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Book Review: The Total Money Makeover by Dave Ramsey

book review

Dave Ramsey is a best selling author of many popular self-help books about getting your finances together. He’s inspired many with his simple, no-hassle philosophies on how to manage money. He also has a radio talk show called the Dave Ramsey Show, that you can listen to anywhere you listen to podcasts. He even started his own company built on his financial philosophies called Financial Peace University. Dave Ramsey and his colleagues have loads of resources you can find helpful in your own personal money management journey. Whether you are managing a household or a small business, Dave Ramsey has the financial advice you need to be successful and smart with your funds.

Today we’re going to take a focused look into one of Dave Ramsey’s most prolific publications, The Total Money Makeover: A Proven Plan for Financial Fitness. You’ve heard of fitness journeys and makeovers that change your style into something fresh and new, but Dave Ramsey takes all that and puts a financial spin onto it. With Dave Ramsey’s baby step plan you can exercise your financial abilities in ways you never thought possible and finally get into shape where your wallet is concerned.

What Kind of Book is The Total Money Makeover?

book cover

The Total Money Makeover is written as a self-help book. It’s even been compared to popular self-help books like, Your Best Life Now and 7 Habits of Highly Effective People because of the reader-friendly way it is written. It’s an engaging book with lots of real-world examples and stories from real people who have actually gone through Dave Ramsey’s baby steps and seen results. These short anecdotal stories throughout the book help all of Dave Ramsey’s concepts make clear common sense.

The book also includes a lot of motivational help along with the tips and advice. One of the biggest factors that holds people back from taking full control over their finances is the proper motivation and encouragement to make necessary changes to their lifestyle. Dave Ramsey helps with that too, giving you the fresh outlook you need to understand your goal and the rewards you can gain.

Dave Ramsey is also a Christian, so his books often have a religious undertone. So you may find him referencing Bible verses every so often in this book, and tackling religious views and practices with regard to money as well.

What’s in the Book?

The Total Money Makeover is essentially a step-by-step guide for how to go about your own personal money makeover journey. These steps are based on Dave Ramsey’s key money philosophies. Dave Ramsey has strict beliefs about not ever using debt, loans, or credit cards. He believes that our society today is too dependent on credit and that true financial freedom only comes when you live a completely debt free life. So the first steps in his plan are all about helping you get out of debt, and then setting you up to never get into debt again.

Simple and straightforward advice.

Dave Ramsey’s book became so popular probably because of how easy it is to follow his clearly set plan. Each step is specific enough to leave no doubts about what exactly you need to do, making his plan one that anyone can follow and find success. It also helps that he is never vague about his advice, but rather he is extremely straightforward, open, and honest.

Dave Ramsey has no get-rich-quick schemes. He’s more about using honest work, responsibility, and common sense to reach your goals. So you won’t find any crazy secrets to financial stability and success in his book, you’ll just finally learn to implement the basics in a way that really works.

A change in perspective.

Another reason people enjoy Dave Ramsey’s teachings is because he doesn’t pretend that money is what brings happiness. He’s realistic and believes that money is a tool to create stability and contentment in our lives, not the secret solution to all our problems.

He eloquently tackles many mental barriers and misconceptions many of us have about money, and works to not only change your behavior with money, but your perspective about money as well. One thing he talks about a lot is getting over the need to “keep up with the Joneses.” Often in life we compare ourselves to others in unhealthy ways, and sometimes those comparisons can lead us to make poor financial decisions for superficial reasons. So, when you read the Total Money Makeover be prepared to gain a whole new outlook on the purpose of money, and break free from comparing yourself to others.

The Money Makeover Baby Steps:

The main event of this self-help read are the baby steps the reader can take to reach financial peace and freedom. You can read a more detailed article about each of the 7 baby steps that Dave Ramsey will go through in this book, but we’ll go over a quick outline of those steps here too.

Emergency Fund

The first step in Dave Ramsey’s 7 step plan is to basically get your financial life in order. The road to stability starts by setting up your finance in a certain way. This begins with setting up an emergency fund. You can start with at least $1,000 in your emergency fund but eventually you’ll want to work your way toward having at least 6 months’ worth of expenses in your emergency fund at all times.

Debts

Once you start getting your emergency fund in place, it’s time to focus all other monetary efforts toward annihilating all your debts. He goes into more detail about this in the book. For example, he suggests you start with your smallest debts first and work your way up to your larger ones. He also recommends you save paying off your mortgage for last. But eventually the idea is to throw everything you can at your debts until they are all completely wiped out.

Build Wealth

Now it’s time to build wealth and continue saving. Since Dave Ramsey argues you should pay for everything in cash, continually building up your financial stores is an important aspect of the Dave Ramsey lifestyle. You have to have enough in savings to cover all your costs completely with cash.

In the book Dave Ramsey goes into more detail about what savings you should prioritize. He advises that you first complete your 6 months’ worth emergency fund if you haven’t gotten there already. Then he suggests you work toward saving for retirement and (if you have kids or plan on having kids) your children’s college funds.

Things You Can Do Differently:

Dave Ramsey’s primary goal in all of this is to help people get out of crippling debt and stay out of it. But there are modifications you can make to his more rigorous financial plan.

You can choose how much you want in your emergency fund.

If you’re a college student then putting aside even $1,000 may be more difficult for you. But that’s ok! Just put aside what you can. Even just adding $5 to $10 a month into an emergency fund is better than having no emergency fund at all.

Likewise, if you’re more settled in life it might be easier for you to put even more than $1,000 aside into an emergency fund. It really doesn’t matter how you do it, what matters most is that you start accumulating that safety fund in order to be more prepared for surprise expenses in the future.

You can still use credit cards and loans.

Dave Ramsey may believe in using only cash to pay for things but there are advantages to using credit cards and installment loans. When used responsibly using credit can help boost your credit score and get you the things you need to have a comfortable life. Credit cards can also provide lots of perks outside of boosting credit scores. Some credit cards come with special points that can go toward paying for things like groceries and traveling. So long as you understand your limits and include loans and credit payments in your carefully calculated budget and financial plans, you’ll be just fine.

Should I Read This Book?

You may now be wondering whether you should give this book a read or not. You should definitely read this book if . . .

  • you are in debt
  • you have trouble managing your money or realizing where your money goes
  • you have trouble making a budget

If you are looking for a book with more specific details about financial topics (like investing, or small businesses) then you should check out Dave Ramsey’s other books that go more in depth on complex financial topics. The Total Money Makeover doesn’t expound upon these topics too much since it was written more as a beginners guide to Dave Ramsey’s financial baby steps.

 

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Check out some other helpful reviews about Dave Ramsey’s book, the Total Money Makeover:

Review: The Total Money Makeover

The Total Money Makeover Review

Goodreads


How to Write a Check

write checks

Not everyone uses checks on a frequent basis, so sometimes it helps to have a refresher on how to fill them out, just to make sure you get it right.

What is a Check?

Checks are a form of paper payment. They are a document that allows a bank to take money from the account of whoever wrote the check, to pay whoever is depositing the check.

Checks are a very useful financial resource. They come with their own unique properties and safety measures that make them a useful money tool to use more often.

How to Write a Check Out

check example
 

Listed below are all the different fields found on a check. You need to understand the purpose of each section in order to know how to fill each field out properly.

Field #1: Date

In the upper right hand corner you’ll find the date line. Usually you’ll just write the current date, but one of the great things about checks is that you can post-date it. This means you write a future date on the check to ensure it can only be deposited after the date you mark down.

So if you need to pay someone, but need them to wait until payday to deposit the check, you can still hand them the check now and just write a date after payday.

Field #2: Pay to the Order of

This line is where you write the name of who will be receiving the check. This might be the name of a person, or the name of a company or organization. For example, if you’re using a check to pay for groceries, then the name you’ll put here is the name of the grocery store.

Field #3: Dollar Box

In this box, you write the monetary amount of the check in numerals. So instead of writing “one hundred dollars” you write “100.00.”

Field #4: Dollars Line

Then there’s a line with the word “Dollars” at the end of it. Here is where you write the monetary amount of the check in words. So instead of writing “100.00” you write “one hundred and 0/100.”

Field #5: Memo Line

The memo is where you write a note about the check’s purpose. You can fill out this section for your own files, so that the check stub has what the check was used for written down. The memo section can also let the person receiving the check know what the check is meant to be used for.

You don’t have to fill out this section but it can be helpful to not forget why you wrote out the check in the first place.

Field #6: Signature Line

Here is where you sign the check.

Field #7: Numbers

The numbers at the bottom of the check are divided into 3 sections and show 3 different numbers. The first set of numbers is the routing number, the second set of numbers is the account number, and the final, shorter section of numbers is the check ID number for that individual check.

*Keep the check stub and use it for your files. The check stub is the thinner paper copy behind the check that gets written on as you write out the check. This gives you a hard copy of the check you wrote for your own checkbook.

How to Write a Check Amount

So how do you write numbers in words on a check? If you have any questions about how to write your specific amount you can take a look at the chart below. A printable number chart is also available by clicking here.

 
number word chart
 

Let’s quickly go over some frequently asked numbers to words questions:

How to spell 90: ninety

How to write a check for 1,000 dollars: In the Dollar box write, “1,000.00” and in the Dollars line write, “one thousand and 0/100.”

How to write a check for 1,500 dollars: In the Dollar box write, “1,500.00” and in the Dollars line write, “one thousand, five hundred and 0/100.”

How to write a check for 100 dollars: In the Dollar box write, “100.00” and in the Dollars line write, “one hundred and 0/100.”

How to write a check with cents

A lot of people have questions about how to write out cents for a check, but have no worries! This is the easiest part of the check because you can still write the cent amount out in numerals on the Dollars line:

After you write out the dollar amount in words, write “and” and then write the number of cents in numerals over 100. For example, if you want to write a check out for $100.50, you would write on the Dollar line, “one hundred and 50/100.”

How to Balance a Checkbook

checkbook
 

In the back of your checkbook there is a check registry—extra pages with a chart to record key information from each transaction. Whenever you write a check, keep the check stub. This will make it easier to fill out the check registry later.

Field #1: Write the date on the check in this column.

Field #2: In the description column write the same thing you would write on the “Pay to the Order of” and the memo line. This column helps you know who you paid and why.

Field #3: In the “Payment/Debit” column write down the amount you paid.

In the Deposit/Credit column record deposits to your own bank account. Keeping track of both payments from your account, and deposits made to your account, will help you keep track of how much is in your bank account at all times.

In the Balance column keep track of your total account balance, adding deposits to your account, and subtracting transactions you’ve paid.

Field #7: Write out the check ID number. It’s the last couple of numbers at the bottom of the check.

Common Questions About Checks

If you don’t use checks very often you probably have more than a few questions about checks and how they work.

What are the fees for cashing checks?

If you cash your check at Check City, then our fees are based on the type of check that is cashed. Our rates start as low as 1.99% for in-state payroll and government checks. That means for payroll and government checks it only cost about $2 per $100.

What information do you need to cash a check?

We have you fill out a quick application and you need a photo ID.

Do I have to wait for the check to clear to get all my cash?

No, once we have verified the check we give you all your money right then.

Is there a limit to the check amount?

No, as long as we can verify it, we can cash it.

When do you use a check?

You can use a check anytime check payments are permitted. If it is a personal transaction, you can always ask the recipient if they are ok with receiving their payment in the form of a check.

Where can I get checks?

You can get checks from almost any bank or credit union where you have an account.

How to write a check to yourself

Sometimes when you need to transfer your own money, you’ll need to write yourself a check to yourself. Writing a check to yourself is super simple. You just write your own name on the “Pay to the Order of” line.

 
Hopefully checks don’t feel as unfamiliar to you now as they did before reading this article. As you can see, checks are very simple to use, and easy to fill out correctly. You just have to know the purpose of each section on a check and you’re good to go!



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Learn more about the benefits of checks, “6 Advantages of Using Checks.”

See how cashed checks can actually help your finances, “Cashed Checks Improve Your Financial Situation.”


Budgeting in 4 Easy Steps

budget
No matter your financial situation in life, everyone needs a budget. With a budget you can plan for needed expenses and prepare for the things you want. In fact, the most simple budget only needs a couple lists, a calculator, and some goals. Below are the the main points our post will go over to help you set up your budget:
 

 
Budgets are an important tool in anyone’s financial arsenal. Budgets can help you organize your needed expenses, like rent and bills, prepare for emergencies and get ready for whatever your future might hold. By knowing how to budget you can learn to stop living paycheck to paycheck and start building up your savings. it can help you save up for big expenses or future life events like a wedding, starting a family, buying a car or a house or moving to a new state.

Budgeting can also help you save for retirement, something else that even younger people just starting out on their own sometimes forget to think about but should. But most of all a it can grant you financial power and freedom and help you provide for your wants and needs. But for those just starting out on their own especially, it can be hard to know where to begin.

There are several key elements you’ll need to include in your budget. You need to think about all your necessary expenses and plan them out accordingly so you are aware of how much of your monthly income you need to spend each month no matter what. Then you’ll have to think about unnecessary expenses. This is where you have the most freedom to plan out the numbers and make adjustments.
budget-template

How to Budget

There are many ways to budget and there is a lot of advice out there in the financial spheres about how to do it. You can also choose to plan for certain events by making a specific wedding budget, or for major purchases like car payments. But if you’re making a simple budget for yourself, then the main thing you’ll want to decide first is whether you want to make a monthly or yearly budget. Most people like to create a yearly one to get a general big picture view of their financial goals and future plans. But, a monthly one is more helpful for everyday use. We’re going to try and condense all that down to the bare bones minimum of what every smart budget needs.

#1: List your monthly income

List out all your forms of income. This would include the paychecks from your job, but also any extra money you make from any of your side hustles. Here is also where you can decide whether you want to organize your finances for gross income or net income.

Gross income is simpler and easier to calculate. You just need to know how much you get paid and use that money for your calculations.

Net income isn’t as simple to figure out but there are advantages to using it. You figure out your net income by looking up what the income tax is in your state, and taking out that percentage from your gross income. Using net income instead of gross income is perhaps better because it more realistically reflects what you will actually receive from your paycheck.

#2: List your fixed expenses

After you have all your sources of income written down you’ll want to form another list for all your fixed expenses. Fixed expenses are the expenses you have each month that don’t fluctuate in amount. Everyone’s list is going to look different depending on what expenses do and don’t apply to you, but here is an example list of some fixed expenses:

  • Rent or Mortgage: A calculation you’ll want to do when looking at your housing expenses is to check that your total housing expenses aren’t over 28% of your monthly gross income.
  • Insurance
  • Debts: A calculation you’ll want to do when looking at your debts is to check that your total debts aren’t over 36% of your monthly gross income.
  • Loans
  • Student loans
  • Credit card payments
  • Streaming services like Netflix, Hulu, and Spotify
  • Phone bill
  • Medication you pay for each month
  • Child support
  • Education

After you’ve listed all your fixed expenses total the amount, subtract it from your monthly income, and that’s what you have left to spend on varied expenses . . .

#3: Set up your savings

Before we go into varied expenses though, let’s take a moment to think about your savings and retirement. Get a savings account if you don’t have one already, and set aside a portion of what’s left over after fixed expenses. Any amount you can afford to put away into a savings account each month will set you up for success in the long term, even if it’s only 5 to 10 dollars a month.

Aside from general savings and saving for retirement, you also want to set money aside in an emergency fund. It’s recommended that you have at least 3 months worth of your fixed expenses put away into an emergency fund at all times.

Digit is a great app you can use to help you plan and organize all your savings.

#4: List and portion out your varied expenses

Everyone’s list of varied expenses is going to look differently depending on what expenses do and don’t apply to you. Varied expenses are any expenses that are going to fluctuate in amount each month, or are considered more like luxury expenses than needed ones.

Varied expenses are a big reason to do a budget in the first place so that your varied expenses each month don’t overtake your more important fixed expenses and your savings. Here are some examples of varied expenses you might need to consider:

  • Groceries
  • Eating out
  • Entertainment
  • Gas and transportation
  • Recreation
  • Clothes
  • College textbooks

Another way to figure out the reality of what you’re spending on varied expenses is to look at your transaction history for the month and see 1) How much in total you were spending on varied expenses that month, and 2) What those varied expenses were on. Do this for a couple months back to get a more realistic idea of what you are spending on varied expenses each month.

Organizing your varied expenses is where you have the most control over your budget. Whatever is left over after your fixed expenses and your monthly payments to your savings account is what you have to spend on all your other spending for the month.

Here is where you will list out what all those varied expenses might be and portion what you have left in the budget into them. Remember that you don’t necessarily want to portion out 100% of what’s left into these categories so that you can accumulate a comfortable cushion in not just your savings account but your checking account as well.

Budgeting Tips

Invest

Making investments is a great way to beef up your financial portfolio. There are probably a trillion ways to invest, but the idea behind investments is that you put money into something that will give you more money in return later. This is called compounding interest.
interest-rate
A helpful tip to remember when going into any investment is the rule of 72. This rule means that if you take 72 divided by the interest rate you’ll figure out the estimated number of years it will take for your interest to double your initial investment.

Personal Capital and Acorns are some of the most helpful investing apps you can use to step up your investment game.

Where should I put my budget?

Figuring out where to even put your budget can get complicated. You can use excel or make your own table in Word or Google Docs or any note taking program of your choice. There are also many free budget templates online that you can print out and use. Budget tools are all around if you take the time to look and decide on which ones best suit your needs.

Click here for a free budget worksheet from the Federal Trade Commission.

You can also use budgeting apps to keep track of all your bills, expenses, plans, and goals. Some of these apps even allow you to connect your budget to your financial accounts.

Control your spending

Sometimes it can be difficult to control your varied expenses throughout the month and track your spending. You can make controlling how much you spend each month easier by using a prepaid debit card. With a prepaid debit card you put money on it like a gift card to yourself almost. You can also use a similar method of spending control by just taking money out and only using that cash for your varied expenses each week.

PocketGuard is an app that can help you track your purchases.

Get a Side Gig

Getting an extra source of income can really come in handy. There are a million different kinds of side hustles any ambitious person these days can get into. You can babysit, drive for uber, or sell your own products. The possibilities are endless and it never hurts to have a little extra money each month.

Plan to Decrease Debts

Debt can be a real financial weight on your shoulders, but it can also be a necessary evil in order to get a house, get a car, get through college, and much more. Decreasing the amount of debts you owe can still help alleviate some of that weight and provide more financial comfort and peace of mind.

So it’s important to budget with paying down your debts in mind. You can pay down debts quicker by planning to spend more on that fixed/necessary expenses each month, by spending less on varied expenses, or by getting another job to provide more income to put into your debts each month.
 
Budgeting doesn’t have to be hard. All you really need is 4 lists and a calculator! Everyone should practice using a budget now so that you can control your finances instead of your finances controlling you.


READ MORE
Check out some of other Check City articles on budgeting:
Budgeting for Dummies
 
What is a Budget?
 
Budgeting Tips You May Not Have Thought of Before
 
3 Simple Tips to Building a Budget
 
Ways to Keep Track of Your Spending

How Much House Can I Afford?





Maybe you are a first-time home buyer and have no idea what you are doing, or maybe you’ve bought a home before, but this time you want to make sure you are being financially savvy in your decisions. Either way, there are so many things that go into buying a house that the overall process can be daunting. But by understanding how to budget for a home, and taking advantage of your local financial services, you can tackle the house-buying world and how it applies to you on an individual level.

The process for buying a house is not going to be the same for everyone. We all have different financial situations, incomes, salaries, bills, debts, expenses, and spending behaviors. We even all have different desires, wants, needs, and hobbies that go into how we spend our income and will therefore also affect our buying options when looking for a home. All of these variables should be carefully weighed and considered as you embark on your home-buying journey.

First let’s go over some key home-buying terms that you will want to be familiar with . . .

Definition of Key Terms

For an even bigger list of terms and definitions that you might need to know when buying a house, see the National Association of Home Builders’ (NAHB) Home Buyer’s Dictionary Page.

The Principal

The price of a home can also be referred to as the principal, especially by mortgage lenders. It refers to the base cost of the home, and does not include interest, fees, or closing costs. Many people use mortgages to pay for their home, meaning you’ll want to figure out how much mortgage you can afford when shopping home prices.

Down Payment

The down payment on a home is whatever the buyer can pay of the total price upfront. The less money put down in the beginning, the higher the interest rate on the mortgage will be, and the more the buyer will have to borrow from a lender. But the more you can put down in the beginning, the less you will have to borrow, and your interest rate will be lower as well. It is always advisable to pay as much for the house upfront as you can.

Homeowner’s Association Fees (HOA)

Some communities will be part of a Homeowner’s Association (HOA). Communities with an HOA are part of a planned community that often comes with communal benefits and amenities, like a pool, or snow ploughing. HOA’s also often come with certain rules for those who live in that community—rules about lawn upkeep and such—so make sure you understand the requirements and benefits of the HOA before committing to a house in their neighborhood.

Property Taxes

Owning a home and property will require you to pay property taxes each year. The percentage you pay in property taxes will depend on the location and value of your home. When looking in different locations for your home be sure to also look into what the property taxes are like in that area.

Mortgage

A mortgage is the loan and payment plan you go on with a lender to eventually pay off your home. Unless you can afford to pay the entire price of the home upfront (100% down payment), you’ll need to take out a mortgage with a lender to help eventually pay off your home through monthly mortgage payments instead of all at once.

Mortgages come with different time periods to pay back the loan. There are 15-year mortgages, 30-year mortgages, and a 5/1 Adjustable Rate Mortgage (ARM).

  • For a 15-year mortgage your payments are going to go up more and more each year and your payments are going to be higher in general. But you’ll pay less interest overall and pay off your mortgage quicker.
  • A 30-year mortgage is going to allow for smaller payments, but in the long run you will pay more in interest, and it will take longer for you to pay off your mortgage.
  • A 5/1 adjustable rate mortgage is another kind of 30-year mortgage, but your interest rate stays the same for the first five years of the loan. After that initial five years, your interest becomes subject to whatever market changes there are for interest rates.
Homeowner’s Insurance

Homeowner’s insurance is insurance for your home. It can protect you when disasters, natural or otherwise, affect your house. It can even cover some of the costs for damages caused by natural disasters or crime. It can also protect your possessions in these same scenarios and help you to replace whatever was lost or stolen. It is not illegal to not have homeowner’s insurance, but many lenders will require it. There are two kinds of homeowner’s insurance:

  • Cash-value coverage will help cover the costs of damages when they occur, but won’t usually be enough to rebuild your home should you need to.
  • Replacement-cost coverage is insurance that will cover the total cost of your house if you should ever need to rebuild it due to disasters. Most advisers will recommend you get this kind of homeowner’s insurance since it covers more.
Private Mortgage Insurance (PMI)

PMI stands for Private Mortgage Insurance. It is a form of insurance that lenders use to reduce their risks when a borrower can’t afford a down payment of at least 20 percent. Your lender will require a PMI when they are lending you more than 80% of your home’s total value. PMI is also a very costly form of insurance, but there are ways to get rid of it later by refinancing.

Interest Rate

Interest rate is a percentage of money added to your loan as payment to the lenders for borrowing a home loan from them. The interest rate you get on your mortgage will be determined based on your credit history and score. Usually the interest rate will be included in your monthly mortgage payments.

Credit History

Your credit history comes from your credit report and shows your history of paying debts and bills. It is meant to show how often you are on time or late in payments and your overall level of responsibility with your finances. Your credit history and score are what lenders will look at when deciding the interest rate they will put on your mortgage.

Credit Score

Your credit score differs from your credit history in that it is an overall score calculated from your credit history to show how much of a credit risk you are for the lenders. Instead of looking at an entire credit report or history, lenders can simply look at this score to get a quick, overall idea of your credit’s well-being.

Gross Income

Gross income refers to your total income before taxes.

Net Income

Net income refers to your total income after taxes. It is also referred to as “take-home pay.”

Understanding Mortgages

When applying for a mortgage, there are four main factors listed below that lenders will consider and that will influence the kind of mortgage and interest rate you can get:

  • Your income
  • Demands on your income, like debts, monthly bills, loans, and other expenses
  • Your credit history
  • Your credit score
Types of Mortgage Lenders

There are also five general categories of lenders that you can get your mortgage from, and each one comes with its own pros and cons.

  • Federal government agency lenders
    • Federal Housing Administration (FHA)
    • US Department of Agriculture (USDA): These mortgages can be for homes in more rural areas. The USDA can also be used to rebuild and rehabilitate old properties that qualify.
    • Department of Veterans Affairs (VA): These mortgages are for veterans. You can even use them to make your home more accessible.
  • State government lenders
  • Nonprofit lenders
  • Local lenders, banks, and credit unions
  • Larger banks and lenders

The 5 Steps of Buying a Home

Step 1: Look at Your Credit Score

When starting the house hunt many people like to begin with the fun part by getting on Zillow and browsing for the perfect home. But you can’t figure out how much house you can afford on Zillow. If you are serious about buying a home, then you should look at your credit score before you start looking for a home. While looking at your credit score you will want to keep your eye out for the following:

  • See where your credit score is at—how good or bad it is.
  • Check your credit report for any errors and have them corrected.
    • Get on this now because if you need to correct your credit report, the changes will take some time, even months, to correct.
  • Look for ways you can better your credit score.
    • Figure out the reasons your credit score is lower than you want and develop plans to fix those issues or habits.
    • Paying down your general debt will also help your credit score.
Step 2: Do Calculations and Budgeting

The big question most people want to know when looking for a home is how much can I afford? There are many methods for figuring out your own budget for buying a home. Which method you choose will depend on what feels most comfortable for you. But in general, financial advisers will tell you to spend 2.5 to 5 times your annual salary on a home. Again, it is ultimately up to you where you decide to land in this range.
Method One: Based on Your Savings
People are generally advised to pay at least a 20% down payment. In order to figure out the amount of house you can afford based on what you have saved for a down payment, use the following equation:

Method Two: Based on Your Annual Income
If you want a quick estimate of the amount you can afford for a house, below is an easy calculation you can do based on your annual income.

Method Three: the 28/36 Rule
The 28/36 rule is a recommendation that your budget has no more than a 28% front-end ratio and a 36% back-end ratio. Lenders will look at both these ratios to decide your mortgage loan, so it is important to understand where you stand according to this ratio because this is how most lenders will decide what you can afford to borrow from them. When budgeting for a home, you can use this ratio to see if you meet these requirements and to see how financially ready you are to buy a home.

  • Front-end refers to your total housing payments (PITI) to income ratio.
  • Your total housing payments is not just referring to the Principal, but also the Interest, Taxes, and Insurance (hence, PITI). This front-end ratio means that you should not spend more than 28% of your monthly gross income on your total monthly mortgage payments.

  • Back-end refers to your total debt to income ratio (DTI).
  • This back-end ratio means that you should not spend more than 36% of your monthly gross income on debts. Debts include credit card payments, child support, auto loans, student loans, and any other debts you may have.

Dave Ramsey’s Advice

Dave Ramsey has influenced and guided a lot of people in their financial affairs with his knowledge. Below is some of his basic advice for buying a home:

  • Pay a 100% down payment in cash when you can.
  • Choose a 15-year mortgage over a 30-year mortgage.
  • Keep your mortgage payments (plus insurance and taxes) no more than 25% of your take-home pay (net income).
    So unlike the 28/36 rule, Dave Ramsey advises that your front-end ratio be no more than 25%, instead of 28 percent. He also advises that you use this percentage on your net income, or take-home pay, rather than your gross income, because this will better reflect the money actually going to your account after taxes.
What to Remember When Budgeting:

The Mortgage:
Just because a lender qualifies you for a certain amount that does not mean you should use it all. How much mortgage you can qualify for is very different from how much mortgage you should use. The maximum loan amount that your lender is willing to let you borrow, does not reflect your personal budget and what you actually want to be paying each month. This is why being able to do your own budgeting and calculations is important because then you can see and decide for yourself how much you are willing to borrow.
The Down Payment:
When preparing to buy a home, what you really want to be doing is preparing for the down payment. The higher a down payment you can afford the better.

Your down payment should be at least 20% of the total price of the house. But, you can find loans that accommodate lower down payments if that’s what you require:

  • Fannie Mae, Freddie Mac, the Federal Housing Administration, the USDA, and the Department of Veterans Affairs are just a few options for low down payment mortgages.

Other Costs and Fees Associated with Buying a Home:

  • Closing costs and fees. Some examples of what may be included in the closing costs are appraisal fees, loan fees, attorney fees, and house inspection fees. Closing costs and fees will vary and depend on local tax laws and the cost of your home. If you want to estimate how much your closing costs might be, they generally range between 2 and 5% of the cost of your home.
  • Taxes, insurance, and HOA fees for certain neighborhoods.
  • Home maintenance, upgrades, and repairs: Homes need regular maintenance, remodeling, normal upkeep over the years, and repairs when emergencies and damages suddenly occur.
  • You’ll need to potentially buy appliances, furniture, and decorations.
  • You’ll be responsible for paying all your utilities, which can include, heat, electricity, water, sewage, trash removal, cable television, and telephone services.

Your Other Financial Goals:
Buying a home is a big financial goal and dream in life, but you probably have other financial hopes and dreams as well. Don’t forget to factor these in as you budget and look for a home. Some of these other goals may include general savings, saving for retirement, buying a new car, raising children, paying for their college, starting a business, vacations, trips, and any other hobbies, interests, or personal endeavors that may also require a place in your budget.
Know Yourself:
It is important to understand the kind of spender you are. This is another reason doing your own budget for your future house is a good idea, because then you can thoroughly be aware of your spending habits and therefore be more realistic when it comes to budgeting in a mortgage as well.

But you also need to be mindful of how you handle debt. For some people, being in a certain amount of debt can be stressful, while others don’t mind it so much. Be aware of whether having a larger mortgage on your hands is going to bother you or negatively impact your internal well-being. This will also factor into what you decide to do financially about budgeting for a mortgage.

You can also hire a personal financer to look over all these factors for you and take a more personal, detailed look into all of the many costs involved for you individually. Hiring a professional may be wise if you do not have the time or patience to look into these variables yourself. It is less wise to rely solely on a lender’s analysis because they will only look at income and credit history, and not consider your personal, bigger picture.

Step 3: Find Your Agent

Buyer’s Agent
A buyer’s agent is the kind of agent you want to be working with directly because they are meant to work with the buyer (you) and will thus work to get you the best price you can get.
Seller’s Agent
This is not who you want to be working with directly because they will be trying to get the best price for the seller. Though usually the buyer and seller agents will mediate offers and agreements and work alongside each other in that way.

Now it’s time for the fun part—the home search! After you’ve done all your budgeting and have all your ducks in a neat, planned-out row, you can begin to search for the home that fits your wants, needs, and budget!

Remember all the budgeting calculations you did above when you are filtering in your price range. It’s recommended to select a price range 10% above and below your calculations as a cushion when you are searching.

What to look for in location:

  • A healthy economy: low unemployment rates and good incomes
  • A good real estate market: look at whether the homes in the neighborhood are selling well, meaning they sell close to or above their asking price.
  • A healthy community: look for a range of ages in the residents and families nearby.
  • A good school district: even if you don’t have children, being in a good school district will help your home retain its value and make selling your home easier should you need to sell later down the road.
Step 5: Enter Your Contract and Close the Deal!

Once you’ve made your choice you can work with your agent to make an offer to the sellers. If all goes through, your agent will draw up the papers and officialize a closing date, which is usually 45 to 60 days after the offer was accepted by the sellers.

When entering into a housing contract you will first want to make sure you have the following common contingencies in your agreement. This means that your contract relies on these personal requirements being met first:

  • obtaining a mortgage
  • getting a home inspection

Buying a home is a big deal and naturally you want to be as knowledgeable and savvy about the basics as possible. By applying these basic rules you will know how to buy a home in the smartest way possible.


READ MORE
Visit the Department of Housing and Urban Development (HUD) for seminars and counseling about buying a home.


Visit the HUD’s common questions page for even more answers to your home-buying questions.


Use an online “How Much House Can I Afford” calculator to plug in your numbers and quickly see how much house you can afford.


Listen to NPR episodes about home-buying to learn more about the home-buying world.


FEATURE IMAGE BY BRENO ASSIS

How I Learned to Stop Living Paycheck to Paycheck

Living paycheck to paycheck is actually very common in the United States. In fact, you could say that most Americans live paycheck to paycheck. As many as 78% of Americans live paycheck to paycheck—that’s 8 out of every 10 workers. And it’s not just low income workers that are living this way, even many workers who make $100,000 a year or more report to still be living paycheck to paycheck. This tells us that living paycheck to paycheck isn’t a problem of money, it’s a problem of mentality or the ability to keep ahead of your finances.

Why You Want to Stop Living Paycheck to Paycheck

The big problem with living paycheck to paycheck is you don’t have any extra funds each month. This makes you vulnerable when disasters and emergencies strike. If all of your monthly income is being used each month then you won’t have any funds to lean on when you suddenly have to repair your house after a flood, or you need to move, or travel for a wedding. It also keeps you from saving for important things like,

  • Savings
  • Retirement
  • Car
  • House
  • Repairs and renovations
  • Emergencies
  • Tuition
  • Accumulating wealth

Assess why you are living paycheck to paycheck

There are many reasons to be living paycheck to paycheck, but it usually comes down to one of three reasons. Either you aren’t making enough money, you are spending too much each month, or you have essential spending like debts or housing that overtake your whole monthly budget. After you determine which of these three reasons applies to you, you can better determine how to fix your finances.

Basically you need to see what is overtaking your budget and readjust to be living within your means. When you are living within your means you are able to save which helps you live better later on in life. Living within your means and putting away into savings each month is how to budget for the long-term.

Get a new job

If you just aren’t making enough money to live on, then you need to get a better job, a raise, or a second job or side hustle that can help make up for the little you’re making where you’re at. There are lots of job websites out there right now to help you find a better job. There are also many programs that can get you the training, education, or certifications necessary to help you qualify for better paying jobs.

Control your spending

If the problem is your personal spending habits, then you want to deal with this by controlling yourself and your budget more. this may sound boring or depressing to have to control your spending so strictly, but think of it as figuring out how much you are actually allowed to spend each month, rather than focusing on how much you can’t spend.

Downsize the way you live

You also might need to adjust your living situation. You might be paying too much for rent, compared to how much you make each month. If this is the case than you might need to move so your mortgage or rent is more doable within your budget. You can also downsize other aspects of your life, like transportation. Downsize to a more affordable vehicle, or try carpooling or biking to work to save on gas.

Take care of debts first

If you have a lot of debts that are bogging your budget down, you can try debt consolidation with your bank to get a better interest rate or payment plan. You can also downsize the way you live so that you can pay off your debts more quickly.
The rest of this article was written by a guest author named Adam. He wanted to share with everyone some helpful tips that he’s used to stop living paycheck to paycheck. We hope you enjoy his insights as much as we have!

How Adam Stopped Living Paycheck to Paycheck

Sometimes, during the week leading up to payday, I find myself clinging for dear life to my finances. If I can just survive until I get paid, I think to myself, then everything will be OK. I go into crisis mode, axing all discretionary spending and hoping that no unexpected expenses pop up.

When my paycheck finally appears in the mail, I breathe a huge sigh of relief. And then I revert to my old spending habits—eating out, buying the latest gadgets, etc. A few weeks pass, and I’m right back where I started, panicking about making it to my next paycheck.

It’s a cruel cycle, like the spin cycle of a washing machine. But instead of coming out clean at the end, I would just wind up dizzy and half-drowned.

If any of this sounds familiar, you’re not alone. Thankfully, I found a way to escape the constant spin cycle and stop living paycheck to paycheck.

My Arch-Nemesis: The Dreaded Budget

Saving money does not come naturally to me, and money gets spent often without me even realizing it. I knew right off the bat that I was going to get nowhere without a budget.

Budgets take hard work and discipline especially if you want to stop living paycheck to paycheck. You need the self-control to resist making any unnecessary purchases, and you need the personal honesty required to separate wants from needs.

Taking a Long, Hard Look at My Spending

It was time to take out the old magnifying glass and look at how I was really spending my money.
I was shocked. Did I really spend that much money eating out every month? It was atrocious how much of my paycheck went to entertainment.

As soon as I had a strong grasp on where I was spending my money, I was able to craft a budget that accounted for my needs, and even made a little room for some wants (for the sake of my sanity).

My Game Plan for Dealing with Credit Card Debt

One of the big motivators for turning my finances around was that I wanted so badly to get out of debt. Over the years, my spending habits had been subsidized by various credit cards, and I’d built up quite a chunk of debt.

Thankfully, my credit card debt provided short term goals to help me along the way. Basically, I would zero in on one balance, keeping all other balances on the back burner. Once that one card was paid off, I felt the accomplishment of having achieved a goal, which helped me forge ahead with my budget.

Reevaluating Progress

Every six months or so, I take time to reevaluate my budget and spending, and make adjustments accordingly. As I’ve reduced my debt and added to my savings, things have gotten easier. I’m no longer living paycheck to paycheck, and I’ve even been able to fit in a few purchases for things I really want, like gadgets and such.

How did you stop living paycheck to paycheck? Leave your tips in the comments section below.

How to Gain Weight on a Budget

budget-gain-weight
 
Losing weight isn’t the only way to stay healthy. Nowadays we understand that when it comes to weight, less isn’t always better. Whether you simply need to gain weight, or you’re trying to gain muscle mass, these tips can help you reach your weight gain goals.

While most people in the country are looking for ways to lose weight, some people are looking to do the exact opposite. For every person that has trouble losing weight, there is somebody struggling to gain weight. This could be because they want to bulk up and gain more muscle, or because they have a higher than average metabolism that makes it difficult for them to gain and maintain a healthy BMI.

To Maintain a Better BMI

For those that do not know, BMI stands for Body Mass Index. This is a weight-to-height ratio that helps indicate where you are on the spectrum between being over or underweight. The US Department of Health and Human Services has an easy to use BMI calculator that tells you whether you are underweight, normal, overweight, or obese. All you have to do is input your height in feet and inches, and your weight in pounds.

Why Is Being Underweight Bad for Your Health?

Knowing your BMI is important because it isn’t healthy to be overweight OR underweight. We hear a lot these days about how unhealthy it is to be overweight, but many studies have shown that it can be just as unhealthy to be underweight.

  • Worldwide, underweight children are at greater risk for childhood mortality and disease, particularly pneumonia.
  • Underweight pregnant women have a greatly likelihood to suffer complications during pregnancy, like Intrauterine Growth Retardation (IUGR), which affects the healthy development of the fetus.
  • Underweight men are at greater risk for early all-cause mortality than men in the normal weight range.
  • Being underweight can cause osteoporosis and protein deficiency in the elderly.

To Gain Muscle Mass

Maybe you’re not underweight and you just want to gain muscle weight. Either case will find the following tips helpful. Some people want to build up muscle for sports, weightlifting, an acting role, or a job that requires physical work.
Whether you’re looking to bulk up with muscle or just add some curves to your physique, gaining weight can be expensive. Luckily there are some simple ways to gain weight on a budget. It doesn’t have to entail crazy dieting measures like binging unhealthy fast foods or eating out of cans everyday either. You can gain weight the healthy way while on a budget with these simple principles.

How to Gain Weight

Carb Load

The main way you gain weight is by increasing your daily calorie intake. A calorie is a unit of energy used in reference to the body. One of the main ways our bodies get energy (calories) is through carbohydrates. Carbohydrates are a type of nutrient that provides your body with a source of energy. Your body changes carbohydrates into glucose which then helps power your body, tissues, and organs on a molecular level.
Carbohydrates come in two forms—complex and simple. Complex carbohydrates are generally better for you, are less processed, contain less sugar, and take longer to digest so you’re left feeling more satisfied. Simple carbohydrates are more processed, have more sugars, and take less time to digest so you’re left feeling hungry again sooner.
Most foods have carbohydrates in them, but some of the best carbohydrate candidates are bread, rice, oatmeal, pasta, and starchy vegetables like potatoes and corn. Other fruits, vegetables, and dairy products can also be a great way to intake healthy carbohydrates, but grains really are the star when it comes to carbohydrates.
Bread is really not that expensive and you should be able to find oatmeal and other whole grain pastas for very cheap at the store. By choosing the right grains you can dramatically increase your caloric intake.
 
carb-load
 

Protein

Proteins are made up of amino acids and do a lot of the work in the body’s many cells. If you think about anything having to do you’re your body’s cells, you can bet proteins are there doing all the hard work. Proteins also help our bodies have strong bones, muscles, and skin. Increasing your protein intake is a great way to build up healthy muscle mass and weight.
Great sources of protein include meat, nuts, beans, and animal products like dairy, eggs, and cheese. Protein from meat and animal products are complete proteins with all the amino acids that our bodies need. Plants are incomplete proteins meaning they don’t have all the amino acids your body needs. If you only eat plant based proteins you just have to make sure you eat lots of different plants in order to get all the different amino acids you need.
 
protein
 

Healthy Fats & Oils

Fats and oils are an important part of any diet. While you may hear a lot of people telling you to not eat fats or oils, there are some healthy ones you should be eating. Some healthy examples of fats and oils that are good for you are extra virgin olive oil, coconut oil, fish, avocado, nuts, yogurt, and peanut butter. Peanut butter is a great way to get healthy fats and oils on a budget because it’s fairly cheap and is loaded with calories and protein as well.
There are three kinds of fats—saturated, unsaturated (monounsaturated and polyunsaturated), and trans fats. You want to consume unsaturated fats and avoid saturated and trans fats. Healthy unsaturated fats are good for you because they protect your heart from disease and lower bad blood cholesterol.
 
fats-oils
 

Exercise

If you’re trying to gain muscle weight then obviously you need to exercise. But if you’re just trying to gain weight you can benefit from exercise as well! Cardio workouts are great for building your heart and lung health, but cardio exercises are primarily helpful in losing weight. Strength training is the kind of exercises that will help you gain healthy weight and build muscle mass.

How to Plan Your Weight Gain Budget!

After gaining a better understanding of the nutrients your body needs and the costs of basic healthy groceries, you can budget and make a plan.
health-quotes

Make Your Goals

Not only do you need to create goals for how much you need to budget out for food, but you also need to know your specific weight gain goal. This will help you create an effective meal plan that works for your body and your budget.

  1. Decide how much you want to spend on groceries each week.
  2. Then choose your healthy groceries full of complex carbs, protein, and healthy fats and oils and stay within that weekly grocery budget goal.

This is why it helps to make a grocery list before you go shopping because at home you can pick your groceries and calculate the cost of everything to make sure you stay within budget before you even get to the store!

Organize Yourself

You should be keeping track of your caloric intake in three separate amounts—how much of your calories are proteins, carbs, and fats. If you keep a log of these three key numbers and use the food pyramid to balance things out, you will be surprised at how much you are able to gain.

Maintain a Balance

While your major goal may be to gain weight don’t forget to still eat vegetables and fruits. Vegetables and fruits have essential vitamins and minerals so keep them in your diet as well. It’s important that you not only eat to gain weight, but that you eat to be healthy as well.
 
We all need to eat and we all have physical goals about our health and our weight. But while you go about planning, remember that you aren’t just reaching short term goals, you are creating a lifestyle for yourself. Remember that it’s not just about gaining weight, it’s about practicing a healthier way to live. It’s also important to still eat things you like even if you are on a weight gain diet. Enjoying your diet will make it feel more like a meal plan, and ensure you keep these healthier habits in the long run.


READ MORE
Read more about effective ways to gain weight in the Mayo Clinic’s article, “ What’s a Good Way to Gain Weight if You’re Underweight?

6 Advantages of Using Checks

checks are better
 
Lots of people are still using checks and for good reasons. Checks actually have their own unique advantages and features that you may be missing out on if you only use cash or cards. Here are the 6 main advantages of using checks:

  1. Checks are safer to mail
  2. Checks can’t be used by thieves
  3. Checks are traceable
  4. Checks aren’t deposited immediately
  5. You don’t need a bank account to cash checks
  6. Checks make budgeting easier

Lots of people are still writing checks. Writing checks may seem old-fashioned, but there are many advantages to writing checks instead of using cash or credit cards. Using cards and cash might be quicker and easier, but checks have features and security that cash and cards just don’t have. Below are some of the main reasons you want to start making good use of checks.

#1: Checks are safer to mail

Sending a check in the mail keeps your money a lot safer than sending cash through the mail. When you have a check inside an envelope it can be very difficult for others to tell there is even a check inside. But if you put cash in an envelope it can be much easier for others to tell there is money inside since bills have their own distinct shape, material, and color.

#2: Checks can’t be used by thieves

Checks are also less attractive to thieves than cash. Checks cannot be cashed by just anyone, and that is too much of a hassle for a thief. Thieves want quick cash and forms of money that are untraceable, and checks are neither of those things. Also, when you carry checks you don’t have to carry cash or cards on you, making you less of a target while you are out.

#3: Checks are traceable

This is another reason why checks are safer than other forms of payment—they’re traceable. When you use a check the bank makes a copy so you can easily prove the payments you’ve made. All the information you would ever need about a payment is also written on your check and the underlying copy. With each check you can know how much you spent, who you paid, when you paid, and even what you were paying for.

#4: Checks aren’t deposited immediately

Another attractive thing about checks is the timing. It usually takes businesses a day or two to actually cash the check that you’ve written for them. This means that you have a day or two to make sure you have the money in your account to cover the check. This can be risky to do, but as long as you handle your checks wisely, then you should be able to use this feature to your advantage.

checks are better

#5: You don’t need a bank account to cash checks

When you get paid through direct deposit you need to have a bank account set up. But if you get paid with checks then you don’t need to use direct deposit or a bank account. If you get paid with checks then you can just cash them, you don’t have to deposit them into a bank account or deal with electronic funds.

Check City offers convenient check cashing services for all of your check cashing needs. If you’ve been paid with a check you can come to any convenient Check City location and get that check cashed immediately. Check City will cash payroll checks, cashier checks, counter checks, government checks, insurance checks, money orders, tax refunds, personal checks, and even out-of-state checks. If you have a check, it is likely that Check City will be able to cash it for you.

#6: Checks make budgeting easier

Every time you write a check you are simultaneously writing your own personal receipt to go along with that purchase. These slips of paper can make budgeting super easy as you can keep those in your checkbook, and at the end of each week or month you can see an overview of all your spending in one convenient place.

Check Cashing with Check City

You may be wondering why you should come cash your check with Check City instead of going to your bank. Well, there are several reasons.

#1: Open Late

One reason is that our locations are open later than almost every bank or credit union. We have extended hours so you can come cash your check after work, or almost whenever you’d like. This makes it so you can get your cash sooner rather than later.

#2: Fast and Easy

Check City also understands how important your money is to you so we want to make sure the process of cashing your check is fast and easy. Our personable staff will make sure your transaction goes through as quickly as possible. As soon as you come in, we’ll be ready to help you and get you on your way.

#3: Low Rates

Check City also offers extremely low rates when it comes to cashing checks. We will not charge you much to cash your check with us, and the convenience of coming to one of our locations greatly outweighs the amount we’ll charge you to cash your check.

You Need:

All you’ll need to come cash your check at one of our locations is your check and your photo ID.

You Do:

All you’ll do is walk into one of our many locations, fill out a quick customer information form, and walk out with your cash in hand. Check City has locations in Utah, Nevada, Colorado, Virginia, and Maryland. At Check City, we want to make sure you get your money when you want it and how you want it. That’s why we offer convenient check cashing services that you are welcome to use anytime.

Cash Business Checks with Check City Too!

Check City also cashes business checks. This means that if people have paid your business in checks you can cash them easily here. In today’s credit driven economy, cash flow management is a challenging task for many small to medium-sized businesses. Check City has provided financial services to the public and its businesses since 1986 and we value the trusting relationship we’ve fostered with our communities ever since. Check City’s Business Check Cashing provides business owners immediate access to working capital by fast tracking the processing of checks to make your business funds available instantly. Cashing business checks at Check City is a great idea because there are 1) NO enrollment fees, 2) NO 3 to 10 day check processing holds, 3) the funds are available instantly, 4) gives your business the freedom to accept checks from your customers, and 5) we have convenient and professional locations.
 
Don’t waste your time thinking checks are a useless tool of the past. Checks are a useful financial product for personal and business use with their own unique features. Checks also provide a level of security in your transactions that cash does not. So don’t forget about this important tool in your financial arsenal and learn to use checks to their full advantage.

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