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Knowing Your Financial Needs

And God will generously provide all you need. Then you will always have everything you need and plenty left over to share with others - Corinthians 9:8 

Understanding the financial options available to you can be key to your financial success

Your FICO Score

Your FICO Score is a three-digit number used by banks and other financial institutions to measure or rate your creditworthiness.

 

In order to calculate your score, one of the three credit bureaus will review a number of financial factors such as the payment history you have on any loans, the length of your credit history and total amount you owe. Scores will range from 300 to 850. The higher your score, the better opportunity you have to get a lower interest rate on any credit cards and/or loans.

 

If your score is below 650, you may want to take steps to improve your score in order to get fore favorable interest rates on credit cards or loans.

Want to check your score?

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Debt Consolidation

Sometimes you might find yourself in a situation where you have two or more credit cards with outstanding balances, a car loan, a student loan and another personal loan.  When this happens, it is not uncommon to feel overwhelmed. 

 

If you find yourself in this situation,  you might be able to save money by consolidating your debts from multiple higher interest rate loans, to one simple loan at a lower rate.  While this can certainly give you more piece of mind now that you are able to move from having to manage multiple loans and focus only one outstanding loan, it is important to also examine your monthly expenses and set a reasonable budget so that you don’t find yourself in the same situation again.

 

Want to learn more about your debt consolidation options?

 

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Adjustable Rate Mortgage (ARM)

Over the last year, interest rates have been extremely low.  This has provided incentive for a number of new home buyers to enter the market to buy their first house or condo.  The purchase of a home is one of the largest financial decisions most people ever make.  Because of this, it is important to understand what the full cost of the loan will be over the full life of the mortgage.  It is not uncommon to get an Adjustable Rate Mortgage (ARM) when the interest rates are low. 

The interest rate for an ARM may be fixed at first, but eventually it will move up and down based upon the Index that it is tied to.  Therefore, as you attempt to determine the full amount of the mortgage over the life of the loan, you will have to assume what future interest rates will be.  Estimating future rates is extremely difficult, but it’s not hard to understand that when rates are at all time lows (like they are now) there is really only one way for them to go . . . up.  You may be better off getting a fixed rate mortgage at a slightly higher rate than the lower starting rate associated with an ARM.  Either way, you need to do your homework.

Want to learn more about getting a home loan?

 

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Annual Percentage Rate (APR)

There are a lot of different benefits associated with various credit cards and it can be difficult to compare two cards to determine which one is right for you. 

 

If you are worried about how much interest you will pay for a given card, you can use the APR (Annual Percentage Rate) to effectively compare the cost of the credit.  The APR includes all associated fees and costs involved with a loan or credit card.

Interested in researching which credit card is right for you?

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Reverse Mortgage

A Reverse Mortgage is different from the mortgage you obtained to buy your house.  When you bought your home, you most likely took out a mortgage over 15 or 30 years where you made monthly payments that covered the interest due and a portion of the principle.  In a Reverse Mortgage, you are able to get the equity out of your home while you still live there.

For example, if you are over 62 years old, you could take out a Reverse Mortgage on your home.  You would receive either a lump sum payment, a fixed monthly payment, or access a line of credit.  In this case, the payment for the Reverse Mortgage is due at the end of the loan and normally is paid off by transferring ownership of your home to the lender.

If you are thinking about accessing a Reverse Mortgage, you will need to do your homework and make sure it is right for you. 

Want to learn more?

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Rebalancing Your Portfolio

Depending on how much more time you have before you plan on retiring, the risk tolerance of your portfolio might change.  As you approach retirement age, many financial advisors suggest you review the balance you have in your nest egg.  It is not uncommon for investors to look over the past 12 months and find that the disruptive nature of the market has made some of their assets grow at a faster rate than some of their conservative investments. 

Rebalancing your portfolio is the process of buying and selling specific stocks, bonds, or other investment assets in order to have a risk profile that meets your needs.  For example, as you approach retirement, you may no longer want to have a portfolio comprised of 70 percent growth stocks, 25 percent bonds and 5 percent cash. If that is the case, you will want to rebalance your portfolio to match the risk profile that is more in line with your investment horizon.

Want to learn more about rebalancing your investments?

 

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