Managing Your Money

Learn which home improvements offer the best return on investment.

Spring and summer are a fantastic time to tackle home improvements to ensure you get the most return on investment, especially if you’re hoping to capitalize on improvements to buy a new home.

When evaluating your home’s resale value, it’s important to ensure that all of the basics – roof, plumbing, water, heat, windows and electrical systems – are in working order. Issues in these areas should be tackled first.

Once the basics are covered, consider revamping the look of your home with an eye toward mass appeal. The two rooms that reap the highest dividends are kitchens and bathrooms.

Before you take the plunge with larger remodeling projects like cabinets, counters, appliances or flooring, I urge you to research the amenities for comparable properties that have recently sold in your neighborhood to ensure you don’t “over-improve” your home. Don’t overlook small projects that can have a large impact: removing clutter, keeping your lawn neatly trimmed and planting shrubs and bright annuals that can lend curb appeal. Some sellers also have their homes “staged” for open houses. These types of improvements should lead to a higher resale value while offering you the opportunity to buy the property of your dreams.

Home Buying 101
Determining your budget.

Ready to enter the home buyer’s market? There are a number of factors to consider when purchasing a home. Are you financially ready?

More Lenders will typically look at your gross monthly income, credit score, employment history, home appraisal and down payment, as well as the principal, interest, taxes and insurance, known as PITI, when approving a loan. As a rule of thumb, the PITI ratio should not exceed 28 percent of your gross monthly income, and all monthly debt including PITI should not exceed 36 to 43 percent of your gross monthly income. Providing a payment below 20 percent on a property will result in mandatory additional private mortgage insurance. Flood insurance may also have to be paid, depending on location.

Lenders base their calculations on gross income, so calculate accordingly. Be sure to budget for monthly expenses and weigh in lifestyle necessities. Think about home maintenance, furnishings, utilities and other bills or miscellaneous expenses such as auto maintenance and leisure activities. Create realistic plans and know your needs, wants and areas in which you are willing to compromise.

College funding made easy

Now that your high school student has decided which college to attend in the fall, the next question families begin to ask is: How are we going to pay for it?

More College funding advice from Donald Kerr, Manager AAA Student Lending

Several funding options are available; looking at each one is a vital part of the process, said Donald Kerr, manager of student lending at AAA Southern New England. “I suggest that most families look at using a variety of the funding options, mixing and matching rather than just relying on any one way,” Kerr said. “Looking at the lowest cost funding options first will help determine the best route to match your funding goals.” The lowest cost option, Kerr suggested, may be a fixed payment plan with the individual institution. Rather than charging a semester’s or a full year’s payment up front, most schools offer monthly payment plans.

Small monthly payments will ultimately save thousands of dollars in the long run by lowering the total cost of what needs to be borrowed. The next step might be to look at federal loans – both subsidized and unsubsidized. Federal loans have the benefit of great repayment assistance. Not only are you able to apply for deferment and forbearance in special circumstances, but you may be eligible for an income-based repayment plan, which allows you to pay a maximum of 10 percent of your income monthly. This is a great benefit for students who have just graduated and are not in a position, salary-wise, to make large payments.

The last items to look into would be federal Parent PLUS loans and private student loans. The former would be held in the parent’s name, and they would be entirely legally responsible for it, while a private student loan would be held by both student and parent. Private student loans can vary, based on credit approval, the terms of the loan and the loan provider. “There is a lot of leg work that needs to be done when dealing with private student loans,” Kerr said. “After you apply to get a rate from one provider, shop against other options and providers to determine what the lowest cost option to you would be.” Of course, the lowest cost option of all to help fund student education would be scholarships. “Students should be applying for as many scholarships as they are able to, throughout their college career,” Kerr said.

Set the stage for personal savings

With AAA by your side, plotting a course for a personal savings is as simple as 1,2,3!

  1. Goal Set Prioritize your savings goals by making a list such as gifts, vacation fund, college savings, new car, home purchase, or retirement. Then select the most appropriate savings tools to help meet your goal. Options include online savings accounts, high interest money market accounts, CD’s and IRA’s.
  2. Look for Hidden Opportunities Interest rates are at all time lows, so refinancing a home or auto loan is a great way to save without placing any additional demands on your paycheck. Another option is to consolidate your student loan debt to allow for greater monthly cash flow. AAA has a simple, easy plan for either of these options.
  3. Other Ideas Paying off high interest debt can free up additional funds for savings. Look to pay off debts with higher APR first. If credit card debt is an issue, you can lower your APR with a balance transfer to a new card. You may also be able to negotiate with the bank to request a lower rate if you pay your bills on time.

Another great way to save is through your work sponsored 401K program. Be sure to take full advantage of company match if a program is available.