobe elimination thing can be a little intimidating.

After all, we get joy out of buying and wearing beautiful items that we allow us to feel our best selves.

The truth is, having a small wardrobe doesn’t mean you have to put an end to shopping. Instead, it encourages us to embrace a new type of shopping. This is one in which we think more honestly and more rationally about every item we purchase.

Once you embrace this minimalism, you will begin to notice that every item holds a special place in your heart, allows you to feel confident and serves many benefits to your wardrobe.

Goodbye unused items taking up a prime real estate in your closet; Hello ample space, reduced stress and a whole new attitude towards clothing in general.

Leave us a comment if you have any thoughts.

How to Buy a Timeshare Cheap in 6 Easy Steps

how to buy a timeshare cheap

The timeshare industry is a multi-billion dollar market, and it’s only expected to grow in the coming years.

If you’re interested in investing in a timeshare for your family, now is the time to buy.

If you want to know how to buy a timeshare cheap, read on for six great tips that will help you save money and find the perfect place for your next vacation.

Benefits of Owning a Timeshare

There are a number of benefits that come with owning a timeshare and using it as your primary vacation spot. Some of the main benefits include:

Amenities

Timeshares offer a lot more space than hotel rooms. They also come with extra features that make them more suitable for long stays. For example, even studio timeshares feature fully stocked kitchens so that you can save money by cooking your own meals.

Larger timeshares may also come with living rooms, bedroom suites, and fireplaces. You’ll also likely have access to a washer and dryer.

The resorts themselves also typically come with several other great amenities. There are usually pools, hot tubs, gyms, and game rooms to keep your family entertained all day long.

Easy Access to Attractions

Most timeshares are located close to popular attractions. For example, timeshares in Las Vegas make it easy for you to get to the strip, and Orlando timeshares give you easy access to Disney parks.

In some cases, the timeshares also have shuttle services that will help you get to the attractions you’re interested in seeing, so you won’t have to worry about dealing with traffic when you’re in a new place.

Value and Flexibility

Timeshares allow you to save a lot of money on vacations. There’s no worrying about the cost of hotel rooms, so you have more funds to allocate toward attractions and activities.

There’s also a lot of flexibility with timeshares. If you belong to a timeshare exchange, it’s easy to swap units and explore new locations. It’s also easier to change the timing of our vacation to fit your schedule or group weeks together for a longer trip.

How to Buy a Timeshare Cheap

When you start shopping, be sure to keep these tips in mind if you want to know how to buy a timeshare cheap.

1. Understand the Different Types of Timeshares

First things first, it’s important to understand the different types of timeshares you have to choose from.

Some of the most common types include:

  • Deeded timeshares: This is an actual real estate investment, and after your purchase, you own 1/52 of a specific unit.
  • Right-to-Use timeshares: There are no rights of ownership; you only have the right to occupy the unit at specific times (typically one week out of the year).

Right-to-use timeshares also vary when it comes to the times during which you’re able to use the unit.

Some work according to a fixed time model — this designates a specific time when you’re able to use the unit. Others work on a points-based system. This means you can purchase points and redeem them for stays at a specific time and place.

2. Know Where You Want to Vacation

It’s important to pay attention to location and choose a timeshare in a place you and your family will actually want to visit on a regular basis.

For example, if your family loves beach vacations, you might want to consider these timeshares.

Or, if ski trips are more your thing, you’ll be better off finding a timeshare in the mountains.

Once you figure out where you want your timeshare to be, look for resorts that are just a little off the beaten path. If you buy a timeshare at a resort a few blocks away from popular attractions, you’re more likely to get a better deal than if you buy one right on the oceanfront.

3. Don’t Buy From a Developer

One of the best pieces of advice out there for people who want to know how to buy a timeshare cheap is to avoid buying from a developer. If you buy through a development company you’ll almost always end up paying more than the unit is worth.

4. Check Out Resale Sites

Instead of buying from a developer, check out online timeshare resale sites. People who own timeshares and want to sell them post advertisements on these sites. They’re often the best places to go if you’re looking for a good deal.

Some resale sites broker the sales for a timeshare owner, and others let the owners list the timeshares themselves. You can also check out online auction sites and online classified ads, too.

5. Look at All the Costs

Remember, the price of the unit isn’t the only number you should pay attention to when you’re looking for a timeshare.

Other costs you need to take into account include:

  • Assessment charges for renovations
  • Maintenace fees
  • Transfer taxes for deed timeshares
  • Transfer fees if buying on the resale market

Factor all these costs in before making a purchase. This will help you get a better idea of how much you’re spending and allow you to find the best timeshare deal, not just the timeshare with the lowest listing price.

6. Pay in Cash if Possible

Finally, if at all possible, it’s best to pay for a timeshare in cash. There are a couple of reasons for this.

First, interest rates for timeshare mortgage loans are significantly higher than traditional mortgages. They usually fall somewhere between twelve and eighteen percent.

Second, timeshares typically depreciate in value. This means, if you decide to sell it later on, you’re less likely to get as much back as you paid for it.

Bonus Tip

Since you’re saving money on your timeshare by following these tips, you have no excuse not to hire an attorney to review your contract. This is an essential step for people who want to avoid a timeshare scam.

An attorney will help you make sure you’re actually getting a good deal. They will also be able to thoroughly review the fine print. That way, you’ll be aware of any conditions that could end up costing you later on.

Want to Earn Extra Money to Put Toward Your Timeshare?

Now that you know how to buy a timeshare cheap, it’s time to start saving your money.

If you’re looking for some easy ways to earn extra money to put toward your timeshare, check out these tips today. There are tons of ways you can earn passive income to help you take the vacation of your dreams!

Buying a House: How to Prepare Financially

buying a house

Are you looking at buying a house? Before you start looking at homes, you need to make sure all of your finances are together. 88% of all homebuyers in 2016 financed their homes.

The need to understand the finances surrounding a home purchase is crucial.

In this article, we’re going to take a look at what you need in order to get your finances together for a home purchase.

Preparing Your Credit For Buying A House

Having a great credit score is an important thing when you’re buying a house. If your credit is not where it should be, there are ways you can prepare it before submitting a mortgage application.

One of the best places you can start is by getting a free credit score to see what’s on your credit report. There are a ton of valid and secure websites that do this for free. You may also be able to get a credit report from your bank.

Analyze Your Credit Report

Once you have your credit report in your hands, it’s important to look it over thoroughly. Getting your initial credit report six to nine months before you start home shopping is the best way to start to turn your score around if it’s not so great.

If you have late payments on accounts or other things that reflect in a negative light, having this time is key. If you know that you pay your bills and accounts on time, getting your credit report a couple of months in advance is appropriate. This way you can make sure there are no mistakes.

Find Inaccuracies

Does your credit report have any invalid or inaccurate information on it? Finding these mistakes is important so you can dispute them. The dispute goes directly to the credit report company. Having mistakes or errors on your credit report can significantly affect or lower your credit score.

It’s imperative that these mistakes be addressed so your report is accurate and up to date.

Keep Old Lines of Credit Open

Having older lines of credit open help to give your credit score a boost when you’re buying a house. You may have a line of credit open that you haven’t used in several years. Even if you haven’t used it, it’s still good to keep it open.

If they aren’t in good standing, closing them may help. For those that are older and are in good standing, they consistently add good points to your overall credit.

Don’t Open New Ones

Opening new lines of credit can put a temporary dent in your credit score. It’s recommended that you hold off taking out any new loans or opening any credit lines for up to six months before applying for buying a house.

Opening up a new line of credit is viewed as a risk because the credit report company doesn’t know how well you’re doing to treat that credit. If you have to open up a new line, wait until after your mortgage application has been approved.

Charging to Your Existing Credit Lines

Buying a house can be an exciting time! The worst thing you could do though is to go out and buy things. Resisting the urge to purchase new appliances and decorations before the process of buying a house has come to a close will benefit you.

Even if your loan has been approved, if you don’t meet the conditions or violate the terms of debt, they have the right to cancel and disqualify you for your loan.

Hiring Financial Advisors

Having financial advisors to help you in the process of buying a house can make the process easier. The financial terms and conditions are complex and overwhelming.

Knowing the terms, what they stand for, and how to deal with them comes with years of experience. From making an initial offer on a home to the closing process, financial advice is necessary unless you’re already a financial guru.

Unless you’re an expert, you don’t know what is coming, what it means, or the best way to deal with it. Here are a few financial advisors you can hire to help you in this process.

Real Estate Agent

Are you using a real estate agent for your home buying process? They have great advice about finances because they have to be savvy on how to place an offer. They know the ins and outs of offers, negotiations, and closing.

They can analyze the home listing and verify the worth of a home. They can inform you on whether the asking price is too high or too low and what negotiations you can bring into play.

While they aren’t financial advisors, if you already have a real estate agent, getting their advice is going to help you out.

Mortgage Lender

It’s important to be especially choosy when selecting a mortgage vendor. You want someone that is going to look out for your best interests and be able to help you out when you have questions.

If you just go with a mortgage lender that has the best rates and don’t take personality into account, it may come back to haunt you. Find someone that will go out of their way to give you one-on-one support and establish a valuable relationship with you.

Attorney or Lawyer

A lawyer is often provided by your real estate agent at your home closing. In the case that it isn’t, you’ll want to hire one to help you go through all the paperwork. It’s important that you know exactly what is being said in the contracts and make sure there isn’t something you don’t agree with.

Having all of these financial advisors on your team, or just one assists you in buying a house and ensures you get the best experience possible.

Are Your Finances Prepared?

Now you have some actionable steps you can take to determine if your finances are ready enough to purchase a home.

If they aren’t, you can start with getting your credit report score and combing through it to see what you can change. Hire a financial advisor to help you through this process or take a look at Jeeves Realty champions gate resort.

Having your finances in order before looking at homes will make this process and easier one! If you’re interested in learning about where you can get affordable furniture after you buy a home, read this blog now.

7 Tips To Build Your Mortgage Savings Account

mortgage savings accountThe number of homeowners vs renters is on the path of a cataclysmic shift in the next few years, with the number of owners dropping and renters rising. This could mean major changes for home prices as will happen when any supply increases. The best thing you could do to be prepared is to start building your mortgage savings account now.

For most Americans, their biggest asset is their home. Owning a home lends you a lot of freedom, keeps you from being blindsided by rent increases, and helps build wealth for the future.

While not everyone might think homeownership is within reach, there are clever ways to start building for the future while living on a budget. Even if you live paycheck to paycheck, maybe it’s time to think about ways you could start saving for a home. Here are 7 tips that could help build a mortgage savings account.

1. Keep Your Budget And Your Promises

While you might still be struggling with New Year’s resolutions, it’s important to make promises to yourself and keep them. And just like fitness or health-related goals, it’s important to make your goals achievable.

Don’t make your goal “Save $10,000 by May”. As you fall short, you’ll only increase your lack of faith in the possibility of saving. Make small, weekly goals. Know when you’ve got something coming up, like a vacation or anniversary, where that goal will get the way of your fun.

Once you have the goals set, make a pact with yourself. Give yourself room to make mistakes and forgive yourself for slipping up. You can and you will.

Make sure you can keep your promise and you’ll be happy watching your savings grow.

2. Change Your Withholding Amount

Talk to the HR person at your job. If you’re regularly receiving a tax return at the end of every year, you could adjust your deductions to have that money put into your account.

At jobs with direct deposit, you may have the option to split your paycheck. You can automatically deduct a certain amount from your paychecks to have placed in a mortgage savings account. This way, you’ll build up your account without even trying.

3. Put Aside Extra Pay

Whether you get paid weekly or bi-weekly, you’ll be receiving 5 or 3 paychecks, respectively, a few months this year. Take that whole paycheck and dump it into your savings.

Don’t factor this into your weekly budget. Let it be a big bonus that you can use to infuse your account with some extra energy.

If you have any side gigs or second jobs you do during the holidays, try to put some of that extra money into your mortgage savings. You’ll find that the more your savings account grows, the more inspired you’ll be to put every little bit into it.

4. Look At Your Cell Phone Bill

While you might not like looking at your cell phone bill because of astronomical fees you’re paying, think about whether or not you can cut back on services. If you’re in the market for a new cell phone, post online to see if any friends have one sitting in a drawer they’d be willing to part with.

See if you’re paying for extra services you don’t need. If you’re paying for adult children on your plan, ask them to start kicking in a portion of the bill.

Shop around for your next contract. If you can get out of it, try to find something cheaper. If it’s hard to get out of, try using Cellswapper to see if they’ll buy your contract from you.

5. Scrutinize Your Utilities

Are you often blindsided by rising gas and home heating prices? If you don’t watch your heating carefully, you could end up paying hundreds extra a month. Make it a habit to turn your thermostat down when you’re away from the house.

Are you using high-efficiency lighting? If not, it could be time to invest in better bulbs for your home. High-efficiency LEDs and CFLs are slightly more expensive than traditional bulbs but they’ll last for years and you’ll be using far less electricity.

Are you paying for a huge cable and internet package that you never use? See if you can scale back to a more basic, barebones plan. Use that as an excuse to spend more time with friends, while saving $50-$100 more a month.

If you run a tight enough budget, you could be saving hundreds a month just by making these small adjustments. While they may not seem like much now, over a year or two, they could help build your savings account in a big way.

6. Get Healthy, Save Money

If you’re a smoker, you could be spending hundreds every week just on cigarettes. Not only are they dragging down your wallet, but they’re also dragging your health into the gutter. You could add years to your life and thousands of dollars a year to your bank account by working to break this addiction.

Even social drinkers could be spending hundreds a week at bars and liquor stores. This spending adds up quickly, just as quickly as the savings could. You don’t need those extra calories as much as you need that extra money.

When you hit the grocery store to buy some healthy snacks, make you’re continuing to save money every step of the way. Save your money and then throw a party in your new house to celebrate later.

7. Cut Travel Expenses

If you drive to work every day, you could be spending hundreds a month on a car note, insurance, gas, and repairs. If you’ve got options to bike or take public transportation to work, think about changing your transportation methods.

Even working from home one or two days a week could be a nice extra bit of savings in your mortgage savings account. Check out this real estate text to get an idea of what your realtors will be expecting from you as a buyer.

Be Clever And Your Mortgage Savings Account Will Grow

While you should be entitled to a relaxing treat at the end of your work week, make sure that you’re budgeting for everything. It’ll make those treats taste all the sweeter when you get them.

If you’re ready to start tightening the belt to build your savings into a home, contact us today to get started.

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