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June 6, 2019 by Neil Christiansen Leave a Comment

Build An Emergency Fund For Life’s Unexpected Expenses

Life happens…sometimes bringing accidents or emergencies that are costly. Recently I had a ski accident that left me with a broken nose and shattered tibia. After two surgeries, several nights in the hospital, doctor’s visits and physical therapy, I am very grateful for health insurance. Despite the coverage insurance provided, I was still left paying my deductible and coinsurance. Thankfully, my wife and I have an emergency fund and were able to cover these costs.

Today, we’re giving you the 411 on creating your 911 and other emergencies fund.

Starting Your Emergency Fund

Having an emergency fund is like having a safety net for when life’s unexpected events happen. If you haven’t started one, you’re not alone…a recent Bankrate survey found⁽¹⁾ only 39% of American’s would be able to cover a $1,000 emergency with savings. A small emergency fund is the first step to building a fully stocked emergency fund. Experts recommend saving $1,000 or two weeks pay – whichever is greater – so you can cover those minor unexpected expenses like a car repair or broken appliance without having to use credit cards or borrow from family or other sources.

Once you have this buffer to handle life’s little curveballs, you can focus on saving for life’s larger emergencies, like job loss, unexpected travel, major medical expenses, etc.

How Much Should You Save?

Most experts believe you should save about 3 to 6 months’ worth of expenses in your fully stocked emergency fund. This means saving for your critical expenses such as:

Rent or Mortgage Payment
Groceries
Utilities (gas, electric, water, garbage)
Telecom (phone, cable, internet)
Insurance (car, health, home)
Transportation (car payment, gas, public transit)
Monthly Debt (credit cards & all loans except a mortgage)
Other Necessary Expenses

While some folks like to make sure their emergency fund can cover life’s luxuries, typically you wouldn’t include things like eating out, entertainment or nonessential shopping.

Where To Keep Your Emergency Fund

When deciding where to put your emergency funds, consider choosing an account that is:

Easily Accessible. You’ll want to make sure that you can access funds quickly in the event of an emergency. That said, keep the account separate from your main bank account so you’re not tempted to dip into your emergency fund for everyday expenses.
Interest Bearing. While making money isn’t the point of having an emergency fund, that doesn’t mean you can’t earn interest on your savings. Choosing a high yield saving account ⁽²⁾ or money market account allows you to access your money when you need it and earn interest to ward off the effect of inflation.
FDIC Insured. There is a difference between money market accounts and money market funds⁽³⁾. Money market accounts are insured by the FDIC* up to $250,000, while money market funds are not. This means it’s possible to lose some, or even all, of your principle.

Is It An Emergency?

Sometimes things that feel like an emergency can actually be budgeted for ahead of time. You can plan for replacing your tires when they wear out (not an emergency), but you can’t plan for ski accident (emergency). Rachel Cruze⁽⁴⁾ recommends asking yourself three questions to determine if you need to tap into your emergency savings:

Is it unexpected?
Is it necessary?
Is it urgent?

If you answer “yes” to all three questions, the situation likely justifies using money from your emergency fund.

How To Save $1,000 Quickly

With a little thought and planning, you can create a small $1,000 emergency fund fairly quickly.

Sell stuff you no longer use. This is one of the fastest ways is to bring in extra money. Take a look through your closets, basement, garage and other storage areas to see what you can find. Even the small items that may only bring in a few bucks can add up!
Save a little from each paycheck. Have a small amount from each paycheck automatically deposited into your savings or money market account every time you get paid.
Create a side hustle or take on a part-time job. Dog walking, babysitting, Uber driver, etc are all ways to save $1,000 quickly – or even create your fully stocked emergency fund!
Check your budget for places to save. Ideas like brown bagging your lunch, making coffee at home (vs. the local coffee shop) can really add up. If you don’t have a budget, now’s the time to start!

Get Started Today!

Worried you can’t save enough? Don’t! Do what you can, as consistently as possible and over time it will add up. The important thing is that you’re saving something. Remember, having an emergency fund can provide you with peace of mind when life throws you a curve ball!

Disclaimer: The information contained herein is general in nature and based on authorities that are subject to change. Churchill Mortgage guarantees neither the accuracy or completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Churchill Mortgage assumes no obligation to inform the reader of any changes that could affect information contained herein. This publication does not, and is not intended to, provide legal, financial, tax or accounting advice, and readers should consult their advisors concerning the application of tax laws to their particular situations.

*The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category.

1. https://www.bankrate.com/banking/savings/financial-security-0118/
2. https://www.moneyunder30.com/high-yield-savings-accounts-compared
3. https://www.ally.com/do-it-right/banking/are-money-market-accounts-fdic-insured/
4. https://www.daveramsey.com/blog/quick-guide-to-your-emergency-fund

May 23, 2019 by Neil Christiansen Leave a Comment

5 Easy Steps To An Effective Budget

Ah, the “b” word. Nope, not that one…the other one. The one that conjures up images of spreadsheets, endless calculations and potentially, hair pulling. Yep, that’s it … budget! Sadly, it’s this kind of vision that has folks avoiding the work involved in the most effective tool you can use to take control of your money! Its bad rep of boredom and sacrifice overshadow the amazing benefits of having one.

When you create a basic budget and stick to it, it will suddenly seem like you have more money. ~Dave Ramsey

A budget gives you the freedom to choose how you spend and invest your money. And, with the amazing technology we have available today, maintaining a budget is easier than ever!

Follow these 5 easy steps and you’ll be well on your way to controlling your finances!

1. Determine Your After-Tax Income

This amount is your total take-home pay, after Uncle Sam takes his cut, of course. Besides a regular salary, you should include any other income that comes your way during the year. This could include a side hustle, alimony, child support, interest, dividends, social security, year-end bonus, etc.

Have any automatic deductions like a 401(k), savings or insurance? Be sure to account for them so you have an accurate picture of your income and expenditures. If you’re married or have a significant other that you share expenses with, include their income as well.

2. Calculate Your Expenses

This is where the fun really begins! Grab your bank & credit card statements and any other financial files you keep…and possibly a can your favorite energy drink. While most of your expenses are monthly, some may occur only quarterly or annually, so using 6-12 months’ worth of statements can help you get the most accurate financial picture.

List all your expenses – we’ve included a Personal Budget Template to help you get started. Depending on your budgeting experience, or enthusiasm for details, you can either:

Get an average monthly expense by adding up everything you’ve spent in the last 6-12 months and dividing it by the number of months.
Break out your expenses by month. For instance, if your HOA fee is paid the first month of every quarter, you only have to include this item in your budget as an expense for January, April, July and September.

3. Subtract Expenses From Income

Your budget should account for every dollar. Although possible, it’s not likely that your expenses will match your income exactly. If your expenses are greater than your income, revisit your budget and see where you can make some cuts. If your income is greater than your expenses, you’ll want to account for those remaining dollars. You could start an emergency fund, pay down debt, invest them in retirement, etc. Just give them a home or they’ll find one of their own.

4. Budget Adjustments

Are you putting your money where your priorities are? Once you’ve taken a look at where you’ve been spending your money, you can make any necessary adjustments to create a budget that reflects your financial priorities. Let’s say after reviewing last year’s expenses you’re surprised to learn that the $5 coffee you grab on the way to work every morning is costing you $1,250 a year…YIKES! What if you got coffee only twice a week and put the $750 you’re saving towards your monthly debt? Or better yet, what if you make your coffee at home every day and saved the entire $1,250?

5. Record & Track Your Spending

Now that you’ve created this beautiful work of art (yep, we’re still talking about your budget), it’s time to put it to good use! Decide whether you want to use technology or take a DIY approach to your budget. If you decide to go the technology route, having software that links to your accounts, downloads all your transactions and categorizes them can be a great time saver. If you’re not comfortable with having your accounts linked to your budget software, using a spreadsheet or good old pencil and paper are still great options!

Review your budget at least once a month to see what money is coming in, how quickly you’re spending it and what you’re spending it on.

Life Happens, Be Realistic

Remember to be realistic about your budget. If you fall off the wagon once and a while, hop back on as soon as you can. If you stick to your budget the majority of the time, you’ll be successful in reaching your financial goals!

The information contained herein is general in nature and based on authorities that are subject to change. Churchill Mortgage guarantees neither the accuracy or completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Churchill Mortgage assumes no obligation to inform the reader of any changes that could affect information contained herein. This publication does not, and is not intended to, provide legal, financial, tax or accounting advice, and readers should consult their advisors concerning the application of tax laws to their particular situations.

May 9, 2019 by Neil Christiansen Leave a Comment

Get Debt Free Using A Debt Consolidation Refinance

When our clients Jay and Lisa called us a few months ago they were on pace to pay off their mortgage within 12 years. There was just one little catch… at over $200,000, their consumer debt was out of control. As Dave Ramsey followers, they knew they had to address this if they were going to create a better financial future for themselves. They came to us asking “If we’re already in our mid 40’s, how are we going to pay off all this debt so we can enjoy our retirement years?”

We helped them create a debt consolidation refinance plan so they could to tap into the idle equity in their home and pay off their consumer debt. They took out a new first mortgage to pay off their current first and second mortgage as well as their credit card debt and two car loans. Now they’re taking that monthly savings and adding it to their student loan payments to pay them off even faster. In 4.5 years, when these are paid off, they’ll take that student loan payment and apply it to their mortgage. In just over 12 years, they’ll be completely debt free – that’s 5 years sooner than on their previous path!

Benefits of A Debt Consolidation Refinance

While consumer debt continues to increase in the US, so does home equity. Although Core Logic’s Home Equity Report⁽¹⁾ shows that home equity grew in almost every state, Colorado was in the top 10! We showed a significant increase – gaining an average of $17,000 per borrower last year.

If you’ve been considering a debt consolidation refinance, now may be the time to act. For folks who are disciplined with their money, this can be a great financial planning tool. By consolidating your high-interest debt into your monthly mortgage payment, you could reduce your average interest rate, your total monthly debt expense and pay less interest overall.

Though it can be a great option, consolidating credit card and other debt into your mortgage is not right for everyone. Consider these 5 questions before deciding whether it’s an appropriate choice for you.

1. How Much Equity Is in Your Home?

If you’re thinking about a debt consolidation refinance, you’ll need to be sure you have enough equity in your home. Your loan-to-value (LTV) ratio should be less than 80% after completing your refinance. To roughly calculate the potential LTV of a new loan, divide your current mortgage balance plus the cash out desired by the approximate value of your home. For example:

current mortgage: $250,000 + cash out: $100,000/approx home value: $500,000 = 70% LTV

2. Which Loans Will You Pay Off?

If you’re looking to pay off multiple loans with this debt consolidation refinance, keep in mind that depending on the amount of equity you have available, it may not be possible to pay off everything. In this situation, how do you determine which debts to pay off? Typically, we recommend paying off the loan with the highest interest rate first. However, you should also take into consideration the monthly payment, length of the loan and total interest expense. Longer term loans may end up costing you more in interest over the long haul, even if the interest rate is lower.

Keep in mind that refinancing doesn’t really pay off anything, it just moves your debt around.

3. How Will You Avoid Running Up Debt Again?

One of the biggest challenges after paying off debt? Not racking it right back up! If debt has been an issue for you, work on changing your spending habits first. Set a budget and get a sense of how much disposable income you actually have. Otherwise, you’ll end up back in the same situation in the near future, and this time your home could be at stake.

4. What Additional Costs Will You Pay?

A debt consolidation refinance (or cash-out refinance) carries the typical costs of a traditional refinance, such as closing costs, title fees, appraisal fees, etc. This type of loan also has a slightly higher interest rate; about .25% to .375% depending on factors like credit score and your new LTV. Be sure to factor these expenses in when determining if a cash-out refinance makes sense for you.

5. Are You Willing to Put Your Home on the Line?

Last, but certainly not least … a debt consolidation refinance takes high-interest, unsecured debt and rolls it into a mortgage secured by your home. If you’re struggling with personal debt to the point where you are or might consider bankruptcy, this is not a choice for you. If you lose your job or take out a refinancing loan that you can’t afford, you are much more likely to lose your house than if you were to declare bankruptcy due to excessive personal debt.

Bottom Line: Don’t refinance debt into a mortgage you can’t afford.

What Are Your Next Steps?

If you think a debt consolidation refinance is in your future, give us a call today and we’ll help you determine if it’s the right fit for you.

The information contained herein is general in nature and based on authorities that are subject to change. Churchill Mortgage guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Churchill Mortgage assumes no obligation to inform the reader of any changes that could affect information contained herein. This publication does not, and is not intended to, provide legal, financial, tax or accounting advice, and readers should consult their advisors concerning the application of tax laws to their particular situations.

1. https://www.corelogic.com/news/corelogic-reports-homeowners-with-negative-equity-increased-by-35000-in-the-fourth-quarter-of-2018.aspx

April 25, 2019 by Neil Christiansen Leave a Comment

Smart Ways to Spend Your Tax Refund

As of April 12th, the average taxpayer who has received a tax refund in 2019 will receive a $2,795 payout⁽¹⁾. While the payout is down 1.3% from this time last year, it’s still a significant refund. And if strategically spent, can save you even more in the long run!

A recent survey from GOBankingRates.com⁽²⁾ shows that many Americans plan to spend their tax refund wisely. Over 50% plan to pay off debt, invest or save their refund. Coming in at 16% in the survey? Americans plan to stash their tax refund into savings.

Build a Small Emergency Fund

If you don’t have an emergency fund, using your tax return (or part of it) to fund one is the first step in taking control of your money. According to Bankrate.com,⁽³⁾only 39% of American’s would be able to cover a $1,000 emergency with savings. This leaves the majority to find another way to cover the cost – typically using credit cards or other methods that in incur debt and interest.

Once you have an emergency fund to cover those potential unexpected emergencies, the next step towards controlling your finances is to pay down any existing debt. That’s exactly what over a quarter of those surveyed plan to do with their tax refund. With the national debt at an all-time high of $13.54 trillion,⁽⁴⁾ it’s not a surprise that 27% of taxpayers want to use at least part of their tax refund to pay down debt.

What would this look like? We took the most common average American household debts and ran the numbers to see what would happen if you put your tax refund towards them. The results were staggering! Read on to see how much you can save with these simple steps.

Take on Debt With Your Tax Refund

1. Chip Away at Credit Card Debt
In the 4th quarter of 2018, credit card balances rose to $870 billion⁽⁴⁾ – marking the first time credit card balances have retouched the 2008 nominal peak. According to Nerdwallet,⁽⁵⁾ the average credit card debt per household is $15,561. If you’re only making the minimum monthly payment of 2% with an average annual interest rate of 15%, it will take you approximately 6.5 years to pay it off. That’s assuming you don’t charge any more on your credit card during that time.

Now, let’s say you take your tax refund of $2,795 and apply it to the balance of your credit card. This one small move means paying it off almost 2 years quicker and saving $3,890 in interest.

What if you take it a step further? What if you adjust your withholding so that Uncle Sam isn’t holding on to it (interest-free, I might add) for the next year? You could bring home an extra $233 a month ($2,795/12) and apply it to your credit card debt. In this scenario, you’d pay off 3 years faster and save over $8,170 in interest! Your initial tax refund of $2,795 almost triples its value!

2. Stamp Out Student Loans
Another option is to use your tax refund to pay off your student loans. Student loan debt is at an all-time high of 1.46 trillion dollars⁽⁴⁾ with the total owed by an average US household totaling $47,671.⁽⁵⁾At an average interest rate of 5%⁽⁶⁾your monthly payment would come to $506 per month. That amounts to $23,836 in total interest over a 10 year repayment period. Yikes!

What if you decided to use your tax refund to lower the loan balance and make the additional $233 monthly payments? It would mean saving $9,733 in interest and shaving 4 years off the loan period! Not bad.

3. Crush Your Car Loan
Car loans are another debt to consider paying off, especially since their value can decrease rapidly. Experian’s latest research⁽⁷⁾ shows that the average new car loan is $30,977 with a 7.04% interest rate. The average auto loan term for new vehicles is almost six years. Using your $2,795 tax refund along with increasing your monthly payments of $233, you can save $3,634 in interest and pay off your wheels in 4.5 years!

Invest In Your Retirement

Got your debts and savings covered? Consider kick-starting or adding to your retirement account. Retirement in the US is approaching a crisis. In the coming decades, millions of Americans will get too old to continue working but will not have the means to retire. While stats may differ slightly by source, the story is pretty much the same. A 2018 study by Northwestern Mutual⁽⁸⁾ shows that 21% of Americans have absolutely no retirement savings while an additional 10% have less than $5,000! One in three Baby Boomers currently in or approaching retirement age have between $0 and $25,000 set aside.

With an initial investment of $2,795 and $233 monthly contributions, you could grow your retirement account by $377,820 over the next 30 years ($86,675 in contributions & $288,144 in growth*). Talk about peace of mind.

So, whether your tax refund is fairly substantial or just a drop in the bucket, putting it to work for you can improve your financial situation! You can even treat yourself – just don’t blow it at on a huge, unnecessary splurge.

The information contained herein is general in nature and based on authorities that are subject to change. Churchill Mortgage guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Churchill Mortgage assumes no obligation to inform the reader of any changes that could affect information contained herein. This publication does not, and is not intended to, provide legal, financial, tax or accounting advice, and readers should consult their advisors concerning the application of tax laws to their particular situations.

*assumes an average return of 8% per year
1. https://www.irs.gov/newsroom/filing-season-statistics-for-week-ending-april-12-2019
2. https://www.gobankingrates.com/taxes/refunds/what-americans-do-with-tax-refund/
3. https://www.bankrate.com/banking/savings/financial-security-0118/
4. https://www.newyorkfed.org/newsevents/news/research/2019/20190212
5. https://www.nerdwallet.com/blog/average-credit-card-debt-household/
6. https://www.nerdwallet.com/blog/loans/student-loans/student-loan-interest-rates/
7. https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/2018-q4-safm.pdf
8. https://news.northwesternmutual.com/2018-05-08-1-In-3-Americans-Have-Less-Than-5-000-In-Retirement-Savings

January 16, 2019 by Neil Christiansen Leave a Comment

2019 Economic Outlook

Barry is back! Each January, Barry Habib, Founder and CEO of MBS Highway and mortgage & real estate market expert shares his economic outlook for the year ahead.

Barry’s 2019 economic outlook explains what dynamics are in place for this year, where the stock and bond markets are headed and the future direction of interest rates and housing.

2018 In Review

Prediction: Stocks will be toppy and vulnerable and there will be a significant stock market pullback in 2018.
Actual: Stocks were toppy and they did pull back significantly at the end of the year.

Prediction: Inflation will be tame in 2018 and the fed will tighten by hiking rates 1-2 times and reduce their balance sheet.
Actual: Inflation did remain tame and the Fed stopped reinvestments and reduced the balance sheet. They hiked rates 4 times.

Prediction: The 10-year-2year yield curve will flatten in 2018.
Actual: The yield curve flattened from 0.51 to 0.11. This is important looking forward as an inverted curve in 2019 may become a self fulfilling prophecy where fears and concerns could hurt stocks and help bonds.

Prediction: The 10-year will trade between 2.65% and 3.04% most of the year and mortgage rates would be 0.375% to 0.5% higher on average.
Actual: The 10-year did trade between 2.65% and 3.04% for 10 months of the year and mortgage rates did rise for most of the year within our predicted range.

Prediction: Our forecast for appreciation was for housing to be up to 4.5% to 5.5%.
Actual: For most of the year, housing was up greater than that – to over 7% at times – but as the year came to an end home prices had risen nationally between 4.7% to 5.5% year over year.

2019 Economic Outlook Dynamics

China – Could there be a trade war?
US Economy – Is it slowing?
The Stock Market Pullback – How much and what will the impact be?
Rates Set to Rise – The Fed is indicating two rate hikes and is scheduled to further unwind its balance sheet. How much and what will the impact be?
Housing – Housing appears to be slowing. Is this a bad thing or will it regain its footing?
Inflation Rising with Oil Prices – We saw wages start to rise at the end of 2018 while oil prices took a big dip, helping inflation stay low overall. If they move back to more normal levels, will that pressure inflation?

Key Areas To Consider In 2019

1. Stocks

The 2019 economic outlook starts with a more normal market. With the Fed no longer artificially adding liquidity through the purchase of mortgage bonds and treasuries, we expect stocks to be choppy and volatile. The Feds are not the only ones draining liquidity – the European Central Bank is as well. This gives stocks a head wind at the start of 2019.

Although stocks will likely decline early in the year, they’ll find their footing with valuations coming down to realistic and sustainable levels. Barry thinks the stock market will reverse course after a very difficult 2018.

Barry’s Prediction: Stocks will end 2018 up 5% to 8%.

2. The Federal Reserve

Different this year, there will be a press conference at every Fed meeting. In the past, only every other meeting had press conference. Since the Fed historically has only changed interest rates where there was a press conference, this could add to increased speculation and volatility with the media covering every single detail and speculating what may or may not happen.

The 2019 Fed dot plot shows is showing that they are planning 2 hikes in the year ahead. The Fed will be concerned about rising inflation due to a combination of higher oil prices and wage pressures. These factors may influence the Fed to push interest rates higher unless we see a slowdown in the economy.

Barry’s Prediction: The Fed will hike 1 time to get the Fed Funds Rate (FFR) to 2.75% although they would love to get the FFR to 3%. The Fed stays on course to reduce the balance sheet.

3. Interest Rates

As we know, inflation is the main driver of rates, and inflation will likely tick higher with oil prices rebounding and increasing wages as 20 states are increasing their minimum wage in 2019. We think theses causes an uptick on the rate on inflation, Because of this, that pressures inflation a bit more – this is the enemy of interest rates.

Also pressuring the interest rate environment is the unwinding for the Fed’s balance sheet by $50 billion per month at the same time that our government has more borrowing needs due to the deficit. As our government puts out more paper (more supply) with less buying, bond prices will worsen which means an increase in interest rates.

Barry’s Prediction: The 10-year treasury note will trade between 2.75% and 3.25% for most of the year, with a high tick for the 10-Year at 3.5 percent. 30-year fixed mortgage rates will be in the 5% to 5.5% range for most of the year. This is slightly more than where we’re at now, but shouldn’t get out of hand.

4. Housing Market

The housing market has taken a beating in the media for a long time. It will have a rocky beginning with some areas doing well and some areas will do poorly. Overall we’ll see a slow start, but as the spring market starts to come around and stocks stabilize, folks will feel the wealth effect and be more confident about buying. Demographics are also favorable as there is more demand than supply. This points to a good housing market ahead.

Barry’s Prediction: Home appreciation in 2019 will fall in the 3.5% – 4% range. While less than last year, it will still create significant wealth.

We wish you and your families all the best for 2019. We wish you happiness, we wish you health and we wish you prosperity!

The information contained herein is general in nature and based on authorities that are subject to change. Churchill Mortgage guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Churchill Mortgage assumes no obligation to inform the reader of any changes that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or any other advice, and readers should consult their advisors concerning the application of tax laws to their particular situations.