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How to Save $500 a Month: Saving money doesn’t have to hurt. We’ve developed a plan to help you save an extra $500 a month without sacrificing your lifestyle.

Even when you’re good at managing your money, it’s surprisingly easy to let things get out of control.

When you’re young and broke, you can be incredibly creative in finding ways to save. Or maybe when you first catch the “get out of debt and save money bug” this happens to you. You take on roommates to reduce your living expenses. You live without a car, cable, and dining out. And when you start getting out of debt and finally investing, it’s all worthwhile.

But then your income starts to increase. And you may let your expenses inflate along with it.

Maybe it starts with some reasonable moves, such as moving into a more expensive, but more comfortable, home or apartment. Maybe you then buy a cheap car because it’s so much more convenient than public transit. Or maybe you start taking on more expensive hobbies and interests on the side.

None of these things is bad, in and of themselves. But over time, you might find that your new lifestyle is more expensive than you want it to be. Luckily, when you find yourself in this place, getting back to the basics may be easier than you think.

Even if you think you already live quite frugally, chances are likely that you can reduce your monthly expenses. Maybe you can even reduce them by $500 or more per month. Think that’s crazy? Start with these steps, and see how much you could save.

Step One: Shop Around for Insurance

All too often, consumers don’t take this step seriously enough. But you really should shop around for insurance–homeowner’s/renter’s and auto, at minimum–on an annual basis. You just never know what you could save by switching your policies. This is especially true if your financial or property situation has changed recently. For instance, as your car ages, you should pay less for insurance. And if you paid off your car and have money in savings, you might consider dropping the requisite comprehensive coverage. This can save you a bundle!

But even without major changes, you could save on insurance by switching companies. So be sure you’re shopping around at least once per year. And be sure to shop all of your property insurance policies at once, since most companies offer hefty discounts for carrying more than one policy with the same insurer.

Step Two: Optimize Your Life Insurance

Most people, even single people, ought to have a life insurance policy. But if you do have a policy, you may want to be sure you have the right amount of coverage. If your children are older or you have significantly less debt than the last time you purchase life insurance, you may be able to downgrade to a smaller policy. This could save you significantly each month or year, depending on how often you pay your life insurance premiums.

Step Three: Refine Your Food Spending

Too many people spend too much money on food. It’s easy to do, especially if you eat out often. But you can often tweak your food spending slightly to save big bucks.

According to the most recent USDA figures, there’s a huge variance between frugal and liberal food spending plans. As of August 2017, a family of four with two school-aged children could spend $642 per month on a frugal food plan. A liberal plan, on the other hand, could cost over $1,200 per month. There’s your $500 in savings, right there!

Maybe you’re somewhere in the middle, though, and maybe you don’t want to spend time clipping coupons and taking other steps to get your grocery budget down to the “frugal” level. But there are some simple ways to save on food spending, which could save you $500 or more per month with barely a thought. My top tips include:

  • Plan your meals. If you’re not great at meal planning, check out online meal planning services. They cost just a few bucks a month and can help you save hundreds by being more frugal with your food.
  • Shop your pantry and fridge. It’s easy to over-buy food. This isn’t as much of an issue with nonperishables. But check for fruits and vegetables or other perishable items you need to eat before your next grocery store trip. You might be surprised what you can make out of what you already have!
  • Look for sale items. You don’t have to clip, organize, and use coupons to save. You can do it automatically by shopping for items that are on sale. You’ll get the biggest bang for your buck by planning meals around on-sale meats and fresh products.
  • Switch to a cheaper store. My family loves the Aldi chain of grocery stores. They offer generally high-quality off brands, and we automatically spend way less when we shop there as compared with other local stores. Find the cheaper grocery store in your area, and buy everything you can there first.

Step Four: Optimize Your Services

If you’re like most modern consumers, you have a huge variety of services that you use every month. This could include basics like your trash and recycling services or optional items like internet and cable service. You can easily save $100 or more per month by optimizing these services. Here are some service-specific tips to try:

  • Shop around for trash and recycling. If your area offers more than one service, they’re competing for customers. You can use this to your advantage by shopping around. Before you switch services, though, be sure to let your existing provider know what the new offer is. They might just beat it and save you even more money!
  • Consider a different cell phone planWhen you’re in an area with good cell phone coverage, switching to a cheaper provider can make a huge difference. If you’re in a less-covered area, Verizon probably still has the best coverage. But you can often save on your plan by cutting out data you don’t use, downgrading to a cheaper phone, or just calling to ask for discounts.
  • Try a lower internet speed. Unless your family is consistently streaming with multiple devices, you may be able to get by with a slower, thus cheaper, internet service.
  • Get away from cable. With all the online options available today to get your favorite television programs, there’s not much excuse to have cable. If you have to have it, go with the lowest-paid subscription you can.
  • Review your subscriptions frequently. From magazines to apps to other services, we all have a lot of subscriptions these days. Some may be well worth your while. If you read a lot, Amazon’s Kindle Unlimited subscription could actually save you money, for instance. But subscriptions that you don’t actually use will just waste your money.

Step Five: Pay Off Your High-Interest Debts

The first four steps could very easily get you to the $500 per month savings level. But what if they don’t get you quite there? Then use the money that you have saved and pay off your credit card debt.

Right now, the average American family owes just over $8,000 in credit card debt. If you’re paying 15% interest on that debt, that’s about $100 in interest every month! So you could save 1/5 of that $500 per month just by paying off your credit cards. And, of course, on $8,000 in debt, your monthly minimum payments could very well cost $500 per month of itself! Sure, it might take you a while to pay off your credit cards, but each month you save on other expenses could be a month closer to this goal.

Another option, of course, is to transfer your high-interest credit card debts to 0% introductory APR credit cards. This can help you pay down your balances more quickly since your payments won’t be eaten up by interest each month.

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Some say carrying a small credit card balance will increase your credit score. Is that true or an urban legend? We asked the credit experts.

Credit Card Balance Will Increase Your Credit Score

I’ve spent countless hours research credit scores. One of the more interesting assertions I came across had to do with credit card debt. Some financial experts say it’s better to carry a small credit card balance than to carry no balance at all.

I’d actually never read this before, even though I’ve been writing about personal finance for nearly a decade now. But it’s an interesting idea, so I set out to determine the truth about this claim.

Credit Score Formula

If you spend any amount of time reading (or writing!) about credit scores, you’ll find that sometimes getting a straight answer is tough. This happens for a couple of reasons:

  1. Credit scores are highly personal. What negatively affects my score might not affect yours at all. Or what causes your score to increase by 100 points might only increase mine by 25.
  2. Credit scoring algorithms are practically state secrets. Companies like FICO make money from having the most finely-tuned credit scoring algorithms that lenders trust. This means they’ll release general information about their algorithms, which is good for consumers who want to boost their scores. But they tend to avoid giving hard and fast answers about some questions. Plus, algorithms are constantly being updated, so what’s true today may not be true tomorrow.

With all that said, getting answers about questions like this isn’t impossible. We just have to look to the actual sources–places like FICO and the actual credit bureaus–for information. And then we need to apply some common sense to the answers–and variations in answers–that we might find there.

What the Experts Say

First, I dug around the internet to find some different opinions on this question. One Bankrate article said experts tend to recommend carrying a balance equal to 10 to the 30 percent of your available credit, though the lower is better.

The article notes that carrying some balance is important for two reasons:

  1. It shows credit reporting bureaus that you’re actually using your cards, which is a good thing from a credit score perspective.
  2. It can keep your credit card accounts from being unexpectedly closed due to lack of use.

A Time Money article, on the other hand, said that consumers should not carry a balance. This advice is mainly because carrying a balance means paying interest. And carrying a balance can get you started down the road to hefty credit card debt.

A blog post from Credit.com agrees that it’s in consumers’ best interests to pay the balance in full each month.

What the Credit Bureaus Say

So how do we resolve this discrepancy in expert opinion? Let’s go straight to the source: the credit reporting bureaus.

Experian, the bureau with the best online documentation, says, unequivocally, that it’s best to pay off your balance in full each month, if possible. A second Experian article says that any credit utilization ratio under 30 percent is good, but that lower is better.

What About Reporting Timelines?

One factor that plays into this question is when credit card companies report to the credit bureaus. If you use a free credit reporting service, you may notice that your credit card balances don’t all change at the same time. That’s because your credit card company might report your balance at the end of your billing cycle, rather than after you pay off the balance when you receive the bill.

This can be a problem if you use your credit card for everyday expenses, leading to a high balance at any point during the billing cycle.

So What’s the Verdict?

After sorting through the information online, it’s clear that paying off your credit card balances in full each month is the best option. Since we’re disagreeing with the Bankrate article, let’s break down why we think the information there isn’t quite correct.

  1. Credit bureaus only care if your account is open. It’ll be counted as active, even if you don’t use the account frequently, or at all. The credit card companies just report your monthly credit limit and balance, and that’s what counts towards your credit score.
  2. You don’t have to carry a balance for a credit card issuer to consider your account active. You can pay off your balance in full each month when you receive your bill, and the issuer won’t close your account for inactivity–because it’s not inactive.

Some Caveats and Exceptions

If you can’t pay off your credit card balance in full, it’s not the end of the world. You just need to make a plan to pay off your balance as soon as you can. And know that the lower your balance gets, the better your credit score will be in most cases.

Also, I’m not saying that it’s a completely dumb decision to finance a big-ticket purchase on a 0% APR credit card. Let’s say your fridge putters out unexpectedly. You have some money in emergency savings, but not enough to have money left over after you replace your fridge. But you qualify for a credit card with a 0% introductory APR offer on purchases.

Should you charge the new fridge to the credit card? Or should you drain your savings account?

Well, as long as that charge to the credit card won’t max out the credit card in question, charging the fridge isn’t a terrible idea if you meet the following criteria:

  • You have a good track record with managing debt.
  • You can definitely pay off the debt well before the introductory APR offer is up.
  • Your overall debt-to-credit ratio won’t go above 30 percent with this purchase.

In this case, using the credit card isn’t the worst choice you could make. But, again, make sure you pay it off as quickly as possible. And don’t make a move like this if you’re getting ready to apply for a large loan like a car loan or mortgage.

Your Credit Card Strategy

So what’s your best credit card strategy if you’re trying to keep your credit score high? Here’s what you should do in our opinion:

  1. Pay down any balances you’re currently carrying. Use this debt calculator to figure out the best way to pay down your debts.
  2. Make a habit of paying off your debt in full each month.
  3. Keep total balances under 30 percent of your total available credit each month, so that your balance doesn’t show as too high at the end of your billing cycle.
  4. If you do want to net rewards by using your card for most of your expenses, consider paying down the balance midway through the cycle to avoid the above issue.
  5. Only use your credit cards to finance longer-term purchases if you meet the criteria above, and limit this type of activity whenever possible.

Finally, check out our guide on how to get out of credit card debt once and for all.

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We’ve tracked bank rates since 2008. The latest list shows the best bank interest rates available nationwide as of November 2017 (with daily updates).

best bank rates

Since many banks are constantly updating their interest rates offered on savings, money market and checking accounts, this chart should come in handy. On the 1st of every month, this page is updated to show the most accurate rate information available.

Banking Deal: Earn 1.30% APY on an FDIC-insured savings account at Synchrony Bank.

This list is organized in two sections. The first section includes FDIC-insured savings or money market accounts and the second includes FDIC-insured checking accounts. Each list is sorted alphabetically and unless there is a notation listed, the APY rate applies to all amounts.

Current rates

Use the table below to search for current interest rates available on money market accounts, savings accounts, and certificates of deposit. For historical rates, scroll down.

Historical interest rates

Banks that have lowered or raised their rates in the last month are shown in red and green, respectively.

Bank Account Name Tier Notes 11/1/2017 1/1/2017 1/1/2016 1/1/2015
Synchrony Bank Online Savings All No minimum balance 1.30% 1.05% 1.05% 1.05%
Ally Online Savings All No minimum balance 1.25% 1.00% 1.00% 0.99%
Ally Money Market All No minimum balance 0.90% 0.85% 0.85% 0.85%
American Express Bank High Yield Savings All 1.25% 0.90% 0.90% 0.80%
Barclays Online Savings All 1.30% 1.00% 1.00% 0.90%
Capital One 360 Online Savings All Formerly ING Direct 0.75% 0.75% 0.75% 0.75%
Discover Bank Online Savings All 1.20% 0.95% 0.95% 0.90%
GS Bank Online Savings All No minimum deposit 1.30% 1.05% N/A N/A
Everbank Money Market $5k to $10k Includes 1st year intro rate 1.31% 1.11% 1.11% 1.11%

Savings Account Rates

As you review the current and historical rates for savings accounts and money market accounts, keep the following in mind:

  • Fees: The best offers come with no monthly maintenance fees. Even a small fee can wipe out much of the yield, particularly in the current low rate environment. Before opening an account, make sure you understand what if any fees you’ll pay. The best savings accounts don’t charge fees.
  • Minimum Deposit: Many bank accounts require either a minimum deposit or a minimum balance going forward, or both. Be sure you know these requirements as you shop for the highest yield.
  • Tiered Rates: Some, but not all, banks offer tiered rates based on the amount of your balance. While one might assume that the rates go up as the balance goes up, that’s not always the case. Some banks actually lower the rate for balances over a certain limit.
  • Online Banks vs Traditional Banks: As a general rule, online banks offer the highest rates. Many brick and mortar banks offer yields as low as 0.01%. It’s as if they don’t want your money. In contrast, online banks offer yields of 1.00% APY or more.

Checking Account Rates

With checking accounts, the interest rates tend to be lower. That’s generally fine because most people don’t keep a lot of money in a checking account. Any extra money one has should be moved over to a high-yield savings product. That being said, many banks do offer interest checking accounts. Here it’s critical to consider fees, which are more common than on savings and money market accounts.

Finally, if you know of other bank accounts or deals we should include in our list, please leave a comment below.

Trying to decide whether to refinance a mortgage? In our guide, we walk you through how to refinance a mortgage and where to find the best rates.

how to refinance a mortgage

Have you been in your current home mortgage for a few years? Do you see advertised mortgage rates well below what you’re locked in for? And do wonder if you could save money by refinancing?

If you’ve considered a refi on your existing home mortgage, there are a few things to consider. While the process itself isn’t difficult, it is a bit involved. You’ll want to shop around, and you should definitely ask yourself some questions first.

We’d like to smooth the process and help you decide your next mortgage move. Here’s everything you need to know if you are thinking about refinancing your home.

When Should You Refinance?

There are a few key instances in which you would probably consider refinancing your mortgage. Let’s talk about some of them.

Interest Rates Have Dropped

Following the housing crash in 2007-08, mortgage interest rates began to plummet. They reached an all-time record low of 3.31 percent on November 22, 2012 before trending back upward. Then, in June 2016, they dipped again, reaching as low as 3.56 percent.

Last month (August 2017), the average mortgage interest rate was 3.88 percent. Let’s say you bought your home eleven years ago, in July 2006, when the average interest rate was 6.76 percent. That’s a difference of 2.88 percent, and you should definitely look into refinancing your rate. You’ll certainly save yourself a pretty penny in the end.

But what if you think you could get a rate today that’s only better by a percent or two? Is that worth the time, effort, and money involved with a refi?

Well, even 1-2 percent can make for some serious savings on a mortgage. Just look at this comparison:

As you can see, a 30-year mortgage for a $200,000 home (with a $20,000 down payment) will cost you $177,840 in interest alone if your rate is 5.25 percent. However, if you were to lower that to 4.25 percent, you’d only pay $138,600 in interest (a savings of $39,240). And if you snagged a 3.25 percent rate, you’d only pay $101,880 (which means $75,960 saved).

That “only a percent” or two actually goes a long way.

We will talk about how to calculate the exact savings in just a bit. But for now, know that if interest rates have dropped, refinancing your home is at least worth considering.

Your Credit Score Has Improved

As you are surely already aware, your credit plays a role in determining the mortgage loans and rates for which you qualify. So, if your credit has changed for the better, a refi is worth considering.

When you first took out your original home loan, your credit history at the time was a significant deciding factor. Your lender used it to approve your loan and decide which interest rate they wanted to offer you.

In the years that have passed, have you paid off debts? Increased card limits? Have negative reports been removed from your credit? If so, your credit has likely improved and, in turn, you’re probably eligible for a better rate than you were when you first obtained your mortgage.

You Want to Lower Your Monthly Payment

One reason that some folks refinance their mortgage is to lower their monthly payments. This isn’t always the wisest decision, as it typically requires extending the mortgage length. However, in some cases, it’s necessary.

For example, let’s say that you’ve been in your home for ten years (with an original 30-year mortgage) and recently determined that your payment is too high. You’ve been slowly paying the debt down over the past decade, but the monthly bill has begun placing a strain on your budget. You’d like it lowered, but what can you do?

Well, you can refinance the now-reduced balance, with 20 years left, into a new 30-year mortgage. This will spread the remaining balance out over a longer period of time, lowering your monthly payments.

You can make this a smarter decision by also working to secure a reduced interest rate. However, you should be aware that, over time, you’re likely going to pay more by going this particular refinance route. As mentioned, though, it’s sometimes a necessity, and is something to consider if your monthly payments have become unmanageable.

You Need Cash

Some borrowers will consider a mortgage refi if they want to get cash out of their home’s equity. This method is called a cash-out refinance, and it is different than a HELOC, or home equity line of credit.

With a cash-out refinance, you’ll be refinancing the home for more than you currently owe, in order to pocket the cash for some other use. This is a route you might consider if you need money for a home remodel or the like.

Let’s say that you live in a home worth $300,000, but you only owe $200,000 on your mortgage. (In this case, you have $100,000 worth of equity built up in the home.) You need $60,000 to build an addition onto the back of the house, and decide that using your home’s equity is a good idea.

You have two options: cash-out refinance or HELOC. With the cash-out refinance, you’ll take out a new mortgage worth $265,000, then use $200,000 of that to pay off the original mortgage. In the end, you’ll only have one note on the home and will pocket the $60,000 (approximately, after closing costs and such).

Conversely, a HELOC involves taking a second loan out against the equity of your home. This $60,000 (or whatever number) line of credit could be taken out with your original lender or a new one; it doesn’t matter. Keep in mind, though, that if you spend against that line of credit, you will now have two monthly payments: one for the original mortgage and one to repay the HELOC.

HELOCs typically have higher interest rates compared to refinanced mortgages. However, while a cash-out refinance is simpler in terms of only managing one debt, a benefit with the HELOC is that it doesn’t have closing costs.

Before you decide to use your home’s equity as a source of cash, be sure to do the math. You may end up costing yourself more in the long run (and losing the security of your home’s built-up equity) in the process.

Will You Save Money?

The biggest question when considering a mortgage refi, for most people, is, “Will it save me money?” While the answer is different for everyone, there are a few key factors to consider when doing your calculations.

Can You Do Better?

First, determine whether or not you can get a lower interest rate. If that’s your reason for exploring a refi, you need to know if it’s the right time.

Look at recent trends in mortgage rates and how much the current advertised rates differ from your existing rate. You can even apply and see what you qualify for through a few different lenders. There are mortgage aggregator tools available (to view multiple lenders at once), or you can just shop around.

Get up-to-date credit reports and scores (for free!) to know where you stand. If there are credit card balances that you can pay down or negative reports that are about to fall off, it’s worth holding off on your refi for a few months. That way, your credit is in the best place it can be in before you apply.

Also keep in mind that if you have multiple lenders pull your credit within the same 14-day timeframe, it will only count against your credit report once. This “rate shopping” time frame can go as high as 45 days with some FICO scoring models. But the older models (which some lenders still use) only give you 14 days. Since you never know which model a potential lender will use, keep that in mind.

Gather your resources and shop away.

  • Check LendingTree for the list of mortgage rates from preferred providers

Breakeven point

To decide whether refinancing your mortgage is the smartest financial move, you’ll need to know your breakeven point. As the name suggests, this is the point at which you will break even between what a refi costs you and how much it will save you. If you intend to sell your home before this point, refinancing is a waste of time and money.

In order to determine your breakeven point, you’ll need to know your loan origination fee. While this may vary from lender to lender, it’s typically around 1% of the loan total. So, if you’re refinancing your home for $200,000, you can expect your loan origination fee to be approximately $2,000.

Once you know that and have a general idea of what your new interest rate would be, you can use a mortgage comparison calculator (like this one) to see when your savings will be realized. It will compare your original (current) mortgage loan with a new, refinanced mortgage to see if and when you’ll save money.

It will show you your breakeven point, as well as the point at which you’ll stop seeing savings (if you have too long of a refinance term, for instance). That way, you know how long you should refinance your home for, so you can avoid throwing money away.

refinancing breakeven analysis

Deciding whether or not a mortgage refi is right for you is a personal decision. It depends on your credit score, how much you owe, current rate trends, and your reason for refinancing.

However, by doing a little bit of homework–and some math–you can ensure that you make the smartest financial decision for your family and your home.

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