Monthly Archives: February 2008

What is home equity loan?

Are you clear of the concept of home equity loan? Not everyone knows what it really is. I am writing this for everyone who doesn’t have a clear understanding about the home equity loan. Here’s a simple and easy to understand explanation.

A home equity loan is a loan that uses the borrower’s equity to secure the loan. People who take home equity loan must know that they have put their home as a security against the loan. This loan can be used for a variety of purposes and the interest is often tax deductible. Typically, a person takes home equity loans to make home improvements or else, it can be used for other variety of options depending upon the individual situation. The loans are granted at either an adjustable rate or a fixed rate. The repayment plan is kept shorter than your first mortgage payment. As per the statistics, a mortgage may typically take thirty years to pay off while a home equity loan can be paid off within fifteen years.

Some people tend to think that this type of loan is an easy way to solve their financial problems, especially if you are in huge debts. Don’t avoid the fact that when you have taken such kind of loan, you have already risked your home the moment you miss one payment. Think two steps ahead, god forbid, if you really lose your home, where will you live and find shelter? Besides, you also need to be very careful of the institution from which you got the home equity loan. There are many scams around and you need to be cautious before putting your home and money. Make sure you have always read the fine print before the loan is yours.

Weigh all the options that are available to you before you sign on that dotted line. You will be making a wise decision if your loan is an adjustable rate mortgage. You will be benefited when the market rate is high and you are paying a lower interest rate. Before taking the loan, clear with your loan company whether there is any pre-payment penalty. Most companies have some penalties if you decide to pay the loan earlier. They average around two to five years. These penalties can be significant and you may end up losing money in the end if the savings is not more than the money you would be shelling out.

Save more money on your groceries

Month after month, we have been spending on our groceries and it can average to around $400-500. This is spent only on food and dining, and not on household items. For our family of three, I know we can spend a lot less than that.

There are free sites that can help you with your grocery shopping and finding good deals. But unfortunately, for us due to our location, those sites do not have any affiliates with our local grocery store. We don’t subscribe to our local newspaper as it’s too expensive. So, to get those flyers, it means a trip to the grocery store and pick the flyer. Then, we have to come back home, review the flyers and creating a grocery list, and go to purchase items. With our schedule and the time when the flyer comes out, the time doesn’t adjust too well for us. So, here’s what we are trying to do.

Once a month, we purchase all the inventory items of our food. I have made a list of all the necessary items that we will need during the month to make meals and I mark those items that have to be fully stocked up. Then we head to Wal-Mart to do shopping. Wal-Mart has some items on sale that our local grocery store will not usually put. Last time, when we came to Wal-Mart, we had a cart full of groceries for $150. I am not sure if we have ever spent that much on one trip before.

Now, we have the normal items that will stay for the whole month. Then it’s the small weekly trip to the grocery store to buy fresh fruit, milk, bread and meat on sale. We don’t buy fresh meat from Wal-Mart anymore because it can get quite expensive for us and our budget is not to exceed $50 each trip during the weekend. So, here’s what we have spent at the end of the month.

$150 + 50 + 50 + 50 = $300/month

So far, it is working awesome. One major problem that we faced was that we were making too many trips to the local grocery store during the week. All those little trips can add up quickly and result in buying items that we really don’t need like frozen pizzas for a quick dinner. This is an unnecessary expense that can fully be avoided. Once we have limited the number of our trips, we are more focused with our purchases and we are getting a little more creative with our meals to use what we have and saving money from our budget.

Limiting our grocery store trips is challenging us and I like it. After some time, I would like to plan our menu also. I used to do that before and this saved a lot of money. But because of my work, I couldn’t devote much time on it. I will have to start doing it again.

The main thing is about saving money. There are many strategies of executing it. You have to spend some time looking at your spending and figuring out the plan that works well for you.