How to Save Money on Your Mortgage

The house with the moss green paint.Do you currently have a mortgage payment that you make each month? Have you ever figured out how much you will actually pay for your house after all the principle and interest payments over the full term of the loan? If you bought your house for $200,000, even with a 4% interest rate you will pay almost $400,000 over the 30-year term of the mortgage! What if I told you that you could reduce that by $100,000? Sounds too good to be true right? It’s not. In fact, it is fairly simple.

Saving Money on Those Pesky Interest Payments

Even with a low interest rate, you still end up paying hundreds of thousands of dollars in interest payments over the course of your home mortgage. But, whoever decided that a 30 year mortgage is the best way to go? What if you shrink down the time-frame of the mortgage payback? True, you might pay a few hundred extra dollars each month, but the savings on interest is phenomenal!

Think about it. When you decide to start investing in your company 401k, what is the most important thing they always tell you? To start early. Let the interest work to your benefit. When borrowing money, you need to think the opposite. To save on the interest payments, you will want to pay off your home as soon as possible. Instead of a 30 year mortgage, consider a 15 year mortgage. Or, if you are able, take a look at the 5 year mortgage rates in Canada. Not only will you be debt-free sooner (which will improve your cash flow each month), but you will also save a ton of money on interest!

Live Well Below Your Means

One of the more radical options that very few people think about is living well below their means. Instead of always buying a bigger and better house, why not downsize or live a little farther out of town? By owning a smaller house that costs less, you will obviously save money on your mortgage payments, but there are many other savings that go along with this as well:

  • Save on cleaning costs
  • Save on heating/cooling costs
  • Save on maintenance costs
  • Save on insurance costs
  • Save on priceless time!

By owning a smaller house, you provide yourself with much fewer expenses and let me tell you, it’s amazing. My friend bought a home a few years ago for just $75,000 and he will likely pay it off by the end of this year. The property is easily managed and is very cheap to heat and cool (with the smaller size). In a couple of years he will need to get the roof replaced, but since the roof is a fairly low square footage amount, a complete redo will only cost $5,000 instead of the usual $15,000+ for an average home. And, with a cheaper house, there is a lower cost to insure it. Finally, my most favorite advantage is time. With such an easily managed property, he can easily come and go without even thinking about anything. His time is priceless and enjoys the fact that he does not need to waste time cleaning and fixing a mansion.

So if you haven’t bought a house yet, step one is to buy one that is well within your means, then pay it off quickly and enjoy your life! You’ll likely learn to love your house and most importantly, you’ll love your life.

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Preventing credit card fraud

Credit cards are surely one of the most efficient financial products out there. They make life more convenient if you have to cover an emergency regardless of whether you’re at home or abroad.

They are lightweight, don’t take up any bulk and using them often earns you points which can be redeemed for all kinds of useful products and services. On top of this, they are widely-accepted both in stores and online.

The widespread use of credit cards has a potentially dark side though; identity fraud.

The Privacy Commissioner of Canada says that thousands of Canadians are victims of credit card fraud each year so following these tips to prevent credit card fraud is essential.

 The basics

It may be tempting to allow people who are close to you to use your credit card but this is not advisable. You can’t necessarily monitor where they are spending and this could make you more vulnerable to attack.

Another obvious tip is to destroy a credit card as soon as it expires so that your details cannot be obtained. Some paper shredders are strong enough to cut through the plastic but otherwise a pair of decent scissors should do the job.

Take care online

Shopping online has a host of advantages, the most obvious of which is convenience. It’s no wonder then that shopping online has risen considerably over the past few years but what risks does this open you up to?

To make your online shopping experience a secure as possible you should only use what are called ‘secure’ web pages.  You know this is the case if the address starts with ‘https’ (the ‘s’ stands for ‘secure’).

Also, if there is a locked padlock symbol in the lower right-hand corner of the browser you are shopping on a secure web page. Don’t be fooled by padlock symbols in other areas of the webpage as these could be an attempt to make a fraudulent site appear legitimate.

 Get protected

It’s wise to choose a credit card provider which takes your security seriously and offers necessary support and advice in the event of identity theft.

Credit cards are protected through a sophisticated screening network which can spot transactions which look unusual and potentially fraudulent.

Under a ‘Fraud Protection Guarantee’, an Amex customer will not be held responsible for any charges which are fraudulent if they have been responsible about protecting their card details.

This kind of scheme is worth its weight in gold for your peace of mind.

Check statements

Set aside a regular time to check credit card transaction receipts against your statement.

Doing this online every week is recommended as it will give you the chance to keep on top of any irregularities.

 

 

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How (and Why) You Should Teach Your Kids about Personal Finance

It’s often lamented that “kids these days” don’t know the value of a dollar, nor do they know how to properly save. If you currently have children living at home, a strong foundation in personal finance is one of the most important lessons you could teach them, one that will affect them for the rest of their lives. Not sure how to go about teaching them how to properly manage their money? Read on to find out!

Basics of Budgeting

First things first: if your kid doesn’t know how to set up a budget and follow it, then the rest of the financial lessons below probably won’t be taken too seriously. Budgeting can be a dry activity, but using a system of stickers or rewards (depending on your child’s age) can encourage them to stay positive and follow through on their goals. All it takes is a simple chart of their income and outflow and some mechanism like personal finance software for tracking their progress toward their savings goals.

Savings Habits: Start Young

Speaking of savings, one of the biggest problems facing teenagers and twentysomethings today is debt. Whether it’s from taking out too many student loans or abusing the credit card privilege, venturing out into the “real world” with a massive load of debt on your shoulders makes life much more difficult. To teach your kid the true value of saving money, start with the classic: an allowance. Getting money in exchange for work is a basic, but crucial lesson for later in life. If money is tight, consider restricting their allowance to a few dollars per week, and maybe even offer a parental match for every dollar saved (similar to the 401(k) match some employers offer as an incentive for their employees to save for retirement). This way, they’ll approach saving as a fun activity that can eventually lead to a big purchase, rather than seeing it as a chore.

Coupon Clipping 101

Who says coupons are only for adults? Although coupon clippers are generally portrayed as stay-at-home moms, the whole family can get involved! Whether it’s surfing online for coupons at sites or browsing through stacks of newspapers for sweet deals, clipping coupons together as a family not only saves money when it comes time to shop, but it also encourages a frugal approach to shopping.

Encourage Entrepreneurial Spirit

Lemonade stands in summer, cookie and hot cocoa stands in winter. It seems simple enough; but why stop there? Kids have wild imaginations and what better way to harness that creativity than through a productive, entrepreneurial outlet? Whether it’s hosting an art show for family members and auctioning off their masterpieces, tutoring younger siblings or neighbors, cleaning yards/pools/houses/cars/etc., caring for animals (or, my personal favorite, setting up a balloon animal stand and selling creations at $1 each)…all of these are viable sources of income and teach kids to do more than wait for a job to appear; they have to go out and make their own opportunities.

Nip Impulse Purchases in the Bud

Kids and teenagers are notorious for exhibiting a lack of restraint when it comes to buying things they want (especially when it’s not their money). This bad habit, if left unchecked, could follow them into adulthood, spelling disaster for their finances. By teaching your kids the difference between “wants” and “needs” (as well as sticking to a budget, as mentioned previously), you could save them a lot of headache and debt later on.

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