Are you paying yourself first? Take control of your money

When I was growing up, my mom told me to Pay Yourself First! Interesting and simple advice. My mom was clear that I was to set aside money for myself before I paid anyone or anything else. Back in the ’80s, that was a few hundred dollars a month. I didn’t use it for clothes or vacations. I put this money towards savings and investments. My Mom, even without a financial background, had a sound financial idea. I’d like to think a degree in Economics, years of banking, real estate experience, and life lessons have given me great insight on how best to Pay Yourself First! It’s about control. Taking control of your money and how you spend your money is critical. Let’s look at a few ways that you can take control of your money and pay yourself first.

  • Get out of consumer debt:

In my humble opinion, you can’t save money when you owe money, particularly credit card debt. Consumer debt, such as credit card debt and automobile debt, is sucking the life out of most Americans. Working on a plan to rid this high-cost debt is a great way to take control of your money. The average credit card interest rate is around 16.65% at the time of this article. Depending upon the personal debt, this can be stifling and takes away your control over your money.

  • Accelerate paying off your mortgage:

Programs, such as CMG Home Loan’s All In One Loan, are amazing in giving you back control over your money and the ability to pay down the principal balance of your loan first. This will reduce the overall amount of interest that you pay on your mortgage, saving you perhaps, tens of thousands of dollars. This is so powerful. Traditional mortgage interest is amortized. This front-loads the bulk of the interest due on the loan to the early years of the loan. Traditional mortgages were established by Fannie Mae in the 1930s to provide affordable payments for home loan borrowers. Traditional mortgages are not geared for paying down your mortgage quickly. Amortized interest makes it very difficult for borrowers to pay down principal for the first 13 years and makes it harder to get out of mortgage debt. Have you noticed that you may have been paying your mortgage perfectly for several years, but your principal balance reduces a very small amount in comparison to the amount you have paid? This is due to the front-loaded amortized interest structure of traditional loans. Most families rely on property value appreciation for equity versus their payments and mortgage debt reduction to increase their equity position in their homes. With the All In One loan, paying principal first is game-changing. Imagine having your home paid for in 7 years' time! It may be possible with the All In One Loan!

  • Reallocate some of your investment budget for debt reduction and real estate investments. Maximize your employer's benefit plans, especially if they match your investments into your 401k or TSP accounts. I think this is a sound plan for your qualified funds. Ask questions regarding performance and investment strategies to make sure that your portfolio is set to grow and not crash. Be mindful of a balance between investments, speculation, and debt reduction opportunities. Perhaps, look to balance your investment dollars between market allocations and real estate allocations. If you are intrigued by Crypto, consider these dollars as wild cat speculation. Remember that you can’t easily leverage stocks, mutual funds, and bond allocations; however, you can leverage real estate purchases. Investment homes have several key benefits that can help your net worth soar. Property appreciation, tenants paying off your debts, and growing your equity, potential tax benefits, and depreciation can significantly increase your wealth and portfolio strength. 
  • Spend wisely and budget with care. We live in an age where we can purchase just about anything with a click. Monitor and be mindful of impulsive spending. The average American spends $314 per month on impulse purchases. A two-adult household will spend over $7500 per year on impulse, non-essential purchases. Imagine if this impulse purchasing was curtailed and these dollars were driven to debt reduction? This is an amazing way to Pay Yourself First!!

My mom’s advice was sound then, and it is sound now. Building a wise debt strategy is key to building wealth and growing your opportunities! Taking control of your spending and money will lead to incredible financial freedom. Feel free to reach out to me with questions regarding your mortgage financing options and the All in One Loan, and get control over your money!!

Carolyn Capalbo | Real Estate Loan Officer

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