Beating Broke

Personal Finance from the Broke Perspective

Using Escrow Accounts and Financial Planning With Your Spouse

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An escrow account can sound foreign and complicated, especially when you’re trying to purchase a home. Some homebuyers have never even heard of an escrow account until they read through their closing documents. Dealing with it doesn’t have to be a headache, however.

This guide will not only detail what an escrow account is, how to use it, and when you can close it, but it will also go in depth about the pros and cons of having an escrow account and how to make financial goals using one with your spouse.

Finances can be a source of contention in the home, but it’s important to talk about and make sure you’re on the same page with your loved one. Doing so has a way of bringing you closer to your spouse and gives you a safe space to discuss sensitive topics.

Everything You Need to Know About Escrow Accounts

Escrow accounts are very useful for financial planning with your spouse. Below, we’ll define what an escrow account is, how to use it, when you can close it, and we’ll look at the pros and cons of this account.

What is an escrow account?

Whenever you and your spouse look to purchase a home or compare home insurance policies, keep in mind that you may be required to use an escrow account. It depends on the lender and insurance company that you work with.

What exactly is an escrow account? To put it simply, an escrow account is an account that is run by a third party and is used to complete transactions between you and another person. It is normally used for large settlements, but it can be used for small business deals as well.

How to Use Escrow Accounts

A prime example of how to use an escrow account is using it to buy a home. You can use the funds in the account to show the seller you’re serious about purchasing the home. Using this will encourage the seller to take the house off the market and help them be more inclined to make an agreement with you.

You can also use an escrow account to pay for property taxes and home insurance. A portion of the mortgage payment goes into this account and is used to pay for taxes and insurance at the end of the year.

These kinds of accounts, as stated above, can also be used for small business transactions like purchasing tires or even something as simple as grocery shopping.

When can I close my escrow account?

There’s really no good reason to close your escrow account unless it is a mortgage escrow account. If that’s the case, the only way to close that account is to make sure you have sufficient home equity. Having enough home equity means making sure you have been paying your property taxes and home insurance.

For other escrow accounts you would like to close, the process is as simple as calling the bank and having them close it for you. It’s a simple process because the account is more like a savings account in this instance.

The Pros and Cons of an Escrow Account

There are several pros and cons to having an escrow account. One pro is that this account provides a secure transaction between parties. Another is that you can pay for property taxes and home insurance monthly as opposed to annually.

This account greatly benefits the seller and the buyer with large settlements like purchasing a home. The seller has guaranteed funding and the buyer doesn’t have to pay out of pocket.

For every pro, there is a con. One disadvantage of having an escrow account is that you have to deal with higher monthly payments for your mortgage. Another is that you might end up paying more on taxes because the estimations are a little off. Escrow fees might also be higher than other services.

Whether purchasing something big or small, escrow accounts are perfect tools. You can use them for virtually anything. They’re also great for financial planning with your spouse.

Financial Planning With Your Spouse

Money can bring up a lot of emotions, especially in marriages. It’s good to talk about these things with your spouse and make sure you’re both on the same page. It’s even better to make financial goals together using your escrow account.

Talk about money in a private setting for both you and your spouse’s safety. Be open and honest about your spending habits, and don’t be judgemental or critical of yourself or your spouse.

Saving Responsibly

The first thing that should be discussed is saving responsibly. It can be easy to comfort spend and not think about spending your money wisely. In these unpredictable times, it makes sense that you would not want to save and put back.

Escrow accounts are perfect for saving responsibly because they can be used as designated savings accounts.

This pandemic has taught us that tomorrow isn’t promised. But that’s all the more reason to have self-control and save. If something happened to you, you need to be prepared and think about those you are leaving behind.

Set Financial Goals

Discuss financial goals with your spouse as well. You could talk about using your escrow account to put back and plan how much money you want to have at a certain date and time. Keeping goals specific, measurable, attainable, relevant, and time-based is a very effective way to reach them.

A perfect S.M.A.R.T. goal would be something like this: I am going to save $500 by August 30, 2021, and use my escrow account to save that money.

Create a Budget

Budgeting goes hand-in-hand with saving and setting financial goals, so it’s important to talk about. You want to set financial boundaries for yourself at the beginning of the month and keep track of where all your money is going.

It may seem tedious, but it’s a great team-building tool to do with your spouse. You can put aside money into your escrow account on the first of each month as well.

When you are educating yourself about finances and financial planning, you are placing yourself ahead of the curve. Many don’t take the time to learn and expand their knowledge, so kudos to you. Take what you’ve learned from this guide and share it with others.

 

Peyton Leonard writes and researches for the insurance comparison site, ExpertInsuranceReviews.com. Peyton is dedicated to helping others save money and be free from financial burdens.

You Don’t Have to Be Rich to Do Something Meaningful, Start Here

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How do you want to be remembered? It is possible that you consider yourself poor and disadvantaged. The harsh reality is you might be right. Further, you might die poor as well. Statistically, your chances of completely breaking free of your socioeconomic status is not good. This varies depending on where you live. But even in the wealthiest country in the world, the majority of people born into poverty never move too far up the ladder. That is unfortunate. But this is a moment for tough love.

It is true that you have as much chance as anyone else of beating the odds. And this site is all about helping you do that. It is most certainly not impossible. But you cannot pin your value as a human being on whether or not you ever achieve a significant amount of wealth. You cannot wait around for your ship to come in or for your luck to turn. You have a life to live right here and now. You have kids to raise and rent to pay.

You are not defined by what you do with your future, but by what you do with your present. It is possible for you to win at life with the hand you were dealt. You can do something meaningful and make the world a better place without becoming a billionaire. Even making minimum wage, these are some meaningful things you can do right now to make the world a better place.

Become a Nurse

You can go back to school even as a busy adult. Millions of people do so successfully every year. If you want to make a lot of money, get an MBA. If you want to do something meaningful that will change the world for the better, look into online MSN programs.

The heroes of the pandemic were not the doctors or the researchers or the journalists who stood up and told the truth. Albeit, they all deserve a round of applause. But the ones who wore the super suit were the nurses who had close contact with the patients who came through the doors every day. They were the most at risk. And often, their super suits didn’t include the proper PPE. They went to work anyway.

Some of them were volunteers. Some were entry-level nurses. Some were just a heartbeat away from being doctors. They all did the job at whatever level they could. They will be remembered as heroes right alongside soldiers who fought in wars. You don’t have to wait for the next pandemic to wear the cape.

Get a Will and Life Insurance

There are plenty of good reasons to have a will, even if you’re broke. Whatever resources you have, you want them to go to the ones you love and not someone else. Further, if you have good life insurance like Bestow, you will have a lot more than nothing to leave the ones you love.

It is all about setting up your family for success. Your family would much rather have you than a life insurance settlement. But you have to think about what is best for them. Right now, your job might be all that is keeping your family afloat. If something should happen to you, they would be ruined. If you make sure there is an ample payout when you die, you will leave at least one family better off because of your forethought. If you have your health today, it could pave the way for your family’s wealth tomorrow.

Go Green

You don’t have to be rich to be green. But it certainly helps. When you are poor, you have fewer opportunities. There is no denying that fact. However, you do not have to worry about the opportunities you don’t have. You can make the little difference that you can make. And that will inspire others to do the same. Many hands lifting make light work of everything. If you can’t recycle, make a conscious decision to purchase products that are responsibly sourced and responsibly packaged. Do the little things you can. It all adds up.

Become a nurse. Set your family up for success. And go green to the extent possible. Even if you don’t see the results, just know that doing these things will make a profound difference. You do not have to be remembered for your wealth to be remembered well.

How to Make Money From the Things You Buy

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Being broke is terrible. It is bad for everyone. It really should be outlawed. Unfortunately, that would make far too many people outlaws. Come to think of it, that is a pretty bad idea. There are all kinds of bad ideas with regard to being broke. Many of those bad ideas are generated and accepted by the people who can least afford to fall for them. If you have some of those bad ideas knocking around your head, you could be your own worst enemy when it comes to beating broke.

One of those bad ideas is that being broke is your lot in life so you might as well accept it. But that is simply not true. Sometimes, the first step is to find the right kind of emergency loan so you can start the process of righting the ship. Installment loans direct lenders provide are better than your typical payday loan. Remember, you are looking for the kind of loan that gets you out of trouble and not the kind that gets you into deeper trouble. After you get your head above water, consider the following tips to help you spend in a way that actually makes you money:

Buy Bulk

You always save money when buying in bulk. That could make that Costco membership worth the small amount they charge. By sharing that membership, you share the savings. If you eat out for lunch every day, you can save a ton by bringing your own. The types of ingredients you need will cost a lot less in bulk. Just remember there is a reason you bought that membership. It was not to buy all the things you are used to in the same quantities. You need to be prepared to stock your pantry like you mean it.

You also need to have a clear purpose for your shopping. You are not shopping to help you mindlessly snack while you are on the couch watching Netflix. You are shopping to fuel your work. Fueling your work with economical and healthy lunches that you prepare yourself is a money-making enterprise and not the typical, annoying chore. You might also be helping your children succeed in school. Lack of a healthy lunch at school hurts children more than you think. This is not a political talking point, but an indisputable fact of the world. Don’t just mindlessly shop. Find a good shopping club and shop with a purpose.

Buy only What You Can Write Off

Even if you don’t itemize your taxes, you should make purchases as if you do. There is nothing wrong with buying that new computer. First, ask yourself how that computer will help pay for itself. Is it the tool you will use to create an ad-supported blog? Is it going to help with editing the photos you will license to a stock photo service?

The same question applies to kitchen gadgets. By all means, buy the bread machine. But take a few loaves to work to sell to your coworkers. This is perfectly acceptable in many places of work. Check with your supervisor before you do. You can also make snacks for people at your church and accept donations. The idea has nothing to do with getting rich. It has to do with you changing the way you think about making purchases. Don’t buy anything you can’t monetize and legitimately include in your taxes and learn about the tax code for families, businesses, and real estate. Being uneducated could literally cost you money while also hiding opportunities you didn’t know existed just because of failure to study up a little bit on your situation.

Resell

Some items will only be good for recycling after you use them. Intentionally limit those types of items. To the extent possible, only buy things you can resell to someone else at a later time. Learn to use reselling websites. When you resell a device, you help the environment and you can pocket the money from the sale or convert it to another item which you can later resell.

Unless your business is restoration and reselling, you will not make a lot of money by following these tips. But you will come a lot closer to making a profit if you buy bulk, stick with items you could write off as a business expense, and buy only items you can resell to someone else. Be sure that everything you purchase goes to work for you instead of the other way around.