Debbie has nearly 20 years of investigative experience and journalism on topics of insurance, mortgage, and financial advice.

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Money Strategies with Debbie

TDD 102 | Using Your Retirement Money

Using Your Retirement Money: Processionary Caterpillars And The Wealthy Barber Book Explained

TDD 102 | Using Your Retirement Money

 

Even without knowing exactly how to get there, everybody has at least a vague idea of what they want to have for themselves by the time they retire, but whatever it is, don’t get cocky. For many people, using your retirement money might just be synonymous to losing it, so you have to be careful about where you want to channel those funds. “Dollar Diva” Debbie Bloyd asks you to consider where you’re going to be using your retirement money. Yes, you’re building a future for yourself, but don’t lose sight of the path because you may not even notice it crumbling right before your eyes. You’ve got to be smart: make smart choices with your money so that retirement can ultimately be that much closer. Remember, if you take a little bit of caution, you can avoid a whole lot of regret in the end.

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Using Your Retirement Money: Processionary Caterpillars And The Wealthy Barber Book Explained

Capacity To Adapt

We want to talk about accomplishments. I’m here to make you successful with your money and successful in life. This was a great story that I heard and maybe you can learn something from this. This is a great activity verse accomplishment, The Processionary Caterpillars of Life. I don’t know if you’ve ever heard this story but it meant a lot to me when I heard it several years ago. I’ll let you come up with the moral of the story. As people, we expect our activities in life to be purposeful. The birds of the air and the fish of the sea must resort to instincts deep inside their diminutive and primitive brains to conduct their activities. We are different. We have the capacity to reason, to plan and to adapt. This ability should make us unique among the animals of the world. Unfortunately, we often resemble unthinking lower forms of life.

Case in point, the processionary caterpillars. The noted French naturalist, John Henry Fabray, studied this unique little furry insect in great detail. What makes this caterpillar special is its instinct to follow in lockstep with the caterpillar in front of it. This behavior not only gives the caterpillar its name but also its deadly characteristic. Fabray demonstrated this unusual behavior with a simple experiment. He took a flowerpot and placed a number of caterpillars in a single file around the circumference of the pot’s rim. Each caterpillar’s head touched the caterpillar in front of it. Fabray then placed the caterpillar’s favorite food in the middle of the circle created by the caterpillar’s procession around the rim of the flowerpot. Each caterpillar followed the other, thinking that it was headed for the food. Round and round went those silly insects for seven days.

After a week of these mindless activities, they started to drop dead because of exhaustion and starvation. All that they had to do to avoid death was to stop the senseless circling of the flowerpot and head directly toward the food. It was less than 6 inches away from those ever-circling crawlers. However, the processionary caterpillars were locked into this lifestyle and could not change their mindless behavior. Human beings are different from caterpillars. We alone have the ability to change our direction in life or do we? We often confuse motion with meaning, and activity with achievement. We can all too readily get into ruts, which calls us to dysfunction at work, school or home. These ruts can become vicious circles, which don’t get us any further than the processionary caterpillar goes on that flowerpot. We find ourselves resembling the processionary caterpillar more than we would like to first think or even want to.

If you fear that you share some of the styles of the processionary caterpillar, here are three things you can do that can get you out of that senseless circle. Number one, drive to your destination by a different road next time. As you go a different way of work, look at the site. You will discover an entire world out there you might never have seen. Blaze new trails. Number two, be adventurous about your approach to life. Try an ethnic restaurant sometime. Go to a music concert or movie that isn’t your normal fare. Dare to be different. The best thing that could happen would be that you would have expanded your horizon. Number three, have you broken some of the habitual patterns of activity? Look at your work, school and interpersonal relationships. It’s important to try exploratory wings on things like types of music you listen to or the way you get to work just to try something different.

Let’s think about this. I’ve had this article for years, but it all holds true. How many of us do the exact same thing with our money? If we’re not getting to where we want to be with our job, with our relationships, with our money, it’s time to make a change. I know many people that have come to me for help, whether it’s with their investments or their mortgages and they keep doing the same thing. They keep running their money the same way. They’re getting the same results, but they don’t like those results. You too can change. You just have to quit being like that caterpillar and think outside of the box. If you’re going to think outside of the box, you might want to pick up a new book to read. I’m going to give you the summary of it, but you might want to read it for yourself. It’s called https://zacharyelementary.org/presentation/democracy-history-essay/30/ non rx ed drugs arthur danto the artworld essay scholarships follow site see public health research topics papers enter amoxil reaction https://explorationproject.org/annotated/happiness-and-life-essay/80/ ielts academic reading past papers follow url how much is cialis 5 mg at walmart get link https://teamwomenmn.org/formatting/sociology-essay-thesis/23/ https://heystamford.com/writing/buying-a-book-report/8/ https://chanelmovingforward.com/stories/help-with-my-professional-descriptive-essay-on-hillary-clinton/51/ https://cadasb.org/pharmacy/dosage-viagra-tablet/13/ https://servingourchildrendc.org/format/focus-doing-coursework/28/ 100 word essay on responsibility government solved assignments ignou could you help me with my homework go to site https://leelanauchristianneighbors.org/disciplines/best-admission-essay-editor-service-au/57/ opinion paper samples https://homemods.org/usc/cause-and-effect-essay-about-pollution/46/ trusted online pharmacy no prescription lasix effect on blood sugar go to link dissertation binding sheffield cheap analysis essay ghostwriters sites au does levitra show on a test good beginning words for essays The Wealthy Barber. This article was back in 2009, but the book has been around forever.

It’s quite simply the best financial self-help book. It’s 211 pages. It’s sold over millions of copies and it’s easy to understand. It’s a very quick read. The story is some young people in their twenties, perhaps in their 30s, need help with their personal finances. They’re directed to a local barber who’s known for his financial wisdom. The implication is if someone can become wealthy on a barber’s salary, the rest of us can as well. Their monthly meetings included plenty of humor and character development to keep it interesting. It includes wisdom on savings, wills, life insurance, retirement, housing, investing and taxes. Let’s get started. Pay yourself first. I know we’ve covered this before in lots of my talks. When you get your first paycheck, pay yourself first. Invest 10% of your income. This 10% doesn’t include retirement. If you do that, that’s 20%.

Every time you get a paycheck, move it over to the savings account, 10% of it, and then take another 10% and put it into an investment. Invest 10% in mutual funds. Start young, putting the first carefully selected mutual funds, not buying and selling individual stocks. That’s way too risky. Funds and fund managers do all the work for you. You have to find some good fund managers like American Funds. There are all kinds of funds out there that I place and other people place as well. You can even do this yourself, but you’re betting on your future. Whether you choose a fund, look for funds with top-notch fund managers. Find the fund that performs consistently and better than the other funds. There are all kinds of magazines that you can look at, websites, SmartMoney, Kiplinger’s, Forbes, Money Magazine and also Morningstar. Morningstar rating services got great statistics and advice.

You choose a fund with low commissions, generally, no load and no upfront fees. Index funds beat the vast majority of managed funds over time. Anyone can buy index funds. You can add real estate later if you saved up a substantial amount of money in your mutual funds. You need to be divested. You need to have various investments in different little buckets. Let’s say you’ve got your work bucket, your retirement bucket, your savings bucket, your real estate bucket. When you buy your first home, you’re already investing in real estate. Real estate is always a great way to go. You need to find how to buy the property well. I bought a property in San Antonio as an investment and I got into it at about half price. The people wanted to dump the property. There was a renter in there and it worked out great. Sometimes you have to be in the right place at the right time, but you’ve got to start with real estate agents that are in the know.

Sometimes properties never even make it to MLS, where most of us shop on Zillow and look at homes. There are a lot of things called pocket listings out there in real estate. That means that they’re not in MLS. Agents have it and they keep it in their pocket. They talk to a few people, a few other agents and a few of their investors about it. You want to become one of those investors. It’s better to pay off your non-tax deductible debts than to put money into other investments. Let’s say you’re carrying a balance on your credit card and you’re paying 15%, 20%, 25% on that balance. You need to pay that off first before you make your investments. A quote from the book is, “Wealth beyond your wildest dreams is possible if you follow the golden rule.”

You need to build the future without killing your present. Click To Tweet

This is the golden rule. Invest 10% of all you make for long-term growth. If you follow that one simple guideline, someday you’ll be a very rich person. Ten percent in long-term growth means stuff that you can’t touch like IRAs, 401(k)s, mutual funds and don’t touch them. By saving 10% of your pay, you virtually guarantee yourself financial freedom later in life. Only a fool would say no to that. Start now and don’t stop. Mutual funds have a low PITA factor or Pain In The Ass factor. You invest it and you let it sit. The only thing worse than a bad investment is a bad investment made with borrowed money. There are two times in a man’s life when he should not speculate. When he can’t afford it and when he can. That’s from Mark Twain. That means no matter how much money you have, you don’t want to take it for granted and spend it willy-nilly, invest it on scams and high-risk things unless you’re willing to take the loss. You need to get a will and you need to purchase life insurance.

These are two things the books talked about. You need to get an up to date will, even if you’re single. A living will express your desires about being kept alive by artificial means. A regular will says who gets your stuff once you pass away. If you have investments, 401(k)s, IRAs, life insurance, you’re going to designate a beneficiary. That doesn’t go through probate, that goes directly to your beneficiary, whoever that is. For me, I have real estate. It goes directly to my kids. It doesn’t have to go through probate because I put them on the documents with me. I also do that with my IRAs and 401(k)s. They’re listed as my beneficiaries. That means like the insurance money on my death benefit, they will receive that money. They don’t have to wait on a will. Purchase renewable and convertible term insurance. Renewable means that you can renew it without taking a physical when your term expires.

Convertible means you can convert the face amount of the policy into any cash plan sold by an issuing company without proving insurability. If you got your insurance policy at 30 and you had a stroke at 45, this will be perfect for you because you can convert it without having to take another physical. Stroke, cancer, heart attack, these are all things to make you less insurable, if insurable at all. You can shop for best insurance companies. I am an insurance salesperson. I work as an independent. I have a license to do business with clearinghouses, which means that I get to quote like an independent insurance agent would be at a P&C. I get to quote any of the companies. I go through great big companies that helped me fine-tune the policies, who you are, what you’re looking for, and they shop all the carriers to find that the best thing for you.

You need to plan for retirement. You need to build the future without killing the present. Saving in retirement is in addition to the 10% of savings and investing in chapter four that he talked about. How much do you save? On the positive side, your house will hopefully be paid off. Your children will be independent and you won’t need life insurance. A lot of people dropped their life insurance when their kids get out of college and they convert that into something else. Maybe it’s long-term care for them. Maybe it’s money spent on investments, but medical bills will escalate. You may need to care for your aging parents and inflation will keep the cost of living escalating. You need to plan on at least as much as you live now per year and then add 3% a year. If you live on $70,000, add 3%. That’s what it’s going to be from every year on.

Invest As Much As You’re Allowed To

Invest as much as you’re allowed to by law in the IRA, which is an individual retirement account, and place that in a good mutual fund so it can grow tax-free, significantly increasing your gain over time. Contributions are also tax-deductible. If you’re self-employed, you need to set up a cue plan or a SEP-IRA plan. A SEP is Simplified Employee Pension. It allows both employers and employees of independent business owners to set up a contribution that’s deductible into the IRA. If you’re not self-employed, contribute to your employer’s 401(k) plan even if they don’t match it. Some of them matched the first 3% or the first 6%. You need to talk to your CPA about that and also talk to human resources at your company.

If you want to become wealthy, you must have your money work for you. The amounts you get paid for your personal efforts are relatively small compared to the amount you can earn by having your money make money. That’s compounded interest. Make the most of your home. Sometimes it makes sense to rent. Sometimes it makes sense to own. It depends on the market you’re in and what you’re doing with the rest of the money. Over the years, I’ve watched a lot of people buy lots of things investment properties, and then as they get ready to retire, they will gradually sell off a property a year or the income. They’re getting passive income with a rental property, with renters being in there. You have to deal with the renters, redoing floors, putting up fences, having a management company, take care of all that for you or doing it yourself. You need to save on taxes by getting a CPA. I know a lot of people think they can do it themselves with whatever the tax plan is that they’re familiar with, but there’s a lot of ways to structure your life. If you get the help of a CPA and a financial planner, it will put you in a better position. Things that you don’t know about.

The problem with money is we only know what we know. We have no idea what we don’t know unless you ask. With all the internet, all the knowledge is at our fingertips, but how do we apply it to our own lives? I can’t tell you how many people come to me as first-time home buyers and they say, “I know nothing about owning a home.” How can that be? The internet is there. There are videos, tutorials and there are books. There is everything, yet they don’t want the information until they think they’re ready for the information. One man called me and he was saving up 20% to put down for a home because that’s what he was told he needed. No one even told him about the 3.5% on FHA loan or a 5% on the conventional loan. He honestly thought he needed 20% in order to go looking for homes. Had he asked more people the right questions or even Google it, he could have found better information.

One of the things that this book talks about that I talk about with my clients, and you think that people in their 40s and 50s would get this, but they don’t is have an emergency fund. That means set up money on the side that you don’t touch for emergencies. You might want to put it in a high varying interest rate credit account, maybe online where you can’t touch it. That’s money that you can get at if you call in and wait three days to get your money, but you may be making 2% on it. I know that doesn’t seem like a lot, but that’s more than normal banks do. You need six months of living expenses set aside that you don’t touch. If you don’t do anything else this year, establish an emergency fund. With many emergencies going on in our country at one time, a lot of people are living paycheck to paycheck, job to job, week to week.

They don’t have any emergency funds set up. I don’t want to say that all people waste money, but many people are not frugal. They have their $5 Starbucks every day. They eat out lunch every day. They don’t think about ways to cut costs. Eating at home can save you a lot of money. A lot of people don’t like to do that because of convenience. I think it’s time we start over and readjust what our goals are. If those goals are to save money and be financially free, we’re going to have to start doing some of these things. We need to keep learning. You need to make sure you have disability insurance and adequate life insurance. These are all important things that a lot of people miss.

TDD 102 | Using Your Retirement Money

Using Your Retirement Money: If you desire to show support for your friends by helping them financially, do not do so in a way that brings their burdens unto you.

 

I have another book for you to read. It’s called The Richest Man in Babylon by George Clason. It says, “The more we know, the more we may earn. The person who seeks to know more of their craft is capable of earning more.” Zig Ziglar always said, “You can make everything you want to make by helping other people get what they want.” I’m a helper in the financial world, whether it’s investments or mortgages, I help. Life insurance or long-term care, I help. Because I helped, I do okay. I’ve got two kids in college that I have to support and me. I think I’ve become more educated, taking more classes, taking more licenses on so that I can be of service to people and talk better to people like you that don’t know the ins and outs of life insurance, health insurance, long-term care and mortgages.

You cannot arrive at the fullest measure of success until you crush the spirit of procrastination. A lot of people keep putting it off. I know people in their 50s that have put off and it’s too late. By the time they get to be 65, 70 their health is bad. They can’t get long-term care insurance. They can’t get insurance of any kind. There are five laws of gold. Number one, gold comes easily and increasingly quantity to the person who saves at least one-tenth of their savings. You’ve got to save money and then money will start coming to you. Gold labors diligently and multiplies for the person who finds profitable employment. You keep working and working. You’re going to get paid for your knowledge. Gold claims to the protection of the person who invests their gold in wise people.

Make wise investments. I’ve loaned money to people from time to time and it’s never a wise investment. They need to put themselves in that position, not take it from you. Gold slips away from the person who invests golds into purposes to which they are not familiar. Let me tell you a quick story about my dad. He was great in the oil business. He was a CPA, part of the tax world of oil companies. He was a vice president of a very big, old company and when he retired, he decided to take about, $500,000 of his savings. He bought a seafood restaurant in the middle of Phoenix, Arizona. He didn’t buy an existing restaurant that was up and running. He wanted to make one. He hired an architect and built a ship in the middle of this busy street that he thought would be a great place for a restaurant. He is not a restaurant guy. He didn’t even go out to eat that much. He’s not a great cook. He had to hire a chef and staff. He had to hire a manager to manage it all because he was investing in something he knew nothing about. You can figure out what happened. He lost it all and a lot of more money.

People keep putting money after money into their dream. Their dream isn’t anything they know about. I’ve watched so many people retire and then decide they wanted to open a restaurant, open a company, whatever it is that they want to do. It takes a large investment to start a business. They know nothing about it. Usually, these are the people that don’t want to buy into franchises that are tried and true. They want to do something on their own. Number one, they get taken. Number two, they have no idea what they’re doing. They have to hire people educated in that area of which they still get taken. For your benefit, don’t start down a road you know nothing about with your retirement money. That’s a bad idea. Don’t go please the person who tries to force it into impossible earnings. They say, “I’m going to invest my money, but I’m not going to take less on it than 20% interest every year.” You’re always looking for the short, fast fix. That is never going to win. You may win once or twice but it’s like Vegas, you’re going to lose more than you win. If you desire to help a friend, do not do so in a way it brings their burdens unto you.

A Little Caution

There are many ways to help people. You don’t have to choose the ways that restrict your time, money, energy or ability to care for yourself. The wise lender always has a guarantee of repayment should the investment go poorly. Above all, you should desire safety for your money. Better a little caution than a little regret. Protect yourself with insurance. You cannot afford to be unprotected. You’re protected with your homeowner’s insurance and your car insurance. Maybe you have a self-employed job like I do. You need disability insurance. What if I can’t work? How am I going to replicate my salary if I can’t work? If it’s me and I’m not married, how am I going to do that? Also, life insurance and long-term care insurance, these are all things that protect you. You say, “I can self-insure. I have plenty of money.” Most adults that are going into retirement think they have enough money, but then they get to 70 and things have gone wrong.

Maybe their house didn’t keep appreciating. Maybe they had a health scare and that depleted maybe $400,000 or $500,000 and they’re left with, “How am I going to make it from 70 to 90?” Don’t let this be you. The soul of a free man looks at the world as a series of problems to be solved. Meanwhile, the soul of a slave whines, “What can I do?” You can always change your situation. Do not live beyond your means? No man respects himself if he cannot repay his debt. Where is the determination than a way can be found? A lot of people want somebody else to do something for them. They’re not willing to do the hard work themselves.

I wasn’t around my parents after I was about 21 and I had to do everything myself. You say, “That’s so sad that you don’t have a family and no one to depend on.” It’s sad but it’s made me independent. I don’t have anyone to turn to. I manage people’s money for a living. I take care of others. That puts you in a very powerful position. There’s probably no situation that I can’t find my way out of or find a solution to. I’m not saying they’re all pretty, but I’m saying that when people come to me and they want to maybe buy a house, they want a $400,000 house but they can only get approved for a $250,000 house. Their question is, “Debbie, this is what I want. How can I get it?” “You need to make more money.” They look at me and laugh. I’m like, “Spend less or do both.”

That’s all there is. You have to make more or spend less or both to get to where you want to go. If you live in debt, you live on 70% of what you make. Save 10% for yourself and use the 20% to repay your debt. Money accrues surprisingly quickly when your debts are gone and you have discipline and consistency. Hard work is the best friend you’ll ever have. I hope this was motivational. I try not to lecture too much when I talk about money, but a balance sheet has assets and liabilities. The goal in life is to have more assets and liabilities. If you have questions about this or anything else that I talk about, please email me or call me. Let me give you my phone number. It’s (979) 220-3018 or my email address is DollarDivaDebbie@Gmail.com. Thanks so much.

We’re talking real estate. I’m in the mortgage business. I see a lot of things happening in the real estate market. Depending on what part of the country, we always say it’s location. No matter how many times I’m interviewed on national shows and they ask me about the interest rates and the housing market and what I expect, it does come down to location. We can now divide that even into segments of the community that may be part of the housing problem. We’re talking about Baby Boomers are struggling to downsize and it could create the next housing crisis.

Don't invest in something you know nothing about with your retirement money. Click To Tweet

I was born in ‘64 and they say I’m the last year of a Baby Boomer. I don’t think I’m a Baby Boomer at all. I do not fit into the same category as 70 and 80-year-olds, but I can see where the problem lies. These are people around my age doing crazy things that they shouldn’t do, but it’s not crazy to them. When we look at Baby Boomers, this is a unique generation of people and we’re going to see more problems with the way they would live their life. Every generation is a little bit different. Millennials are different than Gen X-ers or whatever. One of the things with Baby Boomers is they were the first segment of the population that had credit cards readily available and got to deal with debt. They also got to buy the newest, greatest, latest craze of whatever it is and had a lot of disposable income or they made it look like it.

A lot of people have set in their minds of any age who they are and what their value is based on what they own. This is something that we talked about in church. This is something that we talked about in investment meetings. I find myself talking to a lot of people about where they think they should be, where they’re at and who they are. It all comes down to money and their thoughts about money. Some people hoard money because they never had it growing up. Other people freely share their money because they know they can make more. I’m one of the latter. I freely share my money because I’m still earning money. I can recruit from a lot of it. Some of my clients have become awfully selfish with their money as they age because they’ve made all their money. They’re stuck on, “This is the most I’ll ever have and it has to last.” They have a different outlook.

A lot of people buy a nice house. I’m not against nice houses. I love nice houses. What happens with a nice house was they talk themselves into needing that nice house. A lot of people buy a house that they truly can’t afford with rooms that they don’t need to impress people that they don’t know. You can see this everywhere, whether it’s the cars, the clothes, the bags. A lot of people live to impress others and they’re living beyond their means. A lot of people spend nearly half of their household income on rent or other housing-related expenses and this isn’t good for them because they’re not saving any money for a rainy day. A lot of people look for homes, but there’s nothing on the market that’s affordable.

They want to live closer to someone. They want to be closer to work. They want to be in a certain neighborhood. This is a problem with our aging adults that are trying to age in place. A survey of Home and Community Preferences AARP found out that 76% of Americans ages 50 or older prefer to remain in their current home and 77% would like to live in their community for as long as possible. However, just 59% of older American thinks that they’ll have to stay in their community, either in their current home or in different home because of the requirements of money it’s going to take to live there.

Aging in place versus downsizing, that’s what we’re talking about. A lot of my clients have downsized and that’s the smart move to make. You’re using up a lot of income to buy rooms that you’re never in or a second story of a house that you’re never in, never used or you use once a year when the family comes over. You need to restructure that money and put it to use in other places as you age. By 2016, there were roughly 74.1 million Baby Boomers. These are people born between ‘46 and ‘64 in the US according to the US Census Bureau. By 2030, when all Baby Boomers will be between 66 and 84, the census predicts Boomers numbers will drop to 60 million people. As Boomers age, an alarming trend has emerged. They’re entering their golden years with mortgage debt. I can’t tell you how many people it’s true for when they call me to talk about a reverse mortgage. Americans over the age of 60 are more than three times likely to carry a mortgage debt in 2015 compared to 1980. Much of the increase in the senior’s mortgage borrowing is in the households below median-income assets with no pensions. That’s scary.

That means that more seniors are digging into their house, keeping it at a mortgage. Maybe they had it paid off, but due to a health concern, they had to go back, get an equity loan to pay off bills or long-term care. The only nest egg they had to go into was their home. Generally, past generations have aimed to have their mortgage paid off before retirement, but not this generation. Carrying mortgage debt may offer an explanation as to why many Baby Boomers prefer to stay in their current homes. A lot of them can’t find something that they like less than what they’re living in because they have such a narrow view of what they have to have and why they have to have it. Aging in place can be harder if the homes aren’t equipped to meet future needs. That’s why I see a lot of people are happy to do remodels, to make the doorways wider, maybe to make a slope instead of a step. Wheelchairs have to be able to go into showers now. They have to have ramps.

These are all the things that are going to be changing in their homes. As they pass away, younger people have to come in and make the changes to those homes and renovate them. There is a growing link between housing and healthcare and being able to stay in your home longer. Making your house accessible for in-home healthcare is ideal, but this is harder to manage than people think. It does cost money and you have to tap into your equity to stay put. Mobility and health issues pose the greatest barrier to seniors that want to stay in their current homes. Many of these homeowners need to add amenities such as bathroom grips, walk-in showers and wheelchair ramps.

Most of these improvements are simple, but when you start redoing a bathroom or a kitchen, money can add up quickly. Seniors who own their homes outright have significant home equity. They usually borrow against it to help that. They do that with the home equity loan, but they still have to pay that money back. That’s why the reverse mortgage business is coming into place so much nowadays. You can get a reverse mortgage and purchase a house that’s smaller with less money and then you can use a reverse mortgage to access that equity, take it out and never have to pay it back. That’s the goal. There is a home equity line. There’s a HELOC loan that works like a revolving line of credit. There’s VA financing if you’re a veteran and reverse mortgages. All of these things help the homeowners stay in place longer.

The national average for a 30-year fixed-rate mortgage is going to vary. The rates are between 3% and 4%. This is recorded at the end of March 2020 and the market goes up and down quite quickly. On our rates right now with the uncertainty of other things, there is a limited supply of home along with rising prices and this is changing the way neighborhoods ebb and flow with age. A lot of the desirable places that people would like to renovate and cute little communities. They want to renovate the neighborhood. There are too many older people living in place and they can’t get in to renovate the neighborhoods. Those people are not budging. There is good news. With these loans, people were able to renovate and stay in place.

TDD 102 | Using Your Retirement Money

Using Your Retirement Money: There is a growing link between housing, healthcare, and being able to stay in your home longer.

 

I’ve been in the mortgage business for many years now and we do all types of loans. We do conventional, VA, USDA, FHA, every kind of loan that’s out there, even something called bank statement loans. I’m going to take a break from the normal talk that I do to talk a little bit about this bank statement loan. It’s a unique loan that’s out there for people that are self-employed. Pre-2008, we had stated income loans. That means you tell me how much you make, I don’t look for tax returns. I go on your word and we state your income on the application. That’s been considered long ago a liar’s loan, but we dealt with all of them. It was legal and they were encouraged. If I didn’t do your loan, you’d just go to the next mortgage broker and then do your loan. We all did them. Now we have a bank statement loan for our self-employed borrowers.

The way a bank statement loan works is that you’re able to provide me 12 or 24 months of bank statements with your name on them or your company name on them. What the lender does is they analyze all the deposits coming in and then they divide by ever how many months you have the bank statements for. That becomes your new income. What it does do is it does not take into consideration your expenses or outgoing. This puts my self-employed borrowers in a much better position to buy what they can truly afford, but that doesn’t reflect on their tax returns. Most self-employed people tend to write-off as much as they can. Their CPAs let them so they don’t have to pay tax on it. If they were to truly write on their tax returns what they make, IRS would eat up a lot of their money. They would rather save it and have less of a house than pay it to the IRS.

These bank statement loans came into existence a little while ago and we’ve been using them. You have to be self-employed and have good credit. Whereas a normal rate would be 4% on a conventional loan, they’re probably paying 6%, 6.5%. They would rather pay more money in interest to get a nicer home than to write on their tax returns that they make that much and have the IRS eat up all that money. I want to put that bug in your ear. If you know someone that’s self-employed that could benefit from one of these loans, contact me. My email address is DollarDivaDebbie@Gmail.com or my direct phone number is (979) 220-3018. Thanks for being with me and we’ll be back with more episodes soon.

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