If you're feeling the pinch of a rising mortgage payment, you're hardly alone. By one estimate, about $1.3 trillion in existing mortgages will face an interest-rate reset by the end of 2008. Anyone who took out an adjustable-rate mortgage in recent years, or was enticed by a mortgage with a too-good-to-be-true initial rate, will get hit with a reset that goes up, not down.
If you're facing an adjustment - or have already fallen behind on payments - take a deep breath and think clearly. If you're like most Americans, there's enough "hidden cash" around your home to more than make up the difference. You just need to uncover it. The following tips will help you do so.
Every time you find yourself one click away from an online purchase, I want you to ask, "Why am I buying this?" Often the answer will be, "Because it's just $20." You know what I mean: The rationalization that a small purchase is no big deal in the grand scheme of things. Well, it can be a very big deal.
A refund is nothing more than Uncle Sam returning money you overpaid. Adjust your withholding so that you don't have more deducted from your paycheck than is required (or if you're self-employed, rework the numbers to make sure your estimated quarterly tax payment is correct). Online tools can help you calculate the exact amount. Just type "withholding calculator" into a search engine. Try to estimate carefully, and remember that it's OK to owe the IRS a small amount at the end of the year.
Those of you who use the standard deduction when filing tax returns should consider itemizing. A few years ago, the Government Accountability Office found that 2.2 million people who took the standard deduction could have reduced their tax bills by an average of $438 if they had itemized. TurboTax or TaxCut software can do the calculations and determine whether it makes sense to itemize.
Reducing the interest rate on any credit card with a balance is another great money-saving tactic. Transfer your balance to a card that offers an introductory rate of zero percent for the first 12 months. Credit-card issuers that offer the zero rate reserve their best deals for consumers with the best credit scores, so yours needs to be at least 760 (find out your FICO credit score at myfico.com). If your score is below 760, make it a priority to nurse it up by paying your bills on time, even if you're making only the minimum payment. That accounts for 35 percent of your FICO score.
Opt for higher deductibles on your auto-insurance policy, and your premiums could go down 40 percent, according to the Insurance Information Institute. This move will also prevent you from filing too many claims, which could result in a higher rate or, in some cases, being dropped by your carrier. Insurance policies should be for protection from major calamities rather than from minor scrapes. If you currently have a low deductible, call your insurer or agent and ask to raise it to at least $1,000.
Also, you can shave as much as 15 percent off your overall payment by buying your home insurance and auto coverage from the same provider. And you may be able to reduce your auto-insurance cost by an additional 10 percent by taking a defensive-driver course.
I know there's nothing you wouldn't do for your kids. But in saying yes to their every spending request, you're doing them a disservice. Less is more.
I can pretty much guarantee you'll find $100 a month in savings if you scale back unnecessary expenditures. Pore over your bank and credit-card statements for the last year and weigh each withdrawal or charge. That premium cable package is probably draining $30 or more that could be better used toward your mortgage.