Summer Jobs

This is a great opportunity for college students to earn some extra money and add to their resume.

Where Are They?

According to the Bureau of Labor Statistics, the top 5 industries that attracted seasonal workers in the summer of 2009 between the ages of sixteen to twenty-four were:

• Leisure and Hospitality
• Retail trade
• Education and Health Services
• Government
• Professional and Business Services

However, the current state of the economy may affect college students who are looking to get the same jobs that they did last year. While the national unemployment rate is staying steady at 9.7%, some of these sectors are recovering slower:

• Leisure and Hospitality – 12.5% unemployment rate
• Retail trade – 10.1% unemployment rate
• Professional and Business Services – 12.4% unemployment rate

Alternative Sectors

There are alternatives for college students who can’t find hospitality, retail or office jobs. In March 2010, job growth continued in the temporary help services and healthcare industry. The federal government is also continuously looking for educated college students to fulfill internships. For college students who are taking some classes during the summer, government positions are ideal because they can create flexible schedules.

A summer job can give a college student “hands-on” training for a future career. When evaluating your summer job or internship, ask yourself these questions:

• Does this job interest me?
• What’s the hourly wage?
• How many hours per week? Is there any flexibility?
• What’s the level of responsibility?
• Is this going to interfere with taking summer classes?
• Could this help me learn valuable career skills?
• Will this help me build contacts for my future career?
• Could this summer job turn into a recurring, part-time/full-time job?

Is This Job BENEFICIAL?

Make sure you understand your short-term and long-term goals. If you’re just looking some extra money, you’ll choose your job based on salary. However, make sure that there’s a long-term goal, such as valuable job experience or gaining business contacts.

Being short-sighted can hurt you if you graduate and don’t have any experience in your chosen field. Sometimes it’s worth taking a low-paying summer job or unpaid internship if it’s going to lead to bigger and better opportunities. Just make sure that your financial circumstance will allow you to take the job.

I want to expand on what MLR introduced a month ago and offer a few home buying pointers that I’ve gleaned from my line of work. These points are intended to help you be intentional about leveraging your mortgage and your home for financial success.

But first, let’s talk about bread.

Everyone knows how to walk into a grocery store and buy bread. Centuries of marketplace development, mass consumer input, and a lifetime of incremental firsthand experience combines to make the bread purchasing process simpler for you than it’s ever been. But as much as your neighborhood market would like you to believe that their prices and their quality are the best in the world, the truth is that there’s still room to apply a bit of sweat equity to the transaction and get a better deal.

With some work, you can probably find better bread at lower prices elsewhere. And this is bread we’re talking about, not a sophisticated financial instrument like a mortgage. As much as it may seem that the mortgage application process is streamlined to assist consumers who have no clue what they’re getting themselves into, you’re setting yourself up for failure, or, at best, minimal success, if you don’t do it right.

Set Yourself Up For Success

You’re not buying a home. You’re buying an investment portfolio, and you’re funding the portfolio with a mortgage. What does this mean for you?

1. Know what you’re doing.

Don’t try to use debt to get ahead unless you know what you’re doing and you understand the costs involved. You don’t need to be an economist, but you need to have a strong sense of where you are and where you’re going, financially. Take the time to do some calculations. Make sure you’re ready to purchase a home.

Reread MLR’s Back from the Dead post, in which he spends a paragraph or two detailing the money he’s saving as a homeowner. You think this happened by accident? As with all things, calculate the costs involved before you move forward.

The best way to monitor your financial situation is through effective budgeting. Read the linked article. If you haven’t completed all of the steps outlined there, you’re probably not ready to buy a home. And that’s just a place to start. Talk to a trusted mentor or financial professional and discuss your options.

Don’t buy a home for social reasons. It might be nice to own a home, but unless you’ve got a family of five and you need the room to expand, your home is a financial product.

2. Every lender is different.

The first and most important part of taking on a mortgage is finding the lender or mortgage broker that offers the best rate on the investment. Most lenders offer similar rates. But similar does not mean identical, and closing fees and loan terms differ. The speed with which a given lender can close your loan makes a difference, too.

MLR’s Note: When I was going through my process to get pre-approved for a lender, I can tell you, I was quoted very similar rates, but my expected cost varied wildly. Between some charging points, lock in fees for the rate, appraisal fees, etc… some lenders with a slightly lower rate wound up being much more expensive.

Compare lenders and the mortgages they offer. You can check out current mortgage rates provided by multiple lenders at Lender411.com, Bankrate.com, LendingTree.com, or any other major internet mortgage site. For the sake of disclosure, be aware that I work for Lender411.com.

3. Get preapproved, not prequalified.

Prequalification is a meaningless thing. It’s an unofficial guess as to how much money you’ll be able to borrow. The guess is made by a lender who has received nothing more than a verbal statement from you regarding your own income and credit history. Prequalification won’t give you any financial backing to negotiate with.

Preapproval is different. It’s like applying for the loan in advance. Lenders will look at tax returns, pay stubs, bank statements, and your official credit report to determine what loan amount you’re qualified to receive. You’ll receive an official preapproval document that carries real financial weight. With this in hand, sellers will be willing to negotiate with you and you’ll close your loan much faster.

4. Avoid mortgage insurance.

Private mortgage insurance (PMI) is required for all conventional mortgages and Federal Housing Authority (FHA) mortgages in which the borrower purchases less than 20% of the equity of the home at closing. In other words, if you don’t make a 20% down payment, you’re going to have to pay for PMI. How much does PMI cost? It depends on the cost of your home, but you can expect to pay at least $50 or $60 per month, or $5,000 or more over the life of the loan.

The best way to avoid PMI is to make the 20% down payment. But many young home buyers can’t do this. The next best thing to do is to make at least one if not two additional mortgage payments each year toward the principal balance of your loan. This will build your equity faster than otherwise.

If your mortgage has a longer term length or you’re making minimum payments or, horror of horrors, missing payments now and then, it will take longer to gain the 20% equity required to eliminate the PMI. The best thing you can do is manage your mortgage well and make additional payments to bring down the principal.

5. Don’t take out an adjustable rate mortgage.

An adjustable rate mortgage gets you a low initial introductory rate for a brief fixed period. If you’re able to refinance into a low fixed rate before this period is over, it’s possible to use an ARM to your advantage. But most of the time, an ARM is a bad idea.

Please, just don’t get one. This may sound a bit dramatic, but unless you have a good idea of where the mortgage marketplace will be in seven years when your rate begins to adjust, you’re asking for uncertainty at best and financial terror at worst. Get a mortgage with a fixed rate.

6. You can negotiate closing costs.

Negotiation is a wonderful thing. Just about every closing expense you’ll have to pay, from the rate lock fee to the broker commission, is negotiable to some extent. Your success will vary depending on the lender you’re working with and your negotiating abilities. Here’s a list of a few fees you may be able to negotiate lower.

• Origination fee. This is simply the lender’s profit. Profit can always be negotiated, though you may not have much leverage to bargain with.
• Assumption fee. This one doesn’t apply in every case, but if you’re assuming a mortgage of a previous borrower, many lenders will charge you an assumption fee. Assumptions don’t cost lenders any additional money, which makes this fee unnecessary.
• Appraisal fee. This is the worst. Many lenders will charge you for the appraisal even after you’ve paid for it yourself. It’s just standard practice. Keep careful records and watch out for this.
• Mortgage insurance application fee. Exactly what it sounds like. Any private mortgage insurer worth working with will waive this fee. If your lender is charging it to you, dig deeper and find out why.
• Document preparation fee. Sometimes this fee is used to hire an attorney to review certain documents, but most of the time, it’s charged for no reason at all.

This list of closing costs and fees hosted on Zillow.com is pretty extensive and will give you an idea of the various costs you may have to cover at closing.

Oh, and MLR’s post reminded me of one more thing…

7. An emergency fund is a wonderful idea.

One missed payment on your mortgage will destroy your credit score, and there’s no better way to hinder your future financial success than a poor credit score. As in MLR’s case, it’s better to make a smaller down payment and retain an emergency fund than to pay everything you can up front.

MLR’s Note: I went back and forth with myself over this dilemma. In the end, having a year of living expenses in my bank account as a safety net is worth the bit in PMI I will pay for a few years. Because I have that safety net, I am paying additional on top of my mortgage to accelerate paying down the mortgage and get rid of PMI.

Be intentional about your mortgage.

This is really the point. Remember the bread story. Even with a product as simple as bread, you can save money if you take the time to research your options and do it right.

A mortgage is a tool you can employ to your advantage if you’re willing to be intentional about using it for financial success.

Forex is an abbreviated form of “foreign exchange.” The Foreign Exchange Market is where traders trade money. In the stock market, traders trade stock. But in the forex market they trade currency. To understand it in real terms, let’s break down a real-life example.

Forex Explained

If you travel to Paris for vacation (for those of you who are travel inclined, check it out! 36 hours in Paris!), for example, you will most likely need to convert your U.S. Dollars into Euros. When you approach the currency exchange counter to trade US Dollars for Euros, you are trading in the forex market! Let’s assume that you want to exchange $100 for Euros. At the current exchange rate, you would receive about 70 Euros. Essentially, you just sold $100 and you bought 70 Euros.

How Much Is Traded In Forex?

Now, this happens on a millisecond basis in the forex market to the tune of about $4 trillion a day. That is how much the Bank of International Settlements estimates is turned over each day in the foreign exchange market. The New York Stock Exchange experiences about $75 billion a day in turnover. Thus, the FX Market is roughly 40 times larger than the NYSE!

Who Trades Forex?

The main players in the forex market, however, are not people exchanging money when they are on vacation. In fact, that is a very small percent of the average daily turnover. The main players in the forex market each day are central banks and governments, hedge funds, large banking institutions, and very wealthy, sophisticated investors.

Until the late 1990’s, in fact, the only players allowed in the forex market were banks, hedge funds, and very wealthy people. The reason is rather simple. The minimum contract size during those days was generally $1,000,000, which meant that a market participant needed at least that amount just to hold 1 contract. This minimum contract size made it essentially impossible for most people to trade in the FX Market. Today, however, the advance of the internet and technology has opened the door for small, retail online brokerages to open up shop.

Advantages of the FX Market

The FX Market operates on a 24 hour basis. Liquidity and market action simply flow from one time zone to the next as Central Banks and large financial institutions open and close shop each day. This schedule makes it much easier for U.S. businesspeople to trade the FX Market because they are able to trade before and after normal working hours.

The FX Market is not only the largest financial marketplace in the world, but it is also the fastest growing. The Bank of International Settlements estimates that average daily turnover in the FX Market will reach $8 trillion by 2020, which means the Forex Market is a growth industry, set to expand in the coming decade.

Disdvantages of the FX Market

These advantages aside, there is also a high risk trading the forex market. As with any investment or trading, the risk of loss is substantial and forex trading is not suited for everyone.

Learn as much as you can about the dynamics, factors and risks before considering trading. There are also many professionals out there, as well as great courses and training material, that you should consult prior to making your decision.

To Forex, or Not to Forex?

Should you invest in Forex? That entirely depends on a few things… 1) Your comfort level, 2) Your current financial situation, and 3) Your willingness to learn about financial markets and stay abreast of the current markets.

MLR’s Note: I don’t think this is as simple as putting your money in a Target Retirement Fund and forgetting about it, so make sure you educate yourself before making any risks!

If you successfully establish your business as a reputable enterprise, you can even develop a network of knowledgeable professionals who can help you now and in your future. If you should somehow fail to meet your initial projections, you’ll still be far ahead of those who wouldn’t dare strike out on their own so early, as you will have learned a great deal about the professional realm and your career field.

This isn’t to say you should be unprepared for the challenges you will have to overcome, however. Although starting your own business now could give you valuable real-world experience that will set you apart from the rest of the pack, you will need to do a great deal of homework beforehand.

Things to keep in mind if you before starting your own business while in college:

Before you run out, register a LLC, and throw money at a custom developed website, there are some things you should think about.

1) Be sure to follow all industry regulations.

Most industries have legal requirements that mandate the use of certain types of insurance and surety bonds before the government will issue you a valid business license. Many of these stipulations entail additional fees you will need to take into consideration when drawing up the budget for your new enterprise.

2) On that note, be sure you have the financial stability to do so before you start.

Develop a business plan that outlines your basic idea for financing. Some typical advice for new business owners is that they have the financial stability to be able to live on their current finances for at least two years without turning a profit.

Some entrepreneurs have found it beneficial to use leftover student loan funds to fund their business ventures. This can give you short-term access to the funds you need, but remember that you’ll be accountable for paying all applicable interest.

MLR’s Note: If you use student loans to finance a business idea that flops, you can’t escape that debt. No matter what. Bankruptcy does not let you escape from student loans, remember that!

3) Time management is key.

Before you open for business you’re going need to figure out how much time you will feasibly be able to dedicate to your business. You’ll also need to bear in mind how much time you’ll need to set aside for your studies, as well as any social life you might hope to maintain.

4) Develop an effective marketing strategy.

Oftentimes the best entrepreneurs are marketers. Consider both your product and market to determine which approach will be best suited to help you achieve your goals. Establishing an efficient website for potential consumers is typically a good investment for any new enterprise.

MLR’s Note: This is, of course, assuming you are doing B2B. Also, don’t underestimate the value of themes/templates when just starting out. $300 can go a long way to determining your market before you lay down a chunk of change on custom development!

5) Find a viable location.

You’ll need to think about where you’ll be conducting your business. It might not be feasible—or even legal—for you to operate a business out of your dorm room. Furthermore, solicitation is often prohibited throughout many college campuses. Depending on the nature of your business, you might be able to operate solely online, or you might need some face-to-face contact with your consumers.

6) Try a test-run before you open for business.

Before opening for business, run your service or product by a segment of the demographic you will be marketing to. Conduct surveys to find the best ways to communicate with your consumers, to really understand their wants and needs. You may find out that there isn’t a viable market for your idea in the area you live in. Or, you could uncover a gem of information that could help your new business succeed.

Go Ahead and Try It Out!

With the economy being down, it may be the perfect time for a startup! Also, with the surge in smart phones, there is still a demand for apps and services that are of value to the consumer and business via the mobile market.

There is still time! Brainstorm, partner with the right people, follow the above advice, and make your mark!

However, making the decision to go back to college isn’t easy, and there are several challenges a more mature student might face in attending a university at an older age.

So to help you out, here are 10 tips to help you make the transition.

1. Visit the Campus

Many younger students pick a campus that they’ve been to before, or that an older sibling has attended, so they often have an idea of what the campus is like.

Older adults may have never visited the campus before, and do not know what to expect. If you are unfamiliar with your university’s campus, consider making a special college visit, to get a basic idea of the layout. Most websites also offer campus maps for additional help.

2. Use the Resources to Fit In

Obviously one of the biggest concerns older adults have is fitting into a campus of mostly teenagers and people in their early twenties.

See if your university has an office for adults going back to school. They can likely give you resources aimed at others like you, which will help you meet other adult students and fit in faster.

3. Catch Up In Technology

Many adults may feel like they aren’t up to date on modern types of technology.

Check with your university’s library for help on what types of computers and other forms of technology are used. The library often offers additional courses and helpful tips to get adjusted to new tools.

4. Meet New People

In addition to fitting in, building a relationship with peers and professors is important. Because most adult students live off campus and only come to campus for class, you may have to put in extra effort to develop such relationships.

Make a point to talk to your professors, and try to hang out with a few fellow students once or twice a week. Email and IM clients like msn and gtalk are also good ways to keep in touch. These relationships can be useful both in your social life, and in making connections for your future career.

5. Manage Your Employment

Most adults that go back to school do so while keeping a job.

If employment is necessary while in school, see what your university offers as far as online and night classes. These can be great options that allow you more flexibility in your schedule, so you can continue working.

6. Balance your Time

Taking on a college education can seem overwhelming.

Make sure not to overbook yourself at first. It’s fine to start out with only one or two classes, until you get used to the extra workload. Make sure not to neglect your work, family, and other important aspects of your life. As you get used to being in college, you can take on a heavier course load.

7. Doing Well

If you haven’t been in a school setting for a while, it might seem scary to think about writing papers and having exams again. It’s important you have enough time to study.

Consider studying with fellow students to help form relationships. You can also go to your professor for help, or take advantage of tutoring services offered by your school.

8. Get Involved

Of course, getting involved in campus groups and clubs isn’t necessarily a given for many older adults. However, there may be clubs that could interest to you, and could be helpful for your future career. Going to your university’s sporting events is a fun way to relax and support your school.

MLR’s Note: Example of a club that could be helpful for your future career: The Supply Chain Society if you are getting a degree in supply chain management or logistics!

9. Manage Stress

An adult is faced with several extra stress factors such as additional jobs, bills, and family pressures, that other college students often don’t. Make sure you take time for yourself, especially if things get stressful, and stay organized so that assignments don’t pile up.

10. Enjoy Yourself!

Going back to college is a decision you made for you. It’s hard work, but it shouldn’t be all difficult. Make sure you take time to relax, socialize, and enjoy the time that you’re in college.

There are many opportunities while at the university, and you won’t have them after you’ve completed your studies. Make the most out of your decision to go back to school.

And Oh Yeah, Network!

If you didn’t gather from each tip, they are all enhanced by networking. So, despite the fact that you were sporting your leather coat and shades in the 80s in your Firebird while your college “peers” were just being born, they will be valuable contacts to have.

You never know, the young’n next to you may be the next Mark Zuckerberg, founder of Facebook, or Tony Hsieh, founder of Zappos.

What happens, then, if your happy son or daughter successfully graduates from college only to find themselves simply another number in that unfortunate statistic?

Home They Come!

A year ago, My Life ROI published a post devoted to five financial tips for parents whose high school graduate was leaving for college. In the same spirit of that post, I’d like to offer to parents four tips to help them properly welcome and support their unemployed son or daughter upon his or her returning home after graduation day.

1) Have Another Talk

If you’ve offered your son or daughter a place to stay after college, then it’s important to have another talk with him or her to establish good communication. During this talk, you and your child should set out an agreement as to how everyone will behave in the house. Try to respect your son or daughter’s wishes; after all, you’re the parent of a college graduate now… an adult! Likewise, ask him or her to respect your own sanity as well. Figure out ways that you can accommodate him or her, and in return he or she should find ways to help out around the house.

Finally, you should encourage your son or daughter to come up with a plan for finding a job and eventually moving out. Try to establish a timetable by which you and your son or daughter can check each progress towards an ultimate goal: your child’s complete independence.

2) Keep Each Other Accountable

As you get used to living again with your son or daughter under your roof, you should make it a habit of keeping him or her accountable for the agreement you made. Politely ask how the job search is going. Ask to help connect him or her to your acquaintances that might be able to pass around a resume or two. Of course, you don’t want to pester anyone, so try to do this as casually as possible.

Show interest in your son or daughter’s predicament, but not so much as to make the situation uncomfortable. If you feel tension, don’t hesitate to encourage your child. You should remind him or her that you have the best of intentions.

3) Lead by Example

Because your child doesn’t have any income, you’ll be providing him or her with relatively free room and board. This is a wonderful way to help your son or daughter gain insight into the family financial situation, but it certainly doesn’t mean you can’t turn it into a teaching moment. Ask if your son or daughter would be willing to handle balancing the checkbook or sorting the bills.

This will involve your boomerang child in the financial situation at home, thus showing him or her how much effort goes into properly managing the family’s money. Hopefully, seeing these costs will encourage your son or daughter to double his or her efforts at finding a job.

4) Adjust the Relationship

One thing you should keep in mind is this: just because your son or daughter is back in the house, it doesn’t mean you have to resume your old roles as parent and child, whatever those roles were. Here’s a chance for your relationship with your son or daughter to grow in new ways. You can try to become an advisor to your child, an old friend, an expert in certain life areas. Likewise, so too can your son or daughter teach you a thing or two about life.

This doesn’t mean you cannot expect your child to respect your values in your own house, but that you should expect it as you would expect it of an adult to be welcomed as a guest, rather than a child to be disciplined.

But Have a Backup Plan

So, what happens if your son or daughter’s plan fails? Say your child had planned to move out within a year, but fourteen months have passed and he or she has no job leads? How do you handle that? You have some options, sure, and you should definitely talk them over with your child.

Some parents have offered to help their son or daughter find a cheap apartment by ‘loaning’ money on the grounds that the son or daughter take a part time job and pay back the money plus interest. Others act like benevolent landlords and extend their son or daughter’s ‘lease’ for a few months.

Whatever you do, you should make sure that it is supportive of your son or daughter, as long as he or she is being responsible and actively trying to improve the situation. The important thing here is that everyone is patient with one another.

The general public has been very worried about changes from the Credit CARD Act and particularly how it relates to credit scoring. Consumers are more concerned than ever about the importance of their credit scores and how they will affect their financial well-being. The newly enacted legislation was rolled out in an effort to protect consumers from onerous fees and predatory lending practices of banks and credit card issuers.

One of the unintended consequences of the CARD Act, however, is that it has made access to credit far more difficult, even for the most credit worthy individuals. Prior to 2008, anyone with a heart beat could qualify for a credit card … but not anymore.

With an unsteady economy and a stubbornly high unemployment rate, credit worthy consumers have been heavily impacted by the new credit underwriting standards and have come to the realization that good credit scores are more important than ever. The fact of the matter is that there is still a lot of mystery, innuendo and fiction about the basics of credit scores, from what makes up a credit score to how it’s improved.

The Top 5 Myths

But what about the stuff we’ve all heard about credit scores? How can we tell fact from fiction when it comes to credit scores? We’re going to dispel the top 5 credit score myths right here to give you a head start:

1. All You Get Is One Credit Score

Experian, TransUnion, and Equifax are the three major credit reporting agencies and each of them calculates their own version of your credit score with their own proprietary scoring algorithms. Each of the bureaus gathers a different variety of data about your credit and weights the importance of each on a different scale.

While the scoring models each agency uses are different, creditors make their own choice of credit bureaus and typically will default to the lowest score among the 3 bureaus when making their decisions.

MLR’s Note: I’ve always heard they take the middle score. Anyone care to weigh in?

2. Low Income Hurts, High Income Helps

Your income level has no impact on your credit score – it simply just doesn’t matter how much money you make. Having the capacity to repay your debts, no matter what they are, is far more important than having a large income.

What really matters with your credit score is your “debt-to-income” ratio. The lower your debt to income level is the higher capacity that you have to pay your debts. So, a person with $250K in annual income and $200K in unsecured revolving debt has a high debt-to-income level and represents a much greater risk to creditors. An individual with $35K in income and no revolving debt has a much more attractive risk profile for creditors than the high income individual.

3. Close Old Accounts You’re Not Using

Because your credit worthiness depends so much on your debt-to-income, it can be disadvantageous to close old credit accounts, even if you are not using them. Closing an old account can increase your debt-to-income ratio overnight and actually hurt your credit score.

Now, I’m not saying that you should open a slew of new accounts to increase your credit limits either. Opening up a number of new credit card accounts all at once is a huge red flag for creditors and can significantly hurt your credit scoring.

So, keep those old accounts open to maintain that debt-to-income ratio but don’t use the account if you don’t need it.

4. Checking Your Own Credit Can Hurt Your Score

You need to regularly check your credit score at least once a year. To be safe (for example, you are in the market to make a large purchase such as a house), once every 6 months is even better.

One of the most important factors in doing so is that you need to be sure the information being reported to the reporting agencies is accurate. Inaccurate information on your credit reports can be a huge detriment for both your current credit score and also an indication of possible fraud. You can check your credit as often as you want and it will not negatively affect your credit score.

5. Loan Shopping Will Hurt Your Credit

If you’re shopping for a car or looking to refinance your mortgage and you apply for financing with multiple vendors within a short-time frame (roughly 2 weeks), this will not affect your credit adversely. Understanding how common place that rate shopping is for consumers, credit bureaus roll up these inquiries into a single bundle so as not to negatively impact credit scores.

However, if you apply for credit from a number of different sources, such as a car loan, home loan and credit card all at the same time, this type of behavior signals a level of desperation for credit that will hurt your credit score.

Now, Go Improve Your Credit!

With this new knowledge, start out by checking your free credit report and correcting any inaccurate information. It is a headache if there is incorrect information, but 100% necessary.

Once you have corrected your credit report, give it a few months and get another credit report from one of the other agencies (to keep them free!). Make sure it is accurate. Now you are good to go. If a large purchase (car, home, etc) is coming up soon, check your credit score as well so that you know what kind of interest rates you can receive.

MLR’s Note: If you aren’t actively looking at a loan, a site like creditkarma acts as a great thermometer to measure your approximate credit score, the direction it is moving, and why.

A while ago, My Life ROI published a post titled All You Need to Know About Renter’s Insurance. This may be just the thing anyone who needs to learn just what renter’s insurance is all about. If you fall into one of the categories mentioned above then this is definitely something you need to check out.

Don’t Drop a Policy Because of Money

Others are aware of what renter’s insurance is and what it can do to protect you, however they still are without a policy because of one thing – money.

There are times when people go through their budget and come to the conclusion that renter’s insurance is just not something they can, or want to, include. Unfortunately, neglecting to protect the belongings you have amassed over the years isn’t the wisest thing to cut from your budget, especially when there are plenty of ways to trim the amount you pay in renter’s insurance premiums.

Negotiating a better price

Some people hate negotiating. We all know someone who pays the sticker price for everything. However, when it comes to insurance it’s time to put those negotiating skills to work, even if you don’t think you have any.

Start by calling your auto insurance carrier to see if they offer renter’s insurance. If they do, ask for a multiple policy discount as just about every company will offer some type of discount for people who carry more than one policy with them. After that, check to see if you can get an even bigger discount if you were to pay a year’s, or even a half a year’s, premium up front.

Once you are able to work down the price with a company you are familiar with, call some others and see if they can do even better. Having something compare against will give you some additional room to negotiate with.

Lower your risk

Auto insurance policies are based in part by where you live because there are areas that are more prone to auto theft and where drivers are more likely to be in a collision. If you live in a low crime area that hasn’t had a natural disaster in years you should be able to lower the cost of your renter’s insurance policy.

Of course, you don’t have control over when a storm will hit but you can do some things to lower your risk in the eyes of your insurance company. Homes and apartments with updated wiring and plumbing are lower risk dwellings. Make sure you inform your insurance company if where you live has recently been updated. You may even be able to negotiate a better premium for newer appliances as well.

Of course if you live in a home that has a security alarm you can also save some money on your premiums. Other discounts may be available for smoke and fire alarms, fire extinguishers, deadbolt locks and other home security devices. The important thing is to let your insurance company know about these things so that you can get the discounts you deserve.

Adjusting your policy

If after talking to your insurance company and trying to see what discounts you are eligible for still hasn’t reduced your premiums to the point where you can keep your policy there is still one more step you can take.

Your premiums are based on a number of things. Included is the amount of insurance you carry, your insurance deductible, and the type of policy you have.

Obviously, if you are insuring $75,000 worth of property you will be paying more than if you only were to insure $35,000 worth of property. It’s a fact that many people buy too much insurance because they overvalue what they own. Have jewelry appraised and go through your belongings to see what you really would need to replace. That sofa in the garage from your first dorm room may not be a necessity.

Once you have trimmed back on how much insurance you need you can also raise your deductible to lower your premium. One word of advice though, don’t raise your deductible to an amount that you can’t afford to meet.

Finally, check your policy to see if you have an actual cash value or replacement cost when it comes to a payout. Replacement cost policies are more expensive because they pay you the amount it takes to go out and replace the items you lost. An actual cash value policy will pay out the replacement cost minus any depreciation so it winds up costing you less in premiums.

Get Started ASAP!

Of course the only way for you to save any money on renter’s insurance is for you to initiate the process. Rarely will you find an insurance company that will call you and tell you that they have found some great ways to save you money. Make a list of every way you feel that supports why you are eligible for a discount and make that call.

Because of the duration and obligation of a mortgage, homebuyers should thoroughly examine several options before choosing a mortgage.

Loan Options

Loan types fall into two categories: government-backed loans and conventional loans. No two homebuyers have identical financial histories, savings or credit scores. These three factors are crucial in picking a mortgage, as are other things.

Some loan options cater to first-time homebuyers more than repeat homebuyers, and vice versa. Read below to find out what VA loans, FHA loans and conventional loans have to offer.

VA Loans

As arguably the most borrower-friendly loans, VA loans come with a guaranty from the Department of Veterans Affairs. Certain veterans and active-duty personnel qualify for this program; it is not available to non-military homebuyers. The VA backs up to one-quarter of each loan amount, but the VA does not issue these loans.

Only VA-approved lenders issue these loans, and because of the guarantee they incur less risk. Consequently, VA loans tend to come with slightly lower interest rates than traditional mortgages. For active-duty borrowers, the VA caps interest rates. While low interest rates lead to smaller monthly payments, there’s an even better perk to VA loans.

Qualified borrowers won’t pay anything down to finance 100 percent of their home. Even when military homebuyers do make a down payment on a VA loan, it’s often nowhere near the traditional mortgage standard of 20 percent. VA loans are ideal for military homebuyers—first-time or repeat—who do not have the scratch to make a large down payment. In most parts of the country, the VA loan maximum is $417,000 but soars higher in more expensive markets.

Due to a high volume of minimal down payments, the VA does charge a funding fee of 2.15 percent to first-time homebuyers who pay nothing down. The fee simply keeps the program afloat and allows others to take advantage of their VA home loan benefit, too. But another monthly saving through the VA loan program is the absence of private mortgage insurance (PMI), a common monthly cost in conventional loans that amounts to thousands of dollars during the life of a loan.

The aforementioned benefits of a VA loan combined with no prepayment penalties, interest rate reducing refinancing options and sellers covering a percentage of closing costs make the program an ideal choice for service members fresh out of duty. Qualifying terms are less strict than those of conventional loans. For more information on VA loans, contact a VA-approved lender.

FHA Loans

Loans backed by the Federal Housing Administration (FHA) are well-designed for first-time homebuyers, but are available to anybody. FHA loans’ down payments go as low as 3.5 percent, and can be paid through gifts received by non-profit organizations, friends and/or family. There’s a chance borrowers pay zero percent down if they combine their FHA loan with another loan type.

Your income-to-debt ratio—that is, the amount of money you owe in comparison to how much you make—can be as high as 55 percent and you may still qualify for an FHA loan. The VA loan program looks for ratios of 41 percent and lower. Lenders aren’t likely to issue conventional loans to borrowers with debt ratios higher than 38 percent.

Much like the VA loan program, the FHA insures loans to protect lenders against borrowers who default. Also, the FHA comes with an initial funding fee of 1 percent and a small monthly fee during the life of the loan. This monthly fee could be higher than the PMI of a conventional mortgage though.

Interest rates on FHA loans fluctuate within 0.125 percent of conventional loans. Just like VA loans, FHA loans do not immediately rule out borrowers who have a bankruptcy of foreclosure in their past. Credit standards for both of these government-backed programs are more lenient than conventional loans. The FHA is less concerned with borrowers’ credit history and focuses more on the borrowers’ ability to pay back the loan.

On another note, there are some people who swear by using FHA loans to buy investment properties. Check out that post to find out more!

Conventional Loans

Conventional loans, or traditional loans, come with down payments as high as 20 percent. As a result, these loans suit homebuyers who saved a significant amount of money. The upside to large down payments is competitive interest rates, assuming your credit history is excellent.

Paying down 20 percent or more of the loan may eliminate PMI. Prepayment penalties are another cost that may come with a conventional loan. Borrowers should talk with lenders before agreeing to a loan in efforts to eliminate prepayment penalties. Or, you could negotiate for a shorter prepayment penalty period meaning you’d only be penalized in the first few years instead for the entire life of the loan if you make payments early.

Another important decision for homebuyers is choosing an adjustable-rate mortgage (ARM) or a fixed-rate mortgage (FRM). The former usually come with a fixed-rate period, but interest rates fluctuate with the market thereafter. FRMs tend to be more popular and come with an interest rate that never changes regardless of how the market acts. Borrowers must pick between a 15- or 30-year mortgage.

Ready to Choose a Mortgage?

The decision to buy a home is a lot more complex than what loan to choose. You obviously need to choose neighborhood, price range, features you need, features you want, and features you can live without, etc.

However, understanding what financing options you have available will better prepare you for the (sometimes) lengthy process of a real estate transaction.

The average American credit card has an APR of 14.67 percent. The average auto loan has an average of 7-9 percent. Now that is something for Mr. Banker to smile about. Unless you have read MLR’s advice on how to avoid credit card costs, then Mr. Banker will be sad.

This means that in your lifetime, you could be giving hundreds of thousands of dollars right over to the bank for purchases like your car, mortgage, appliances, television sets, microwaves, food, fashion, and anything you put on a credit card.

On top of this, you probably have a savings account at a bank with some money in it. If you do, then guess what? You are borrowing YOUR OWN MONEY AND PAYING INTEREST ON IT. Sound ridiculous? It should.

So, the question arises, how can we redirect this money back to our circle of wealth?

The answer is by Becoming Your Own Bank.

MLR’s Note: Before you get too far into the post, I was not too familiar with this idea until getting this guest post. I was excited about seeing a view that I am not familiar with. It isn’t an idea that is too out there, it is found on Livestrong.com and has a good discussion on QueerCents (multiple dissenting views).

I’m going to run you through a few different scenarios of how a potential car purchase can happen. One scenario will be what you’re used to, and one will be slightly different.

Borrowing from the Bank

So let’s do some math. We will assume that I buy a car for $30,000 at a 6 percent interest rate for 5 years. Assuming I keep the car for the 5 years, I would end up paying $4,799 in financing over the life of the loan. This means I would pay $34,799 in total for the car.

Now, some people would say, “Alright, so I come out with $4,799 dollars less than when I started. Not a big deal.” Well we still have to take the value of the asset at the end of 5 years. The average car loses 50%-70% of its value in the first 5 years, so now your vehicle is worth, let’s say for ease, $15,000.

So you paid $34,799 for an asset that is now worth $15,000. You end up in the red with -$19,799.

Now I know the common response is, “well what are you going to do, that’s just life?” However, the ultimate problem here stems back to why the bank loves you. You treat them better than you treat yourself.

When you owe the bank money, you pay them back on time, you pay them interest, and you make sure they are happy with you. It’s time to start valuing your own money the same way by using the Infinite Banking or You Be the Bank concept.

Let’s take a look.

Borrowing from Yourself

In order to use the You Be the Bank concept, you must first capitalize the banking system.

Once you have capitalized, you then take a loan from your banking system for the vehicle, cost $30,000. Now, you set yourself up on a finance plan (called an amortization schedule) and pay yourself the interest at 6% interest. Now at the end of 5 years what do you end up with?

You now have the principle AND interest back in your banking system. A grand total of $34,799 is now in your bank.

But that isn’t all. You also have an asset worth $15,000. So in the end you come out, on a balance sheet, with $49,799 in total assets, for something that you would normally do anyways, purchase a car.

Now add in all the credit cards and other financing purchases you make and you can see some of the major benefits. And this doesn’t change anything you would normally do, you begin to recapture wealth by just financing your own purchases.

By getting ahead, capitalizing your own banking system, and then treating your money just like you would treat the banks money, you get the velocity of money on your side.

Risk Involved

And we can see how powerful this can be. Normally, a financial advisor will come to you and take your savings and try to get you a higher return. But when you put your money in a volatile market you also put that money at risk.

This is where the shift happens with Becoming Your Own Bank. By redirecting the 5-15 percent, or more, that you are paying in financing charges, back to your own circle of wealth, you can grow wealth much more efficiently and more importantly WITHOUT RISK.

Dividend Paying Whole Life Insurance Policy

There are many different financial vehicles that can be used to setup your own banking system. However, the vehicle we recommend is a dividend paying whole life insurance policy.

This where many people will stop and wonder if life insurance is a good place to store their money, because they have been told their whole lives that whole life insurance is a bad purchase. And before you jump to conclusions let me give you a few facts.

If you do some research, you will find that large banks have some very heavy dollars stored in similar accounts. According to fdic.gov, Wells Fargo has 19 billion dollars stored in these types of insurance policies.

There are a few reasons for this. Life insurance policies grow tax deferred, they are tax free–if treated correctly–they have tax advantages, they are post tax dollars, they are liquid, they give you control of your money, they have guaranteed returns, and on top of all that you get the added death benefit.

Start the Blueprints for Your Bank

Everything that was said above is what makes life insurance policies such a powerful vehicle for your banking system.

All in all it’s about getting ahead. Whether you just pay cash for your purchases, or you setup your own tax advantaged banking system, redirecting money back into your circle of wealth can have a huge impact on your future, your retirement, and the generations that follow you.