What is a Debt-to-Income Ratio???
- Published in Auto, Business, Finance, personal finance
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How to Avoid Going “Underwater” in your Vehicle….Loan
In a previous post, we spoke about ways to get out of an “underwater” car loan.
In this post, we will discuss a few ways to avoid getting into an “underwater” situation in the first place.
When you become interested in purchasing a vehicle, the first step you should make is to check your credit. This will help you determine what interest rate you may qualify for. You want to shoot for an optimal rate. If you have a credit score over 720, this will put you in a better tier and you could expect to pay a rate of 3.724% or less. Consumers whose credit scores are sub 720 can expect to pay an average of 5.098% or higher according to creditdonkey.com. A high interest rate is almost a sure fire way to end up underwater in your auto loan. Check with your local credit union or bank, as they will often have rates and terms that will match or beat the terms of a dealership.
Do your research! Shop around. Check out what the average selling price is of the car(s) that you are interested in to ensure you get a decent deal. KelleyBlueBook, TrueCar, and Cargurus can help with this. This will help you know what to expect when you walk on a dealer’s lot.
Factor In Depreciation. Cars are depreciating assets, but some cars depreciate faster than others. You want to purchase a car that doesn’t depreciate at a fast rate to ensure that as you pay the balance down on the loan, the value will be in line with it.
(*There will be a future post on vehicles that you may want to avoid purchasing due to rapid depreciation.)
Make a down payment. This will immediately cut down the loan balance and help you get ahead of the depreciation curve.
You don’t need the “add-ons”. When you are finalizing your auto purchase and signing the paperwork, you will be offered myriad of upgrades, warranties, protections, and insurances. Most of these you will not need. I am not totally opposed to some of these items, but keep in mind that they will increase the cost of your vehicle and loan balance. It will be enticing because stretched out over the term of the loan will minimally increase your monthly payment.
The shorter the loan term, the better. Don’t be tempted to extend the term of your loan over a longer period of time in order the get a lower payment. This is very enticing, but it is accompanied by a higher interest rate. This will prohibit the loan principal from being paid down as fast; therefore, leaving you with a higher risk of ending up underwater.
Buy used vs. new- Cars depreciate the most in the first two years. Consider purchasing a 1-2 year preowned certified vehicle. It will be less expensive than purchasing a new one, and it will have absorbed the largest depreciation hits already.
Avoid taking on the balance of your trade-in on your “new” car. If you are already underwater in a car and decide to trade it in on another vehicle, that balance has to go somewhere. It gets added into the cost of the vehicle you are purchasing. When you bring negative equity into a new loan, you are burying yourself in the loan from the start. Make sure to start off on the right foot.
Good luck on your next vehicle purchase!
When is the Best Time of Year to Buy a Car???
Well, Q4 is upon us. This is what I consider to be the best time of year to purchase a car.
As you probably already know, dealerships have goals and quotas to meet. Included in this would be end-of-year goals. Making a car purchase at the end of the year could increase your chances of getting a better deal. According to iseecars.com, the months of November and December offer 26.9% and 23.5% more deals than average, respectively. If I were in the market for a new car, I would begin my search now, in October. There are deals to be had in October, and it gives more time research and compare prices. Pick 3-5 vehicles that you are interested in and compare pricing, options, rebates, promotions, etc…
In addition to quotas, another prompt for dealers to discount cars is due to overstock. The new models begin to roll out late summer and fall, and the dealer has to make room for these new cars. For instance right now, you may begin to see better deals on the 2019 models as the 2020 models are beginning to fill up the dealer lots. Pay attention if a vehicle has been redesigned for the new model, you may begin to see significant discounts on the current model, because they can appear to be less desirable. On the flip side of this, if you are in the market to lease a vehicle, you may see better lease deals on the newer model compared to the current model. Tip: Ask the dealer to show you a side by side comparison of 2019 and 2020 model lease rates. The newer model will likely have better rates due to residual value. Residual value on a lease refers to the estimated value of the lease vehicle at the end of the scheduled lease term.
If you are in the market for a preowned vehicle, there are deals to be had, they just may not be as heavily discounted compared to new vehicles. Larger dealers will begin to receive an influx of people who want to trade in their cars for the latest models and lease terms will be coming to an end. This will present an opportunity to purchase a nice preowned vehicle.
When doing your research and preparing for your car purchase, there a few things to keep in mind.
If the vehicle you want is a strong seller and in high demand, there may not be much of an incentive for a dealer to discount the price.
This may be a similar case for smaller independent used car dealers. Their profit margins may not be as large and they may not have the overstocked inventory problem to contend with to warrant heavy discounts.
The end of the year is not the only time there are good deals offered. Take advantage of holiday sales events and promotions. Christmas and New Year’s, but also Memorial Day, 4th of July, and Labor Day sales can have good discounts.
Most importantly, exercise patience. When negotiating a car purchase, be willing to walk away if you do not feel good about the deal and if isn’t right for you. Wait for the deal that you want (if it is within reason). Chances are you will not likely get a $20,000 car for $12,000. Do your research so that you know what your ideal car is selling for. Truecar.com and Cargurus.com are great resources for price comparisons.
Good luck on your car purchase journey!
5 Ways to Spend Your Income Tax Refund Wisely!
It’s that time of year….
Income tax returns will be in the mail or in our accounts very soon. Make sure to spend it wisely so that it can put you ahead in a few ways for the months and years to come. Below, I have listed 5 good ways to spend your upcoming income tax refund.
1. Start or add to your Emergency fund. We all need to put something away for a rainy day. Trust me, rainy days will come. It’s good to have funds available when an unexpected event arises, such as car or home repairs, or even the loss of a job.
2. Pay off debts. Especially high interest debt, such as credit cards or any high interest loans. Paying off high interest debt is extremely difficult when you are only making the minimum payment. This is because the majority of your payment is paying off interest and only a small percentage of it is actually paying down the principal payment.
3.Open Retirement Accounts. Open an IRA(individual retirement account) or add to an existing one. Max out on your annual contribution if possible. This will help keep you on track with your retirement goals.
4. Invest in the stock market. There is a wide variety of investments that you could invest in to grow your funds. Make sure to do plenty of research prior to investing.
5. Give! This is the most important tip. Give to your local church and/or organizations that speak to your heart. It is more blessed to give than to receive. Acts 20:35
When you receive your refund this year, implement 1,2 or all of the tips below. You will thank yourself later!
“Always plan ahead. It wasn’t raining when Noah built the ark.” ― Richard Cushing
The Power of Written Goals…
Since it is the beginning of the year, I’m sure you have several goals….Perhaps fitness, financial, spiritual or otherwise. I have a question…
Are you putting your goals in writing or are they just in your head? Goals that are only in your head are just dreams. While dreams are awesome, and they are the inception of goals, there are additional steps that have and need to be taken in order to manifest those dreams into existence.
Here are a few of my thoughts and experiences regarding goal setting.
Write down your goals…There is POWER in seeing written goals. It incites action!
Revisit your goals often. This will serve as a reminder to keep you on track to achieving those goals. Don’t let them become an afterthought. You may become tired at times during this journey and you will also probably encounter distractions or deterrents.
I like to post my goals on sticky notes and place them in locations where I have to see them at least daily.(i.e. My bathroom medicine cabinet)
This helps me with holding myself accountable. In the morning, I ask myself what can I do today that he get me one step closer to reaching my goal? At night, I ask the question, what did I do today to bring me closer to my goal? If I don’t like the answers, that means that I have to work harder and be more intentional the following day.
Keeping my goals visible allows me to pray and meditate on them often as well. I usually place an inspiring Bible verse or verses near the goals. I am acutely aware that I cannot accomplish my goals on my own.
I encourage you to try this practice of writing down your goals for at least 90 days and see how it goes. I am willing to bet that if you have never done this before, you will see a significant difference in your goal achievement results.
Don’t just make a resolution and let it fade away in a few weeks. Set goals and crush them!
- Published in Business, Finance, Fitness, Health, personal finance
My Favorite Podcasts…and Why.
Over the past few years there has been a resurgence of podcasts. Right now you can find a number of podcasts out there on any given subject. As my life has become increasingly busy, I have found that podcasts are a great source of information and entertainment. With efficiency being a main goal, podcasts and audio books are are a great way to learn new things while on the go. I have listed below my current favorite podcasts. They feature topics ranging from personal finance, real estate, to entrepreneurship in general. There is a wealth of information in these podcasts. On your daily commute, I would invite you to give these podcasts a listen.
Side Hustle School – I have found this podcast to be super inspiring. Real stories from real people are being shared. Side Hustle School features stories on how people have started profitable side businesses while maintaining their day job. It is awesome to learn how creative some people are. The business ideas on this podcast are so clever! One of the key things I like about this podcast is each episode only lasts an average of ten minutes. It is a great way to keep your entrepreneurial side motivated. The narrator of the podcast is Chris Guillebeau, who is an author and speaker.
Bigger Pockets – Bigger Pockets is about all things real estate. If you are a real estate investor or thinking about real estate investing, you should definitely be listening to this podcast. The interviewees are very knowledgeable and the hosts do a great job of dissecting the information that the guests provide. The guests are very transparent on how they were able to get started as well as current projects. They share the challenges they have encountered along with the successes they have experienced. My advice is to keep a notepad close when listening to this podcast…lots of gems to capture.
School of Greatness – One word…gratitude. Lewis Howes, an author and speaker, does a great job emphasizing the importance of gratitude while interviewing intriguing high profile guests, such as Tony Robbins, Marie Forleo, and Michael Hyatt, who is mentioned later in this post. If you are looking for motivation as an entrepreneur or just a self-help podcast, you should definitely give this podcast a listen.
This is your Life-Michael Hyatt – Michael is a great host, who is all about teaching you the dos and don’ts of building your platform as well as being intentional about the things you do in business and in life. This is a great podcast to learn best practices and “how-tos” to be more efficient and successful in business and life.
His and Her Money – His and Her Money is a personal finance podcast. Married couple, Talid and T, share their own stories as well as others on how they were able to pay off large amounts of debt and how to build good savings/investing habits. The stories and interviews are ultra inspiring and motivating. No matter how much debt you are in, it is definitely possible to get out of it.
Honorable Mention
Business Boutique – Business Boutique is a podcast targeted towards female entrepreneurs. I stumbled upon it by reading a blog post that was sent to me. The host, Christy Wright, shares tips and how-tos that any entrepreneur can put into practice.
- Published in Business, Finance, Health, Interview, personal finance, real estate