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Frugal when frugal wasn’t cool

Millennials have gotten a lot of credit for their frugality. And being thrifty is pretty cool amongst my Generation X peers, too — at least, it has been since the Great Recession.

But on a summer visit with my parents, it occurred to me that we of Gen X and Gen Y have a lot to learn about frugality from our parents.

My mom doesn’t call herself frugal. She doesn’t peruse money-saving blogs like I do, and hasn’t ever gone to a clothing swap. She’s never stepped into a thrift store and wrinkles her nose when I tell her about my finds. She and my dad buy cars new, and they shook their heads when my husband Joe and I snapped up a used 1996 Corolla wagon from a Craigslist ad.

But, on my visit home, I realized that my parents, in many ways, serve as much better examples than my friends of how to be smart with money.

While I cooked with my mom, for example, I opened bottles with a wooden giraffe-shaped bottle opener my sister, then age 5, bought my mom at a school craft fair in 1980. I told my mom I couldn’t believe she still had it. “We sanded it once because it had gotten sticky from all the kitchen grease over the years,” my mom said.

During the visit, I also blew my hair dry with the same blow dryer I used in high school. I poured homemade lemonade from a simple glass pitcher my mom has had ever since I can remember.

As cool as thriftiness is now, a disposable mindset prevails. At my house, that bottle opener would have gotten chucked into a Goodwill donation bag eons ago. Ditto the blow dryer and pitcher.

So, here’s what I took away from my visit with Mom and Dad:

  • Buy good quality items, keep them and fix them when they break. As Man vs. Debt points out, while explaining a $500 purchase of quality clothing, frugal doesn’t always mean cheap. Treating everything as disposable, even if you bought it at a thrift store, is anti-frugality. And I admit I tend to get rid of something as soon as it breaks or no longer fits my style. My parents, in contrast, respect and value their stuff more.
  • Spoil yourself a little less. And while my mom and dad almost never go out to eat, my husband and I blow what I’m sure they’d see as a shocking amount of money on Thai, Korean and pizza. Maybe it was growing up with parents who’d been through the Great Depression, but my parents seem to be free from the sense of entitlement my friends and I have about restaurants, vacations and little luxuries. As personal finance blogger Anna Newell Jones writes on And Then We Saved, it’s easy to justify spending money on any “want” by telling yourself, “You deserve it, darling!”
  • Your house doesn’t have to look like a lifestyle blog. Look at all the home decor photos on Pinterest, and it’s easy to feel like everyone’s home is an ideal reflection of their amazing personal style. But I have to wonder how much money Gen X and Y frugalistas have dropped on “cheap” craft projects designed to make their houses look perfect. My mom and dad’s house contains a lot of items from over the years that aren’t necessarily cool anymore, but are tied to good memories (like that giraffe bottle opener.)

It was fun and educational to get a little unexpected lesson from my parents in personal finance — even though they had no idea they were teaching me by example.

 

Staggering your credit reports is harder than you think

There are two main things you should do to make sure your credit score is at its best: Pay your bills in full and on time; and check your credit reports periodically.

Paying your bills is (in theory) pretty straightforward. You get the bill, you write the check, you mail it. Even better: You pay through automatic debit each month.

But credit reports? I have yet to come up with a fail-safe system for checking them on time. You can get three free credit reports once a year at AnnualCreditReport.com. You can either pull the reports from each of the three major credit bureaus, Equifax, Experian and TransUnion, at the same time each year, or you can stagger them, and get one every four months.

I prefer to get one every four months, something that Nolo.com recommends. You’ll want to check for inaccurate information, such as an incorrect address, or anything that looks suspect, such as a credit card you aren’t familiar with.

But as convinced as I am that pulling a report every four months is the way to go, it never seems to work out that way. For example, I ordered the Experian report in January 2013 (a New Year’s resolution). Then, I checked Equifax in February 2014 (a late New Year’s resolution). Now, here we are in August, and I’m finally checking TransUnion’s report. That’s three reports in 20 months. Not what I originally intended.

I’m a woman who gives her dog his heart worm medicine every month on schedule. The air conditioner filters are diligently cleaned the first weekend of every month. I adjust our investment portfolio allocation every year on the dot. Why is it that I can’t get on a four-month rotation?

There’s something jarring about four months. You get your checking statement once a month. You get your retirement statements on a quarterly basis. Some magazine subscriptions are bimonthly. But there’s nothing that I know of that is on a four-month schedule. Add to that, you have to keep track of which report you pulled when, because they are free only once a year from each credit bureau. So, you can’t pull the Equifax report in January, then pull it again in May.

Then it hit me. What if I checked the credit reports on anniversaries, birthdates or other memorable dates? Would I be more likely to remember — and follow through — to order the credit reports? It won’t be a perfect four-month schedule, but I can at least get on a routine. So, here’s what I’m going to do:

January (the new year): Experian

April (a birthday): Equifax

August (the start of school): TransUnion

I’ve put those dates in my trusty 18-month calendar, which means they are now real.

So, why is keeping track of your credit reports so important?

Your credit report isn’t just for taking out a loan. It can affect whether you get a job, your insurance premiums, even renting an apartment, Quizzle points out. And don’t just check your reports for errors and mistakes, says Complex Research. Look for ways to improve your credit. Do you have the occasional late payment? Do you not have variety in your credit, which is one element of your FICO score?

There are five basic parts to your FICO score, the score most lenders track to assess your creditworthiness. They are your payment history, which makes up 35 percent; what you owe compared to what credit you have available, which is 30 percent; the length of your credit history, which is 15 percent; and new credit and types of credit used, which are 10 percent each.

My FICO scores have been in the 800s for years, although not because of any aggressive action on my part. I have simply taken advantage of the different parts of the FICO score by living my life.

But, one way I can improve is by making sure I check my credit reports every year. With my new system of using important events to remember to check the reports, I think I can make it work.

 

Erasing credit report errors not an easy fix

In a perfect world, a dispute over a legitimate error on a credit report would get corrected swiftly — as federal law requires. But that didn’t happen for me this year when I filed a dispute with the credit bureau Equifax.

Last winter, I pulled my yearly free credit reports at AnnualCreditReport.com and was surprised to see a negative item on my Equifax report. It turned out my husband had spaced out on paying his personal credit card, on which I was an authorized user. He was over 30 days late, and the red mark ended up on my report.

I knew that as an authorized user I wasn’t responsible for payment of the card. I immediately asked Capital One to remove me from the account. The customer service representative told me the item would be deleted from my credit report.

A month later, I looked at my credit report again and saw the negative mark was still there, so I filed a dispute with Equifax. That was in February, and the expected completion date for the dispute was listed as Feb. 17, 2014.

Under the federal Fair Credit Reporting Act (FCRA), credit reporting agencies have 30 to 45 days to investigate a dispute. Not resolving disputes quickly can hurt consumers: A 2013 Federal Trade Commission study found that one in four consumers had credit report errors that could cause them to pay more for auto loans, insurance and other products.

In the spring, when applying for a mortgage refinance, I checked to see if the dispute had been resolved. I used Equifax’s online dispute status checker, and found it still listed as pending.

I tried to hunt down the Equifax phone number consumers can call about disputes, but Equifax keeps it well hidden. According to their website, you need a current credit report to access the number.

When I checked again a few weeks ago and saw the dispute still listed as “pending” six months after it was supposed to be resolved, I finally caved in and paid $10.50 for a report. I was relieved to see that my husband’s account was no longer listed. I was lucky because some banks, after an authorized user is removed from an account, keep the history of that account on the person’s credit report. Capital One told me it does not, and the account most likely dropped off thanks to action by Capital One.

On Kiplinger.com, writer Jessica Anderson describes similar problems: Equifax never responded to her dispute within 45 days, and failed to respond again in that timeframe after she refiled it. Ultimately, it took her two years to resolve disputes with all three bureaus about an old water bill she never received after she moved.

Her advice: Go straight to the source, the creditor. For her, that was the utility company, where a customer service rep helped her figure out what happened. In my case, I realize I should have just called Capital One back. I have a perk-loaded rewards card with the issuer, and am always provided with great service. I think someone there would have helped me get my problem resolved much more quickly.

Sometimes credit bureaus do flout the law that requires them to investigate disputes in a timely manner, according to Consumerist.com. If you have no luck getting a dispute fixed on your own, you might want to enlist the help of an attorney who specializes in FCRA violations, Consumerist.com advises.

Another option: You can report it to the Consumer Financial Protection Bureau, which offers an online form consumers can fill out detailing their complaint about a credit bureau’s dispute investigation process. The credit bureaus have 15 days to respond to the complaint and issues are expected to be resolved in 60 days.

In retrospect, my issue would probably have been resolved more quickly had I just worked with Capital One or if I had filed a complaint through the CFPB. It would appear that the credit bureaus have morphed into these behemoths that just aren’t equipped to deal with the people whose data they market and sell.

 

Avoid financial infidelity by building fiscal trust

When my husband and I were first married, I decided to refinance the mortgage on the house I had bought before we tied the knot. Against the advice of my attorney, who was an old friend, I decided to make my husband Mo co-owner on the house.

My attorney was concerned that if we divorced, I would lose an asset that had solely been my own. But something told me he was wrong, and that by sharing this property with my new, sentimental husband, it would seal our fiscal relationship. I was right.

Mo was overwhelmed with gratitude. He had never owned anything but a car he had bought at the age of 40, and his impoverished childhood made him greatly value ownership. With this one decision, I secured the nature of our financial partnership. For the next 20 years, we would share everything, no matter who made more money, no matter who budgeted the checkbook.

In the years I was home with the kids, not earning a dime, Mo never questioned a purchase I made. When I returned to work, earning half of what he made, he never alluded, even hinted, that I was not pulling my weight. He has repeatedly said we are partners in every way, and his money is my money. In fact, I manage our accounts. He calls me the “finance minister.”

That absolute trust has spared us from money arguments many couples have. If anything, I’ve worried that he puts too much faith in me, and that he needs instructions if something happened to me. So on top of everything in our safe deposit box is a letter that tells him who our lawyers, financial advisers and accountants are and how to reach them. In that letter is a tally of our accounts and what he’ll find in them.

I’ve learned over the years that the fiscal trust we have in each other is not the norm. Other women have told me horror stories about their husbands putting them on austere budgets and questioning their decisions at the grocery store. Some of my friends would respond by buying their kids’ toys on the sly, or sneaking out to buy an outfit while their husband was at work.

I ached for my friends because of the situations they were in, and was thankful that Mo and I didn’t have such a relationship. But whatever the motivation for my friends’ actions, there’s now a term for how they responded: financial infidelity.

An online poll for the National Endowment for Financial Education found that financial infidelity is as significant as sexual infidelity. In the January 2014 survey, which was conducted by Harris Poll for the endowment, 76 percent of those polled said that when financial deception occurs, it affects the relationship. A third of those polled said they had committed financial infidelity against a partner or spouse.

Financial infidelity can come in the form of a secret credit card or bank account, or paying for items in cash to avoid detection.

Daily Worth says there are two main reasons why financial infidelity occurs: The person feels controlled or is ashamed about his or her financial situation. When a spouse is deciding what his or her partner can and can’t buy, the other one might rebel. But also, the infidelity might occur because you put yourself in a financial bind and don’t know how to get out. So, you lie.

Lying about money isn’t just about malicious deception, The Fiscal Times says. There are times when the spouse is trying to be protective; for example, when investments have gone sour.

That’s something I could see myself doing, actually. As I’ve read about financial lies, and congratulated myself that Mo and I would never commit financial infidelity, my conscience has whispered that we are as vulnerable as anyone. Here’s the question I found myself posing: If our investments took a dive, what would I tell Mo?

Reading the study from the National Endowment for Financial Education made me realize that I owe it to Mo to be honest with him if something goes wrong with our investments. While I wouldn’t lie to him about a purchase or a phantom credit card, I might try to protect him from bad news.

And I understand now that if we are going to be the fiscal partners we say we are, then we need to share the bad as well as the good.

 

When slowing down can actually save you money

When a home or auto disaster strikes, it’s easy to pull out your wallet quickly. But getting multiple estimates first could save you thousands of dollars.

Getting a second and third opinion saved me almost $2,000 this past spring.

During a heavy April rainstorm, my husband Joe noticed our roof was leaking. Water was dripping out of an upstairs ceiling vent.

We put a bucket under the leak and fretted. I worried about water damage and mold, so I wanted to act quickly. Then we noticed a spot on the ceiling I had recently painted: We had another small leak.

Our problem wasn’t an easy fix. We live in a home built in the late 1800s, and it has a pressed metal roof that’s probably over 100 years old. There aren’t many companies in our area that work on these roofs.

I found a general contractor who does work on a lot of older homes, and he told us that our roof needed to be recoated with an aluminum roof coating product — something that needs to be done periodically to our type of roof. The cost? A little over $2,000.

With more legwork, I found two companies that work on roofs like ours, and they agreed the roof didn’t need to be recoated. One roofer told us that doing the job before it was necessary might even harm our roof since recoating requires walking on the metal shingles. In the end, it cost us just $150 to get the two leaks repaired.

Personal finance blogger Len Penzo learned the hard way: He got a quote of $800 from the guy who cuts his lawn to fix a leaky irrigation pipe, weed and put down bark mulch. When the job took only two hours, Penzo realized he’d been taken.

If you’ve got a home project or car repair that must be done, here are some steps you can take to assure you get the fix you need — and the best deal:

  • Do basic research. Do some online searches before you solicit bids for a project, Penzo recommends, adding that he should have researched the cost of bark mulch before he looked for a service provider. Find out how much work the project entails, along with a ballpark range of what it should cost.
  • Find qualified bidders. Don’t just pick anyone to give you estimates for your project. Look at qualifications, experience, certifications, references and consumer reviews. I signed up for Angie’s List, and I use it as part of my research whenever I’m considering hiring a professional. Also ask what insurance they carry and what warranties they offer on their work, My Personal Finance Journey recommends.
  • First, describe the problem. When you talk to a pro, tell them what the problem is and ask what solution they’d recommend. For example, when I told the roofers about my roof leaks, I didn’t say I was told to have the roof recoated.
  • Get it in writing. You should get written estimates, and make sure they’re itemized, Penzo recommends. It’s much easier to compare estimates when they’re in black and white, and when the cost is broken down into components that include supplies and labor.
  • Don’t always go cheap. Sometimes, it makes sense to go with the lowest bidder, but not always, according to MLR, a guest blogger on Get Rich Slowly. It can be smarter to go with a slightly higher bid from a more qualified professional, according to Get Rich Slowly.
  • Look at alternatives for easy jobs. Do you have a basic home repair that would be easy to do it yourself, if only you were handy? Blogger MLR writes that her parents saved $14,000 by getting bids from a skilled neighbor for some home improvement projects.

It’s always a good idea to get multiple estimates before shelling out a lot of cash for a home or auto repair. It’s a simple, painless way to save.

 

Don’t let medical bills pile up

One recent Sunday afternoon while cleaning out my garage, I felt an overwhelming ache in my abdomen and back. I tried to power through it, but after a while, the pain was too much. Eventually, I asked my husband to take me to the emergency room, where, after tests, they proclaimed that my gall bladder needed to be removed as soon as possible.

While money wasn’t the first thing on my mind, it occurred to me pretty soon after. How much would my hospital stay cost? What about the surgery? What would our health insurance cover?

Medical surprises can wreak havoc on your budget and can put a dent on your credit report if you don’t pay in a timely manner. Unpaid medical bills are pretty quickly passed on to collection agencies, because health providers’ top priority isn’t collecting money; it’s making you healthy. That’s why it’s important to not let those bills sit in your to-do pile for too long.

Healthcare Savvy suggests that if you have some financial resources and don’t qualify for financial assistance, you can:

Negotiate an interest-free payment plan. You’ll want to extend your due date and make sure you can afford whatever you promise to pay each month, Healthcare Savvy says.

Negotiate a discount. Ask to pay the negotiated rate that private insurance companies or Medicare/Medicaid would pay if you don’t have health insurance. Also, you can offer to pay the full bill at a discount, Healthcare Savvy says.

What if you flat out can’t afford to pay? ReadyforZero.com warns you not to ignore your bill, even if you only have bad news to share. And you’d be surprised what health providers will accept.

ReadyforZero advises that you first make sure you actually received the treatment that you are being billed for and check for double billing. You can use Healthcare Bluebook to gauge fair prices for medical expenses in your area.

Once you understand your bills, contact your healthcare provider and negotiate a payment plan. Fiona Lee of ReadyforZero was able to negotiate a $25 monthly payment. Fiona also advises that you get any agreements in writing.

If your financial resources are severely limited, you might qualify for government assistance. Medicare.gov has a publication that outlines assistance through Medicaid, Medicare Savings Programs, Supplemental Security Income (SSI) Benefits and a program called Extra Help, which helps with Medicare drug costs. Extra Help is for people who qualify for Medicaid, the Medicare Savings Programs or SSI. There is also the Children’s Health Insurance Program, or CHIP. This program varies from state to state, but you can get coverage in every state. CHIP is designed to provide affordable health insurance coverage for children of families that make too much money to qualify for Medicaid.

CreditCardGuide.com’s Allie Johnson gives tips on organizing your documents so that you don’t overlook anything. She warns that it is especially important to keep track of the bills you’ve already paid, because of the double-billing issue.

It’s easy to push medical bills aside, particularly when you are concerned about getting back on your feet. But, you need to stay on top of the documents your medical provider sends. Your mantra: Don’t let the bills go into collections. I plan to make paying my medical bills a priority. I like my good credit score too much to do otherwise.

 

Don’t let restaurant meals eat away at your budget

Restaurant meals were eating up our budget, so I took some simple steps that saved us about $200 a month and helped us shed a combined total of 30 pounds, too.

My husband Joe and I live in a mid-sized Southern city not exactly known for its fine restaurants, unless you love fried meats, sweet tea and sides of veggies flecked with bacon. Unlike most big-city dwellers, we do not have an array of amazing eateries luring us away from our kitchen.

So, I looked at our behavior patterns to see when we were caving to temptation and eating out. Typically, we went out because: I was having a busy week with multiple deadlines and didn’t feel like cooking; or, we had traveled the previous weekend, so I hadn’t done my normal Sunday meal planning and grocery shopping. (I usually handle the meal planning and cooking, while Joe does kitchen cleanup duty.)

Are you spending too much on eating out, too? Here are six ways to get out of the restaurant rut to save your budget — and waistline — from restaurant meal bloat:

  1. Make mock takeout. I tend to be a little all-or-nothing when it comes to food: I usually make ultra-healthy meals such as vegetable soups, huge salads and veggie tofu stir-fry served over quinoa. But I was using takeout on busy nights as a way to reward myself. I wouldn’t have to cook, and I could indulge in fatty foods. So, I decided to make healthier versions of our favorite takeout meals that would taste like a treat compared to our usual fare. I made pineapple fried rice, pasta with cream sauce and asparagus and also enchiladas, and put this food on its own shelf in the freezer. We started reaching for those meals instead of the takeout menus.
  2. Create an emergency meal shelf. Every plan needs a back-up plan, so I decided to devote one out-of-the-way shelf in our pantry to canned or boxed items that could be whipped into a dinner quickly without the addition of fresh ingredients. Our emergency shelf contains canned soups, canned beans and veggies. I’ve also stashed a few boxes of angel hair pasta, to which we can add garlic and olive oil for a super easy, bare-bones meal. That’s not ideal, nutritionally, but it’s definitely better than a restaurant meal. For example: A 2014 study at Drexel University showed that a typical restaurant meal contains a staggering 1,500 calories, along with unhealthy amounts of sodium and saturated fat.
  3. Eat a non-meal meal. “Just eat something,” recommends Jessica Fisher, the blogger behind GoodCheapEats.com. She has a list of quick, no-cook dinners that includes hummus with flatbread and veggies, cottage cheese with melon and whole wheat toast or a salad of sliced tomatoes with fresh mozzarella, basil and a drizzle of balsamic vinegar. One of my favorite go-to meals is a half can of rinsed, drained garbanzo beans with cut-up tomatoes, cucumber, red wine vinegar and a drizzle of olive oil. Even cold cereal works in a pinch. Fisher writes: “Every meal does not have to be an event.”
  4. Stock your fridge with fresh ingredients. One of the best ways to get a quick, nutritious meal is to have the fixings for salads and sandwiches handy, according to personal finance blog Money Ning. It takes only a few minutes to toss some pre-washed salad greens into a bowl, throw some cherry tomatoes, carrots and olives on top, then add a protein and some dressing. (Yes, pre-washed greens are more expensive, but they’re cheaper than eating out.) Or, you can pack a pita with veggies, cheese, meat or whatever you like.
  5. List the downsides of restaurant eating. Make a tally of everything you don’t like about eating in restaurants, recommends Money Ning. I’ve already mentioned the calorie wallop that restaurant meals pack, so that’s one. Others will vary based on your own weaknesses or pet peeves. The temptation to order overpriced beer or wine is another one for me. Others might not like the noise or having to pay for parking.
  6. Make restaurant meals go twice as far. Given that many restaurant meals contain almost a full day’s worth of calories, put half of your meal in a to-go box before you start eating. Taking home half of your food is kind of like getting a 50 percent discount on your restaurant meal, according to Money Q and A.

Finally, it’s important to take care of yourself, Money Ning points out. Make rest and exercise a priority so you won’t find yourself stressed, tired and hungry — and reaching for that takeout menu.

 

Why my new system for clothes fits like a glove

I used to look into a closet crammed with clothes and lament that I had nothing to wear. But discovering that I had too many clothes, not too few, has saved me time, hassle and money.

A few months ago, motivated mainly by frustration with my small closet, I Googled “people who have very few clothes.” I came across Project 333, in which you wear the same 33 items, including accessories, for three months. Each season, you can swap out items to choose 33 new things.

Project 333 saves money because once you’ve chosen your items for the season, you’re less likely to go window shopping, open deal emails and rack up credit card debt buying clothes, writes Project 333 founder Courtney Carver. You also free up time and energy to do stuff that’s more fun and fulfilling.

That was the inspiration I needed. I took a weekend and tried on tops, pants, skirts and dresses in my closet. Following Project 333 guidelines, I kept only clothes that: (1) fit me perfectly, (2) look good on me and (3) I love.

Everything that didn’t meet those three criteria went into big garbage bags to be donated to Goodwill. I’d had some of those items for over a decade and had moved them across the country multiple times. They cluttered my closet and my drawers, getting in my way every time I went to get dressed. I chose my 33 things for the season, putting away clothes that fit my criteria but weren’t right for warm weather.

Here’s what happened:

  • I found a bunch of clothes that fit, flatter me and that I love but that I had forgotten I owned because they were under piles of clothes. So, I found I didn’t need to buy any new clothes at the moment.
  • I stopped wearing yoga pants everywhere and started looking nicer on errands thanks to a Project 333 rule: Workout clothes don’t count in your 33 items, but you must wear them for their intended purpose only.
  • I started traveling light because I pack fewer items and accessories. That has made recent trips much less stressful. For a short trip, my husband and I can fit our clothes in one carry-on-size suitcase.
  • I look more polished and put together.

In the future, I won’t buy a bunch of new clothes at once. I’ll be more likely to buy one carefully chosen piece that meets my three criteria. Also, I don’t buy a lot of accessories anymore. I buy only those that I know I’ll wear with something I have and that flatter me and add sparkle to an outfit. (It’s amazing how many cool earrings I had but never wore because they blended into my brown hair.)

If you’re interesting in using Project 333 or other tactics to save money on clothes, here are four tips:

  1. Create a capsule wardrobe. That means you have quality basic pieces and accessories that can be mixed and matched, worn on a variety of occasions, and look good on you, according to Wealthy Winters, a financial independence blog.
  2. Consider your style. Take some time to look at outfits and style pages on Pinterest and other sites to figure out what you really love, Wealthy Winters recommends. Pinterest has lots of examples of capsule wardrobes.
  3. Pay with cash or debit instead of credit. When you do buy clothes, use money you already have and avoid store credit cards at all costs, recommends the blog My Personal Finance Journey. If you don’t pay the balance in full, interest can more than eat up any savings you got by opening the card.
  4. Wait for sales to snag pricy items. Look for high-quality items, and find ways to buy them at a discount, Wealthy Winters recommends. The key is knowing which stores carry the brands you like and keeping an eye out for sales. Also, know the retail cycle and when sales are most likely to occur, according to You Look Fab.

I’m so happy with Project 333 that I’ve decided to make it a permanent part of my life, and I’ve marked the seasonal clothing changes on my iCal. I love the fact that I’ve finally solved my I-have-nothing-to-wear dilemma without spending a cent.

 

Tired of paying home loan PMI? Try refinancing

As daunting as refinancing your home loan can seem, I’ve found it can pay off in big savings on interest and other benefits.

My husband Joe and I are refinancing right now, and the biggest benefit for us is that we get out of paying private mortgage insurance (PMI).

Private mortgage insurance typically is required when you take out a mortgage and make a down payment that is less than 20 percent of the cost or appraisal value of the house you’re buying. Before we moved and bought our house three years ago, we had to sell our last house at a loss. So, much of the money we would have used for a down payment had to go to pay off our other mortgage.

PMI is costing us over $100 a month. Blogger Travis from My Personal Finance Journey recently refinanced too, partly to get out of PMI, which, he writes, “is like flushing money down the toilet each month.” I agree.

Joe and I are able to get out of paying PMI because we recently did a huge remodel that upped the value of our house. Our home used to be part of a B&B and only had a kitchenette. We created a real kitchen next to a more spacious living room in an open floor plan.

The increased home value means we have more equity, which could have gotten us out of PMI with our current mortgage company. However, our lender wanted us to jump through a bunch of hoops, including paying for an appraisal and writing them a letter.

So, we started thinking about refinancing. We were fed up with our mortgage company’s customer service anyway, and we knew we could reduce the term of our loan from 30 to 15 years and get a much better interest rate. Also, we were considering getting cash out so we could paint the exterior of our Victorian home. Flaking paint has made this a top priority because we want to protect the wood siding.

We shopped around and found a good deal with our own bank, a 3.4 percent interest rate for a 15-year term — much better than the 4.5 percent we’re paying for a 30-year term. With a better interest rate and no PMI, our monthly payment will be almost the same as it is now, and we’ll pay off our house in half the time.

So, how do you know if refinancing is right for you? Personal finance blog Get Rich Slowly offers five reasons to refinance: . lowering your interest rate, shortening the term of your loan, lowering your monthly payment, switching to a fixed-rate from an adjustable rate loan or tapping home equity cash for a home improvement.

One other factor: How long do you plan to stay in the home? Closing costs typically add up to several thousand dollars, so it might not be worth refinancing if you think you’ll move in a few years. For us, this was a wild card: We’re here for my husband’s job and don’t know what will happen in the future. We’re gambling that we’ll stay here for a while.

We decided not to pull equity cash out of our new loan. That’s because our home appraised for a bit less than we had hoped, meaning we would end up with paying PMI again if we took the cash out. By applying for a home equity line of credit (HELOC) instead, we were able to accomplish our goal of freeing ourselves from PMI.

A HELOC is a loan in which the borrower’s home serves as collateral. With a HELOC, you typically can borrow an amount equal to or less than 85 percent of the equity in your home.

Also, our bank is having a HELOC special with 1.99 percent APR for a year, so it makes more sense to go that route.

If you do refinance, financial planner Hank Coleman on DailyFinance.com †lists some common mistakes people make when refinancing. These include not shopping for the best deal, settling for the lender’s appraiser (a mistake we made, unfortunately) instead of hiring your own and not knowing that you can change your mind within three days of closing.

All in all, if you’re doing it for the right reasons, refinancing a mortgage can be a great financial move.

 

Millennials’ frugality launches the 50 Percent Club

In April, I admired how millennials seem more frugal than their predecessors.

I’ve noticed that my younger friends and coworkers drive older cars, share cars with their spouses, refrain from eating out for lunch. They remind me of my parents, who grew up during the Depression. And their backgrounds aren’t so very different.

That’s because millennials grew up and came of age during the Great Recession. This generation watched their parents get laid off five to six years ago. They started or finished college when job prospects were thin on the ground.

And millennials have a disadvantage the older generations didn’t have: They carry a greater burden of debt coming out of college because of student loans that average about $29,000 for the graduating senior. And that’s not including credit card debt. They are putting off buying a house, even getting married.

Yes, the younger generation is definitely more careful with money and the future than I was when I was their age. I admire them.

Now, some of them have taken their frugality a step further.

There is a movement among some of the younger financial bloggers to save not 10 percent, not 25 percent, but 50 percent of their income.

Started by Kathleen O’Malley of Frugal Portland and Latisha of Young Finances and called the 50% Club, the idea embodies the fiscal psyche of millennials. Stuff does not capture their attention the way it did for previous generations.

And that’s what really strikes me; they are intrigued by the idea of less stuff. Says Romeo Jeremiah of Life and Personal Finance Reflections: “I realized that I didnít have to replace televisions, clothes, furniture, cellphones, or cars as often as I did in the past. And I also realized that these things didnít bring any additional happiness.”

And these millennials aren’t earning small change. For example, Kathleen plans to save $75,000 a year by combining efforts with her fiance.

So, what’s the point of saving all this money? What do they plan to do with it? In the case of Latisha, she wants to travel the world. Lauren Bowling says on LearnVest that she plans to put her money into retirement. Likewise for Kathleen, who is also using some of the money to invest in non-retirement funds.

When I think back to my late 20s and early 30s, I shudder. I was spending huge chunks of money on eating out with friends. I was making $30,000 a year, and spending $50 a week on eating out, or almost 10 percent of my gross income. If I had invested that in dividend stocks, I would have more than $200,000 today, enough to buy a house outright in some markets.

The millennials have that figured out. They are paying down their debt to save for a house, or retirement, or to raise babies, or just to travel.

For my husband and me, we do set aside 60 percent of my take-home for our millennials’ college funds, but saving 50 percent of our combined income is just not in the cards. Not now, anyway.

For now, I have to admire from afar.

 
 
     


 
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