What to Do With That New Empty Room

 

Your student has gone off to college and you have a mostly empty room. Except for their bed and desk. And probably a few boxes of old toys and mementos. So what can you do with it? You’ve probably been thinking about your options for a little while.

So what should you do?

First, figure out if your student intends to come home at breaks and over the summer. If so, you’ll want to keep a bed for them to sleep in. You could look into a convertible couch or a murphy bed or a fold out futon couch to provide a place to sleep without using up much of the space.

Secondly, talk with your young adult. They probably consider that room to be theirs since they grew up in it. Reassure them that it’s still their home. You just want to better use the space in the house and don’t want to leave a room empty for most of the year. This could also help you with empty nest syndrome if you don’t leave the room as a shrine.

You could re-do the room as a spare bedroom and remove most of the personal stuff and repaint in a neutral color.  Then you could rent it out using an online service such as Air BnB and block out the dates when your student will be home visiting. This could provide some much needed income to pay for the college books.

Another idea is to turn it into a home office. Perhaps your company would consider telecommuting a few days a week. That would also save you on gasoline, wear and tear on your car, and dry cleaning those suits. Or perhaps it’s time to look into starting a small business on the side to bring in additional income to go towards your retirement. A small part time business also can provide security if you’re concerned about the stability of your job.

The next idea is to turn it into a hobby room. Remove the carpeting and put in bamboo flooring. Then buy some long desks from IKEA and you have the perfect space for sewing, scrapbooking, model building or whatever you want. If the bedroom has an attached bathroom, you could add in blackout drapes and have your own photography studio.

Our last idea is to turn it into an exercise room. A bamboo floor would also provide a nice springiness for doing power yoga. Use that room as a place to set up home workouts with a TV, yoga mats, dumbbells, kettle balls, resistance bands, etc.

What would you like to turn the extra room into?

Upgrade Your Garage With These Gear Essentials

 

It is easy to clutter your garage with miscellaneous items, but if you streamline the space by getting rid of what you don’t need and investing in some helpful gear, your garage can become an organized and practical space that makes your household more efficient. Deck out your garage with this essential gear and add some functionality to your home:

Purchase a Workbench

A garage is incomplete without a proper workbench. A sturdy workbench will not only store tools, but also creates space to complete those do-it-yourself projects. Most come with built-in-drawers and are equipped with a light to tackle projects after the kids have gone to bed. There are many options available, ranging from the sophisticated to simple.

Install Lighting

To take full advantage of your space, your garage must come equipped with plenty of lighting in order to allow you to work at convenient times in your busy schedule. Poor lighting hurts the quality of the work you are trying to accomplish and if a project requires small parts you don’t want to spend your time searching for tiny items on your hands and knees. If you prefer not to install a mounted light on your ceiling, invest in a portable light, a less-expensive option to create the lighting you need.

Buy a Tool Chest

A garage with tools on the floor and scattered across different surfaces isn’t the best for productivity. This haphazard approach leads to buying multiples of the same tool because you keep losing them in the clutter. A tool chest will keep items organized and save time whether you are working on a small repair or a long-term DIY project.

Purchase Spare Tires

How many times have you realized you have a flat tire and need an immediate replacement? For convenience, always keep a set of spare tires in your garage. Order a reliable tire brand from Tire Buyer to ensure your backup set of tires is of the highest quality. With a little preparation, a flat tire will no longer have to be a major setback in your day.

Add Garage Storage

Is your rake and broom in one corner and your bike on the ground? A functional garage needs proper storage options, like a peg board affixed to the wall. This storage option will accommodate your small tools, larger items and any miscellaneous tools unable to fit in drawers. If you prefer not to splurge on this expense, at least add sturdy hooks on the wall to store a garden hose, lawn equipment or other tools. With items hung up out of the way, your garage will appear clean and neat.

Invest in Proper Safety Gear

If you like home improvement projects, keep appropriate safety gear in your garage. Invest in protective goggles, gloves and masks to protect your face. Keep a small first aid kit handy for minor emergencies.

Upgrade Your Flooring

To give your garage a polished looked, consider adding an upgraded finish to your floors. Coat the cement with epoxy or tile – this will give your garage an instant face-lift and make it look more appealing.

Written by Realty Times Staff

Market Commentary for the Week of August 24th

 

This week brings us the release of six pieces of economic data that may influence mortgage rates in addition to two Treasury auctions and the annual Jackson Hole Fed conference. There is nothing of importance set for Monday, but there are at least two events or reports scheduled every other day of the week. Only one of the reports can be considered very important. However, with so much going on we still could see an active week in the financial and mortgage markets.

July’s New Home Sales data is the first report of the week, coming Tuesday morning at 10:00 AM ET. This report will give us another indication of housing sector strength and mortgage credit demand, but tracks only a small portion of all home sales. The majority of U.S. home sales were covered in last week’s Existing Home Sales report. It usually doesn’t have much of an impact on bond prices or mortgage rates unless it varies greatly from forecasts. Current forecasts are calling for an increase in sales of newly constructed homes from June to July. A larger increase in sales would indicate housing sector strength, making the data negative for mortgage rates.

The Conference Board will post their Consumer Confidence Index (CCI) for August at 10:00 AM ET Tuesday also. This index measures consumer sentiment about their personal financial situations, which helps us measure consumer willingness to spend. If consumers are feeling more confident in their own finances and employment, they are more apt to make a large purchase in the near future, fueling economic growth. A decline in confidence would indicate that surveyed consumers probably will not be buying something big in the immediate future. That would be a sign of economic weakness and should drive bond prices higher, leading to lower mortgage rates Tuesday. It is expected to show a reading of 92.6, which would be an increase from July’s 90.9. The lower the reading, the better the news it is for bonds and mortgage rates.

July’s Durable Goods Orders will be released by the Commerce Department early Wednesday morning, giving us an important measure of manufacturing sector strength. This report tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years such as appliances, electronics and airplanes. Analysts are expecting to see a decline of 0.8% in new orders, indicating manufacturing sector weakness. This data is known to be quite volatile from month to month, so a decline of this size doesn’t raise too much concern about the economy. However, a decent sized decline is good news for the bond market and mortgage rates as it means manufacturing activity is likely softening. A secondary reading the excludes more volatile transportation-related orders is expected to rise 0.5%. The softer the reading, the better the news it is for the bond and mortgage markets.

Thursday’s only monthly or quarterly data is the first revision to the 2nd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. The GDP is the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. This reading is the second of three that we see each quarter. Last month’s preliminary reading revealed that the economy grew at an annual rate of 2.3%. Thursday’s revision is expected to show that the GDP actually rose 3.1%, meaning the economy was stronger than previously thought from April through June. A smaller than expected reading should help lower mortgage rates, especially if the inflation portion of the release does not get revised higher. There will be a final revision issued next month, but it probably will have little impact on mortgage rates since traders will be more interested in the current quarter’s activity.

Friday is a multi-release day with two pieces of economic data set to be posted. July’s Personal Income and Outlays report is the first at 8:30 AM ET. This data will give us a measure of consumer ability to spend and current spending habits. Rising income means consumers have more money to spend. It is expected to show an increase of 0.3% in income and a 0.4% increase in spending. Since consumer spending makes up over two-thirds of the U.S. economy, weaker than expected numbers would be considered good news for the bond market and mortgage pricing.

The second report of the morning will be the University of Michigan’s revised Index of Consumer Sentiment for August. This sentiment index helps us track consumer willingness to spend similarly to Tuesday’s CCI. It is expected to show little change from August’s preliminary reading of 92.9. If it revises lower, consumers were less confident about their personal financial situations than previously thought. This would be good news for the bond market and mortgage rates because waning confidence usually means that consumers are less likely to make large purchases in the near future.
As with the CCI index, the lower the reading the better the news for mortgage shoppers.

There are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. There are auctions several days, but the two relevant ones are Wednesday’s 5-year Note and Thursday’s 7-year Note sales. Results of these will be posted at 1:00 PM ET each day. If investor interest is strong in the auctions, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates Wednesday and Thursday afternoons.

Also worth noting is the annual central banker conference in Jackson Hole, Wyoming. There have been major events to come out of this event in the past while others have been non-factors. Federal Reserve Chair Janet Yellen is not scheduled to speak this year. The conference runs Thursday through Saturday, so we could still see the markets react to something from this event. Any impact on trading or mortgage rates will happen Thursday or Friday.

Overall, I am expecting to see the most movement in rates Wednesday, although Tuesday could be a fairly active day also. We need to watch the stock markets for rate direction only as their significant selling helped bonds to rally last week. Generally speaking, stock strength often hurts the bond market while stock losses make bonds more appealing to investors. Despite the lack of what we consider key economic data, we should still see plenty of movement rates this week. Therefore, please proceed cautiously and keep an eye on the markets if still floating an interest rate.

Cash Out Options for Tuition Expenses

 

You have a large chunk of change due for college tuition, and your savings can’t cover it. What can you do?

You could claim a hardship and withdraw the money from your 401K. But to discourage these early hardship withdrawals, in most all cases the IRS imposes a hefty financial penalty including a 10 percent early withdrawal penalty if you are younger than 59 1/2. Your 401(k) plan should be dedicated primarily to your retirement.

Also, frequent dips into your 401(k) reduce the amount of money you ultimately have available to reap the benefits of compounding and tax deferral. This, in turn, reduces the overall funds for your retirement.

If you really need to use your 401(k) to pay for college, a better option might be to borrow from it if your plan allows loans. Plan loans are not taxed or penalized, as long as you repay the funds within a specified time period. But make sure you compare the cost of borrowing college funds from your plan with other finance options.

Another plan is to consider using a traditional IRA or Roth IRA instead. With these IRAs, you will not owe the 10 percent premature distribution penalty on withdrawals you make before age 59½, as long as the money is used to pay your child’s qualified college expenses.

The good news is when it comes to school costs, the IRS says no penalty will be assessed as long as your IRA money goes toward qualified schooling costs for yourself, your spouse, your children or grandkids.

You must make sure the eligible student attends an IRS-approved institution, however. This can be any college, university, vocational school or other postsecondary facility that meets federal student aid program requirements. The school can be public, private or nonprofit as long as it is accredited.
You can find out if the school is on the U.S. Department of Education’s Accreditation database.

Once enrolled, you can use retirement money to pay tuition and fees and buy books, supplies and other required equipment. Expenses for special-needs students also count. Room and board also count if the student is enrolled at least half time.

Finally, you could also see if you can set up a home equity line of credit. This may be the cheapest way of cashing out to get money for tuition and not affect your retirement. Payments are amortized just like a mortgage payment and are more affordable. Contact your reputable loan officer to find out how much equity you have in your home.

Don't Miss These Homeowner Tax Benefits

  

One of the most useful yet widely misunderstood benefits of homeownership is tax deductions. Tax deductions are a welcome gift from the government, but if you’re renting, they benefit your landlord, not you.

Property tax deduction: Any money you paid during the year you purchase and in the years afterward to local state, county and city property tax assessors is tax deductible.

Mortgage interest deduction: Your mortgage interest on both first and second liens is tax deductible. Any points you paid to obtain a lower interest rate are deductible. Private mortgage insurance payments are also deductible.

Closing costs: Some fees to the mortgage lender are deductible. Ask your tax professional for guidance. You can deduct some moving expenses, such as items for home offices. Save your Hud-1 form and show it to your tax professional.

Home office deductions: If your home is your principle place of business, and you meet other IRS guidelines for home businesses, you can take a deduction on workspace dedicated to your business and no other purpose. You can also depreciate that portion of your home over 39 years. All improvements to the workspace are tax deductible. In addition, your security expenses, phones, internet costs, computers, insurance, and utilities can be deducted or depreciated according to IRS allowances. Percentages and limits apply, so talk to your tax professional.

Energy Star: If you purchased an energy efficient system or appliance for your home and it meets government Energy Star standards, you may deduct a portion of your expenses. Save your receipts.

Property sales deductions: If you purchased a home today, occupied it as a primary residence, and
sold it in two years, you could be eligible for some capital gains exclusions up to $250,000 if you’re single, or $500,000 if you’re married. You can even live in the home two years, rent it out for three years, and still enjoy the capital gains exclusion.

There may be many other deductions out there for you to take advantage of that are associated with your home, so save all receipts throughout the year for repairs, parts, purchases, remodeling, etc. Some allowances and special circumstances apply, so before taking this exclusion, be sure to talk to your tax professional.

Save your tax records up to seven years, because you have to be able to support the deductions you take with documentation such as receipts, credit card statements, cancelled checks, and online banking. Make sure you take deductions and depreciation only for legitimate items.

Remember all the benefits you could be getting in deductions, your landlord is currently enjoying while billing all costs associated with managing the home to you. Wouldn’t you rather do that yourself?

Written by Blanche Evans

Market Commentary for the Week of August 17th

 

This week brings us the release of only four pieces of monthly economic data with one being considered highly important. In addition to the economic data, the minutes from the last FOMC meeting will also be posted. There is nothing of relevance to mortgage rates scheduled for release Monday, so look for the stock markets to drive bond trading and mortgage rates until we get to the start of this week’s activities.

The first piece of data will be July’s Housing Starts is the first at 8:30 AM ET Tuesday, which will give us an indication of housing sector strength and future mortgage credit demand. It usually doesn’t cause much movement in mortgage rates unless it varies greatly from forecasts. Tuesday’s release is expected to show an increase in construction starts of new homes. The lower the number of starts, the better the news for the bond market, as it would indicate a weaker than expected housing sector.

July’s Consumer Price Index (CPI) will be posted early Wednesday morning. The Consumer Price Index is one of the most important reports we see each month as it measures inflation at the consumer level of the economy. As with last week’s Producer Price Index, there are also two readings in the report. Analysts were expecting to see a 0.2% increase in the overall index and a 0.2% rise in the core data reading. Declines in the readings, especially in the core data, should lead to lower mortgage rates since it would mean inflation is still not a threat to the economy and a Fed rate hike may come later than sooner. On the other hand, stronger than expected readings will likely lead to an increase in mortgage pricing Wednesday.

Also Wednesday, we will get the minutes from the last FOMC meeting. There is a pretty good possibility of the markets reacting to them following their release. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy, economic growth and the Fed’s plans for raising short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading. This is one of those events that can cause significant movement in rates after its release or be a non-factor, so be prepared for a move, but not surprised if the impact on rates is minimal.

July’s Existing Home Sales report will be posted late Thursday morning. The National Association of Realtors will release this report, giving us a measurement of housing sector strength and mortgage credit demand. It covers a very high percentage of all home sales in the U.S., but usually does not have a major influence on bond trading and mortgage rates unless it varies greatly from analysts’ forecasts. It is expected to show a decline from June’s sales, meaning the housing sector softened last month. This would generally be good news for the bond market and mortgage rates because a strengthening housing sector makes broader economic growth more likely. But unless the decline is much larger than current forecasts, the report will likely have a minimal impact on Thursday’s mortgage pricing.

The Conference Board is a New York-based business research group that will post its Leading Economic Indicators (LEI) for July late Thursday morning. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. A higher than expected reading is bad news for the bond market because it indicates that the economy may be strengthening more than thought. However, a weaker reading means that the economy may not grow as much as predicted, making stocks less appealing to investors. This also eases inflation concerns in the bond market and could lead to slightly lower mortgage rates Thursday. It is expected to show an increase of 0.2% in the index, indicating modest economic growth over the next couple of months. It will take a sizable difference between forecasts and its actual reading for this report to noticeably influence mortgage rates.

Overall, Wednesday is likely to be the most active day for mortgage rates and Friday appears to be the best candidate for least important. Stocks will probably be a contributing factor to bond movement several days with little key economic data scheduled this week. I believe bond yields are going to be making a move one direction or another very soon. Unfortunately, it is my opinion that the risk of moving higher outweighs the potential gains of floating for a lower rate. Therefore, I would still proceed cautiously if floating an interest rate and closing in the near future.

Should You Invest In a Property When Your Child Is In College?

 

Will Buying A Rental Property Save You Money When Your Kid Is In College?

Do you have a child going off to college soon? Now would be a good time to look into investing in rental property where they’re going to go to college. You don’t have to know where they’re going yet, but you can start planning on what you want to invest and how you manage the rental property.

According to a recent informal survey at Coldwell Banker, a growing number of parents are purchasing real estate for their children to live in while attending college. In fact, over the past two years more than one-third of U.S. Coldwell Banker agents reported an increase in business from parents.

Zillow also felt it was a good idea for parents to buy college homes now instead of paying for dorm rooms or other rentals. According to its numbers, the rising demand for college rentals keeps pushing rent rates up, while home purchase prices are still recovering from their sharp decline during the financial crisis. Additionally, interest rates are still in an affordable range. This combination makes buying a college home an attractive option for investor parents.

“Any college parents who face paying $7,000 to $15,000 annually for their kid’s dorm room or rental over four or more years can redirect those payments into a rental property as a money saver,” said Dan Gooder Richard, author of the book Smart Essentials for College Rentals: Parent and Investor Guide to Buying College-Town Real Estate.

3 Things to Consider If You Invest

Contact a reputable mortgage loan officer to find out how much you can invest. It’s different for rental properties than it is for your primary residence.

• Pick a property with three to four extra bedrooms and rent them to other students.
• Expect and budget for repairs.
• Invest in a college town where high demand for off-campus housing drives up rents.

But buying a college home involves more than simply watching your investment grow and collecting rent. An important issue to consider is, who will take care of the student rental property?

Are you local or are you remote?

If parents live in town, they may be able to manage the property themselves if they have the time and skills for it. This could involve finding and screening additional renters as well as performing repairs, regular yard work and indoor maintenance. Additionally, you’ll want to collect the rent.

Chances are, the property will be out of town.  If you have a more mature student, it’s possible they could handle being the resident manager collecting rent and enforcing rules. However, this is rarely the case especially if the other housemates are all friends.

Most often parents hire a local management company for maintenance and let the kid focus on their studies.

Property management companies can help find and deal with additional student tenants as well as arrange for property maintenance issues, but they don’t come cheap. Although property management fees are tax deductible, you should expect to pay anywhere from 5 percent to 10 percent of your rental income to cover them, according to the NOLO Law for All website.

Taxes and Insurance

Parents should also be aware of tax implications and advantages of investing in college real estate. Tax laws governing second homes can be very complicated. The IRS website has information about how and when you can deduct expenses related to a second home. As always, it’s best to consult a tax professional for advice about your specific situation.

Additionally, talk with your insurance agent to find out what you will pay to insure a rental property. And encourage your renters to get renter’s insurance to protect their personal items.

Easy Fixes For Potential Deal Killers

You’re ready to sell your home, you’ve got a buyer lined up, you’re about to make an offer on that great home down the street, and then… everything falls apart.

“It’s a problem that’s more common than you’d think with home sales: a buyer has made an offer, the seller accepts, and it seems like the deal is done,” said Fox News. “But then something comes along to ruin the sale and it’s back to square one.”

The good news is there are easy solutions that can help save even the biggest deal killers.

Bad Appraisals

“Industry professionals overwhelmingly named appraisals as the biggest obstacle they face in getting deals to the closing table,” said The Real Deal.

The solution? Gather as much information as possible about your home.

Your agent should be providing comprehensive information about comparable home sales in your area. Anything you can add to that—details about homes that sold, updates you have done—can help.

Credit Mistakes

Boo boos on your credit report from years ago are one thing. Running out to make a big purchase on credit the week before you’re set to close is another.

Your loan preapproval is based off your financial situation at the start of your escrow, and actual loan
approval can be impeded by making large purchases (especially ones that cause more debt and monthly payments).

The solution: Wait until after your loan has recorded to make big purchases.

That way you don’t have any chance of derailing your deal. The bonus is that once your mortgage shows up on your credit report, you might also be able to secure interest-free credit lines from retailers like Best Buy or Home Depot.

Bad Home Inspections

When the inspection turns up a few issues, your buyer will probably request you pay for them. Especially with big stuff like roofing problems or water damage. You can choose to say no, which may result in a cancelled contract. And, you’ll have to disclose the issues that were uncovered, which may make it even harder to find another buyer.

The solution: negotiate.

There may be some wiggle room so you don’t have to cover 100 percent of the costs of repairs. Or, do the necessary repairs with your vendors. You may know people who can get you a deal to save you money.

Unpaid Taxes

So, the inspections looked great (aside from the water damage in the closet, which the seller agreed to replace) and the loan is all set to go. But then it turns out there was something else in that closet. Five years of unpaid property tax bills! And you’re just finding out by running title a few days before closing.

The solution: Do your due diligence to make sure you are protecting your interests. If this had been addressed early enough in the process, there might have been time for a negotiation to save the deal.
Make sure you educate yourself to be able to ask the right questions in the escrow process to avoid this kind of tragedy.

Bank Delays

“One of the biggest killer of deals these days is time itself,” said The Real Deal. “Many deals are falling through not because a buyer isn’t qualified for a mortgage, but because it takes the bank too long to approve it.”

The solution: Good ‘ole communication.

A nervous seller may pull the plug on a deal that’s taking too long, especially if they have other options. Keeping the lines of communication open—between buyer’s and seller’s agents, and also between the buyer’s agent and the lender—can help save it.

Tense Negotiations

You have a potential buyer—finally!—who loves your home. Now it’s just a matter of agreeing on a price. But you’re miles away and no one wants to budge. Even though your real estate agent told you from the beginning that your sales price was too high and is encouraging you come down, you just don’t want to take less that what you think your house is worth.

The solution: Listen to your agent

A professional REALTOR® really does know best when it comes to home prices. If you refuse to negotiate, you’ll probably lose your buyer. And when you find another, you’ll be in the same negotiating situation. If you’ve already found another house and are paying for two mortgages, you’re losing money by not selling, even if the price isn’t exactly what you had in mind.

Written by Jaymi Naciri

Market Commentary for the Week of August 10th

This week brings us the release of five pieces of monthly economic data in addition to two Treasury auctions that have the potential to affect mortgage rates. Some of the data is considered to be highly important, meaning we could see noticeable changes to mortgage rates multiple days. Following Friday’s boring Employment report, the markets will likely react heavily to any surprising data.

There is nothing of relevance scheduled to be posted or take place Monday, so look for the stock markets to heavily influence bond trading and mortgage pricing as the week starts. Employee Productivity and Costs data for the second quarter will be released early Tuesday morning. It will give us an indication of employee output per hour. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don’t see this being a big mover of mortgage rates either, but it may influence rates slightly during morning trading. Analysts have predicted a 1.4% rise in productivity during the second quarter and a 0.1% decline in labor costs. A sizable increase in productivity and a larger than expected drop in costs could help improve bonds, contributing to lower mortgage rates Tuesday.

There are two Treasury auctions this week that also have the potential to influence mortgage rates. The first is Wednesday’s 10-year Treasury Note auction, which will be followed by a 30-year Bond auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is good, the earlier losses are usually recovered after the results are announced. Results of sales will be posted at 1:00 PM ET of each auction day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading those days. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher.

July’s Retail Sales data will be posted at 8:30 AM ET Thursday. This report comes from the Commerce Department and will give us a very important measurement of consumer spending. Consumer level spending figures are extremely relevant to the markets because it makes up over two-thirds of the U.S. economy. Current forecasts are calling for a 0.5% increase in sales. Analysts are also calling for a 0.5% rise in sales if more volatile auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate stronger economic growth.

The three remaining reports are all set for Friday morning. The first will be July’s Producer Price Index (PPI) from the Labor Department at 8:30 AM ET, giving us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting a 0.1% increase in the overall index and a rise of 0.1% in the core data. Stronger than expected readings may raise inflation concerns in the bond market and help guarantee a Fed rate hike sooner than later. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond’s future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices, rising yields and higher mortgage rates.

July’s Industrial Production report is scheduled to be posted at 9:15 AM ET Friday. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.3% increase from June’s level. A decline would be considered favorable news for bonds and mortgage rates because it would indicate manufacturing sector weakness and broader economic growth would be more difficult if manufacturing activity is slipping.

The last release of the week will be posted by the University of Michigan late Friday morning. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which projects consumer willingness to spend. If a consumer’s confidence in their own financial situation is rising, they are more apt to make large purchases in the near future. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 93.9 that would mean confidence was stronger than July’s level of 93.1. That would be considered slightly favorable news for bonds and mortgage rates. Good news for mortgage shoppers would be a sizable decline in the index.

Overall, Friday is the best candidate to be labeled most important day with most of the week’s economic data scheduled, but we could see noticeable movement in rates Thursday since it has the single most important release in Retail Sales. Wednesday afternoon could be active also due to the 10-year Note auction. I strongly recommend maintaining contact with your mortgage professional this week if still floating an interest rate and closing in the near future.

Teaching Your College Kids to Budget

 

Recently, USA Today ran an article about a young woman in Atlanta who had $90,000 in a college fund from her grandparents. She spent all of it by the end of her junior year and didn’t know how she was going to pay for her senior year, so she called into a radio show to try to get the host to convince her parents to give her the money. Her parents felt she needed to take responsibility, and the young woman blamed her parents for not teaching her to manage money.

While many listeners were angered by the Kim’s attitude, her spending habits aren’t rare among college students. “Money Matters On Campus” — a 2015 survey conducted by financial aid company Higher One and an education technology company called EverFi — examined spending habits among college students. The study revealed insights into how students struggle with spending. While 62% of four-year students report checking their account balances, only 39% of four-year students use budgets.



So, the habits the students get while in college will impact their credit rating and ability to manage money in the future. This raises an important question – how do we teach our kids to budget money?

Some parents start early with an allowance that is supposed to cover clothes and extras. If the child blows $160 of the $200 on a pair of shoes, then they only get $40 for the rest of the clothes for the year. Even if you don’t let your kids have the actual money, it’s a good idea to talk about what you have budgeted for items like back to school clothes. It teaches the child to think through the consequences and the drive that they have to have the shoes, or the jeans, or whatever they recently saw advertised.

So, say you didn’t start early. What can you do to help your student before they go off to college?  Or back to college. It never hurts to help your older kids have solid financial knowledge either.

Creating the Budget

CollegeInColorado.org has these steps as well as a worksheet.

Pick A Timeframe For Your Budget

Decide from the beginning whether your budget will be set for a month, a semester, or a school year.

List All Of Your Income

In your budget, include all of your potential categories and amounts of income. For college students, these typically include: financial aid(scholarships, grants, work study, and student loans), savings, contributions from parents, and income from a part-time job.

List All Of Your Expenses

Next, list all of your potential categories and amounts of expenses. Typical college student expenses include: tuition and fees, books and supplies, room and board / housing, groceries and snacks, personal care items, transportation or car expenses, health insurance, cell phone, clothes, and entertainment and activities. If you’re not sure what your expenses are, track them for a week, a month, or more. Recording everything you spend can be an eye-opening experience and a great way to find areas to cut costs.

Plan For Emergencies

The unexpected is a part of life. If your car breaks down or you have an unexpected medical expense, you’ll be way ahead of the game if you have money saved in an emergency fund and don’t have to rely on credit.

Save For Big-ticket Items

If you’re planning to move into your own apartment and you’ll need to buy furniture, or maybe your friends are planning a spring break trip, start saving for the expense as soon as you know about it. Revisit your budget to attempt to increase your savings amount. Even if you end up borrowing to pay part of the expense, borrowing less will save money in the long run.

Make Sure Your Budget Balances

Total your income, total your expenses, and then make sure that your budget balances. You want to either break even or have some money leftover. If your budget doesn’t balance, you’ll need to reduce your expenses and/or figure out a way to bring in more income.

Sticking to the Budget

This is the most difficult part for everyone. It’s easy to come up with a budget when you don’t know exactly what the expenses are going to be. The key is to review the budget and how well it’s working out. Perhaps the student found a farmer’s market and was able to purchase their veggies for cheaper then the supermarket. Perhaps the student health center will cover all the medical expenses and they no longer need to budget for that.

So, start with living on the budget for two months and then evaluate and make adjustments. However, it’s important to review the budget monthly to see if you’re staying on track. In addition, small expenses could be adding up. If you’re going to the movies twice a week, you should ask yourself if it’s worth the cost, or if going once a week or twice a month would be better. It’s easy to want to keep up with your friends who may have more money (but probably they’re not budgeting and blowing through their funds too quickly). Catch things before they become big.

And the big question is using credit cards. It’s easy to do. Whenever you pull it out, ask yourself how you’ll pay it off when it’s due. If you can’t, then don’t use it.

If you’ve gotten yourself into a hole, look into a part time job until it’s paid off. Just put your money towards the debt and don’t think of it as another stream of income.



And if you’re wondering what happened to Kim the college student, she agreed to get a part time job and her parents agreed to co-sign a loan. Thank goodness for radio phone-in shows.