Category: Life

Which is Better: Renting or Owning?

December 5, 2018
Budgeting, Financial Planning, Life, Wisdom

You’re moving. You’ve found greener pastures, and are looking forward—a little excitedly, a little nervously—to your new surroundings. You’ll be asking a lot of questions during this time. One of the biggest is, where will you live? To be a little more specific, should you rent or buy?

Here are some questions to ask yourself as you’re weighing your options:[i]

Can you afford to buy a house right now? How much money do you have saved?
How long do you plan on staying in the area?
Are you looking to settle down or do you want the flexibility to travel or move frequently?
Are you handy? Are you inclined or willing to do home repairs or renovations?
What are your goals involving your career and your family?

What are the advantages of renting? What are the benefits of owning? Let’s explore both sides.

Here are reasons why renting is good:[ii]

As a renter, you may have fewer maintenance costs and repair bills. If something that is part of the rental property breaks, it may be the landlord’s responsibility to fix it.
You may have access to amenities, such as swimming pools or fitness centers, that may cost homeowners bundles.
The taxman doesn’t cometh. You won’t get a property tax bill.
A tough housing market may spell bad news for homeowners, but renters are mostly immune to shifts in the real estate market.
You can jump ship relatively quickly as a renter and move elsewhere. You’re responsible for selling your home if you want to downsize or move. If you’re not committed to living in one spot for at least three years, renting may be your best choice.[iii]
If you fall into dire financial straits, you’re not saddled with a hefty mortgage.
As a renter, you don’t have homeowner’s insurance, you have renter’s insurance that is usually relatively inexpensive.
Apartment renters usually have lower utility costs.

Here are reasons why owning a home is good:[iv]

Owning a home is generally a good investment. If you own your home for many years, it may increase in value.
You’re able to create equity. Equity is the difference between what you owe and your home value. With each payment, you build equity. With your house, you can borrow against your home’s equity to meet other financial needs.
You may be able to reduce the amount of income taxes you may owe. Federal rules may allow you to deduct mortgage interest. Tax law has changed so you should consult with a professional tax preparer to learn more.[v] You may be able to deduct more during the early years of your mortgage with higher portions of your monthly payment going to interest.
Making consistent, on-time mortgage payments builds your credit history and may bolster your credit score. Lenders view you as a responsible borrower with a lower-default risk.
You have the freedom to decorate or renovate your home as you envision. You can paint your walls whatever color you want. You can knock down walls, redo floors, lay new carpeting, and design your home to fit your tastes or personality—without seeking permission from a landlord.

As you weigh your options, you can use rent-versus-buy calculators to determine your best financial options. The calculators request you plug in specific information: zip code, target monthly rent, target home price, and available home price. The calculator then shows you which is less expensive, buying or renting. Go to https://www.trulia.com/rent_vs_buy/ for a sample calculator.

Bankrate asks you a series of questions to help you determine your best choice financially. These questions include:

How much of a down payment are you able to make?
How much debt do you have?
What percentage of a home’s value would you be willing or able to make as a down payment?
What is your credit history?
How long do you plan to stay in your new home?
What are the average home prices in the area you’re considering?
Do you plan to itemize your mortgage interest?
What is the state of your budget?

To learn more, go to https://www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx.

We can guide you in making the tough financial decisions. Working with an independent financial professional can help you build a strategy for the pursuit of your future goals.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. This material has been prepared for planning purposes only and is not intended as specific tax or legal advice. Tax and legal laws are often complex and frequently change. Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.bankrate.com/mortgage/renting-vs-buying-a-home/

[ii] https://www.investopedia.com/financial-edge/1112/reasons-renting-is-better-than-buying.aspx

[iii] http://time.com/money/collection-post/2792045/rent-or-buy-my-home/

[iv] https://www.discover.com/home-loans/articles/advantages-of-homeownership

[v] https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law

Teaching Teenagers About Financial Responsibility

November 6, 2018
Budgeting, Guidance, Investing, Life, Wisdom

Financial responsibility may not top the list of unmentionables for conversations with your teenagers, but it certainly may be one of the most important.

Today’s marketplace provides a wealth of alluring financial “opportunities,” many of which may lead the adolescent mind down unsavory paths with catastrophic consequences. Easy credit. The latest (and most expensive) in fashion. The finest and swiftest in high-tech gadgetry. And, of course, the inevitable lure of the automobile.

Good advice, taken to heart, may help steer your teenagers away from the youthful transgressions that have plagued countless generations past.

Before your teenager (or young adult) takes to the open road, here are four financial life lessons that may help keep them on the straight and narrow:

Credit and debit cards: Handled incorrectly or irresponsibly, these plastic cards can lead your children or grandchildren into some hot water. One in four students leaving college has more than $5,000 in debt.[i] One in 10 have more than $10,000 in debt. College students are hot property for eager credit card companies. Teach your teenagers how to use both credit and debit cards and hold them responsible for how they’re used.
Following a budget: It’s never too late to teach children about developing and adhering to budgets. Budgets help foster financial discipline and provide an important lesson on the value of money. Start by having your teenagers write down their expected income, expenses, and savings.[ii] Make sure they follow their budgets. Focusing on creating a personal budget early in life will create a very beneficial lifelong habit.
Establishing a savings account: Saving money can provide a few surprising and delightful benefits. Stashing away just $5 a week may sound boring, but once your teenager gets in the habit of saving, the easier it gets. Saving money helps develop discipline and reinforces the value of money.[iii] Encourage your teenagers to save early and often.
Automatically save every month. Modern banking technology makes saving money even easier. Teenage life may be filled with distractions, sending earnest adolescents off into financial traps. But understanding and utilizing sound financial tools may help alleviate some of the heartache. Automated savings—through bill pay or regular money transfers to bank savings accounts—can make it feel like another weekly or monthly expense.[iv] Saving money can become an ingrained habit.

If you would like to discuss your current financial needs or learn more about speaking to your teenagers about money management, we’re happy to talk. Call CapSouth at 800.929.1001.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.thebalance.com/credit-card-companies-love-college-students-960090

[ii] https://pocketsense.com/importance-saving-budgeting-teens-3077.html

[iii] https://www.investopedia.com/articles/personal-finance/031215/why-saving-money-important.asp

[iv] https://www.discover.com/online-banking/banking-topics/automate-your-savings/

Monitor Household Finances with Monthly Meetings

October 4, 2018
Budgeting, Financial Planning, Guidance, Investing, Life

Monitor Your Household Finances with Monthly Meetings

Communication is the process through which we transfer information to each other. Although modern forms of communication have increased (emails, texts, letters, social media), connecting with each other is still at the foundation of our humanity. We just have to talk.

Family communication, in particular, molds us together in profound and lasting ways. Without it, the family would inevitably disintegrate.

Communications simple secrets

Effective family communication requires every member to pay attention to what others are saying, how they’re saying it, and to identify the feelings behind words and gestures.[i] Genuine listening is the most overlooked aspect of good communication. It’s the part that makes communication two-way.

Talking about money

Every household has a budget of sorts. It may be a rigid, tightly structured, highly detailed plan or a more carefree, open-ended, and vague financial construct that gets little oversight or review. Or, more likely, it’s something somewhere in between. While budgets or financial strategies are often assembled based on personalities and preferences, they do require mutual input from family members.

An appropriate division of labor that designates who manages the budget or who pays the bills is important. But an arrangement where one partner or family member oversees the finances while the others are kept in the dark is unproductive and unhealthy.

Communication (and consensus) is necessary to bring vitality and direction to families and finances.

While simply discussing family finances is good, budget meetings become even more effective when they’re done with regularity. Holding monthly (or more frequent) meetings will help coalesce your visions and shape the goals of your family.

Here are nine steps for a successful family financial meeting:[ii]

Schedule it. Put the meeting on your calendar. It should not be spontaneous. Hold it at a mutually convenient and appropriate time.
Set the timer. You’re not running a marathon or a congressional hearing. Make it short—30 minutes or so—and sweet.
Eliminate distractions. Turn off the TV. Put your phone away. Make sure the chores are done. Make your meeting an investment of time.
Include some delicious distractions. We’re talking snacks, which make meetings more enticing.
Go prepared. Bring pens, papers, or whatever other tools you’ll need to develop and monitor your family budget and finances. You can use online budgeting tools or apps.
Order in the court. Or the budget meeting. Follow a progressive meeting plan, such as listing income first. Then proceed by dividing and segmenting money into individual categories: donations, utilities, debt, fun stuff.
Allow for objections. You’re trying to create a team plan to financial management. You may have other priorities and preferences than other participants in the meetings. Discuss them and reach an agreement. Find ways to compromise.
Watch the clock. If you’re having trouble or facing challenges, consider addressing contentious matters at another meeting. Stick to your allotted time.
Rules of engagement. Budgets are wonderful tools to reach your goal, but without a way to track spending, it’s just a piece of paper or online platform. Put your budget to work for you by making sure you plug in income and spending numbers regularly and consistently.

If you would like to discuss your current financial plans or budgeting strategies, please contact us at (800) 929-1001 or visit our website.

[i] https://pubs.ext.vt.edu/350/350-092/350-092.html

[ii] https://www.daveramsey.com/blog/how-to-have-a-family-budget-meeting

Category: Life

Which is Better: Renting or Owning?

Teaching Teenagers About Financial Responsibility

Monitor Household Finances with Monthly Meetings

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