Buying

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Mortgage rates spiked the week ending July 3, with the average rate for a 30-year, fixed-rate loan rising above 7% yet again.

The 30-year fixed-rate mortgage averaged 7.01% APR, up 20 basis points from the previous week’s average, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

Explore mortgages today and get started on your homeownership goals

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Won’t affect your credit score

Rising rates, ebbing economy

If anything, mortgage rates probably should have fallen this week — and not just because folks’ minds are on hot dogs and fireworks, not home buying and selling.

Economic data that came out this week wasn’t especially splashy, but it pointed toward an economy that’s cooling down. The Federal Reserve‘s preferred measure of inflation showed that consumer prices month over month remained essentially flat. Construction spending dropped for the first time in 18 months, coming in below market expectations. Employment remains strong, but earlier numbers were revised downward, implying labor markets might be on an even keel.

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Federal Reserve unbothered

Together, these figures indicate that the Federal Reserve’s strategy — raising interest rates, and then holding them high — is working. By making it more expensive to borrow, the Fed hopes to slow the rate of inflation. Less hiring and building aligns with that goal, but in remarks on Tuesday, Fed chair Jerome Powell emphasized caution.

Speaking at an economic conference in Portugal, Powell acknowledged the strength of recent numbers while urging caution. “What we’d like to see is more data like what we’ve been seeing recently,” he said. Declining to state when, exactly, the Federal Reserve might cut rates, Powell noted, “We’re well aware that if we go too soon, that we can undo the good work we’ve done.”

Even though a potential autumn Fed rate cut would likely only be a quarter of a percentage point — a little more than the 30-year rate moved on its own this week — a shift into a rate-lowering phase could relieve upward pressure on mortgage rates.

Source: nerdwallet.com

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Categories

Real Estate

July 3, 2024
by Mark Ferguson

Will the Department of Justice (DOJ) and new regulations make selling houses harder and more expensive? The landscape as we know it is poised for some dramatic shifts, and I want to unpack what that means for home buyers, sellers, agents, and investors. While we do not know for sure what will happen the DOJ has given many hints as to what they want to happen. The DOJ may think what they are doing is helping consumers, in my opinion it will do the opposite if these ideas come to fruition.

Table of Contents

Video: How the DOJ is Making Buying and Selling Houses Much Harder and More Expensive

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The Disappearance of Open Houses

One of the potential changes is the disappearance of open houses. This traditional method of showcasing properties might become much harder to execute, which could complicate the buying and selling process. The intention behind these changes is to lower costs and make it cheaper for buyers. However, the reality might be quite the opposite, making it more expensive and challenging for buyers to purchase homes, ultimately impacting sellers and agents negatively.

One of the major changes the DOJ wants to see implemented is all buyers must have a buyers agency agreement signed with an agent before viewing homes for sale. It has been rumored the DOJ does not want buyers and sellers working with the same agent which could make open houses very difficutl!

Government Intervention and Lawsuits

A significant driving force behind these changes is the involvement of the Department of Justice (DOJ). Previously, I discussed some lawsuits from home buyers and sellers against the National Association of Realtors (NAR) and other agencies. What I didn’t realize then was the extent of the DOJ’s involvement. They have been working on these lawsuits from the beginning, essentially approving or disapproving changes that could alter laws and regulations across states.

Commission Transparency on the Chopping Block

One of the most contentious issues is the DOJ’s push to remove buyer commissions from being listed on the Multiple Listing Service (MLS) and other sources as well. Traditionally, the seller pays both their listing broker and the buyer’s broker, making it easier for buyers who might not have the funds to pay their agent directly. The DOJ’s stance is that this information should not be visible, aiming to avoid the misconception that buyer agents are “free” for buyers, even though their commissions come from the seller’s proceeds.

Should You Sell Your House Yourself? (For Sale By Owner)

The Impact on Agents and the Industry

This move has stirred a lot of debate, as it fundamentally changes how transactions have been handled. Buyers will now likely have to sign a buyer agency agreement, committing to an agent and agreeing on their compensation before even seeing a property. This could make open houses and for-sale-by-owner situations much more complicated. Furthermore, there’s talk about potentially banning dual agency, where an agent represents both the buyer and seller, adding another layer of complexity.

How Much Money Do Real Estate Agents Make Their First Year?

The Economics of Regulation

Many believe these changes could weed out less competitive agents and streamline the industry. However, basic economic principles suggest otherwise. Reduced competition typically leads to higher prices, not lower. With fewer agents and more complicated processes, costs are likely to rise. Agents might start charging more due to the increased complexity and reduced competition.

Federal vs. State Control

The DOJ’s involvement also raises concerns about federal overreach. Traditionally, states have had the authority to regulate real estate practices within their borders. Now, the federal government seems to be stepping in, overriding state laws and regulations, which could lead to a one-size-fits-all approach that might not be suitable for every market.

Potential Consequences for Buyers and Sellers

For buyers, this could mean higher out-of-pocket expenses, as they might have to pay their agent’s commission directly, on top of other closing costs. This change could particularly affect first-time buyers or those with limited financial resources. Sellers might feel pressured to still offer commissions to make their properties attractive, but the lack of transparency could create confusion and miscommunication.

The Broader Economic Impact

Real estate has long been a cornerstone of wealth building in the United States. Making the buying process more complicated and expensive could hinder people from purchasing homes, leading to fewer homeowners and more renters. This shift could drive up rental prices and decrease housing affordability overall, impacting the broader economy and wealth distribution.

The Road Ahead

As these changes loom closer, the real estate industry must brace for a period of adjustment. The outcomes are still uncertain, and the industry will need to adapt quickly to navigate the new rules and regulations. The hope is that these changes, though challenging, will eventually lead to a more transparent and fair market for all participants.

In the meantime, if you have any questions or comments, feel free to share. I will continue to keep you updated on these developments and provide insights into how they might impact your real estate ventures. Stay tuned for more videos and updates on real estate trends, my flips, rentals, and other projects.

Why do you think? Let me know in the comments below.

Source: investfourmore.com

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The average 30-year fixed mortgage interest rate is 7.00% today, down -0.02% compared to one week ago. The average rate for a 15-year fixed mortgage is 6.46%, which is an increase of 0.03% since last week. For a look at mortgage rate movement, see the chart below.

The Federal Reserve has been holding off on interest rate cuts because inflation has been slow to improve. While experts still expect mortgage rates to gradually move lower in the coming months, housing market predictions can always change in response to economic data, geopolitical events and more.

Today’s average mortgage rates


Today’s average mortgage rates on Jul. 04, 2024, compared with one week ago. We use rate data collected by Bankrate as reported by lenders across the US.

Lower mortgage rates make buying a home more affordable. Experts recommend shopping around with different mortgage lenders to find the best deal. Enter your information below to get a custom quote from one of CNET’s partner lenders.

About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.

How can I choose a mortgage term?

Each mortgage has a loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. With a fixed-rate mortgage, the interest rate is set for the duration of the loan, offering stability. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market. Fixed-rate mortgages are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.

30-year fixed-rate mortgages

The average 30-year fixed mortgage interest rate is 7.00% today. A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.

15-year fixed-rate mortgages

Today, the average rate for a 15-year, fixed mortgage is 6.46%. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.

5/1 adjustable-rate mortgages

A 5/1 adjustable-rate mortgage has an average rate of 6.66% today. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.

Why are mortgage rates so high right now?

At the start of the pandemic, mortgage rates were near record lows, around 3%. That all changed as inflation began to surge and the Federal Reserve kicked off a series of aggressive interest rate hikes starting in March 2022 to slow the economy, which indirectly drove up mortgage rates.

Now, more than two years later, mortgage rates are still around 7%. Over the last several months, mortgage rates have fluctuated in response to economic data and investors’ expectations as to when the Fed will start to lower rates.

Today’s homebuyers have less room in their budget to afford the cost of a home due to elevated mortgage rates and steep home prices. Limited housing inventory and low wage growth are also contributing to the affordability crisis and keeping mortgage demand down.

Will mortgage rates drop this year?

Most experts predict mortgage rates will fall below 7% in the coming months. However, a sustained downward trend will depend on several factors, including upcoming inflation and labor data.

The Fed hasn’t hiked interest rates in almost a year, but an actual rate cut doesn’t appear imminent. Some experts say the first cut could come as early as July, though it’s more likely we see the Fed lower rates in September or November.

“If the Fed makes any moves later this year, the signal would be sufficient for the mortgage market, and mortgage rates would start falling,” said Selma Hepp, chief economist at CoreLogic. “In that case, we could see the mortgage rates around 6.5% at the year-end.”

One thing is for sure: Homebuyers won’t see lower mortgage overnight, and a return to the 2-3% mortgage rates from just a few years ago is unlikely.

Here’s a look at where some major housing authorities expect average mortgage rates to land.

Calculate your monthly mortgage payment

Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.

Where can I find the best mortgage rates?

Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.

  1. Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest.
  2. Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates.
  3. Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments.
  4. Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs.
  5. Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.

Source: cnet.com

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Imagine you’re a gardener. You spend a weekend building a few raised beds, planting sunflowers and corn, etc. It’s a nice little hobby. Your first summer gardening ends up successful and fulfilling.

You come back for Year 2 with vigor! You want to expand. You spend a month preparing your beds and double the size of your garden. You plant new veggies and a few flowers, and all goes well.

You rinse and repeat for a few more years. Not only is your garden blooming, but its size is blooming. After years of doubling in size, it occupies a couple acres in your side field (we’re putting you in the countryside).

Eventually, you grow so big that an annual doubling size is no longer feasible. You don’t have the time or equipment to build twice as many new beds. You don’t have the resources to water and fertilize the full area. You don’t have the patience to weed the weeds and scare away the hungry deer and rabbits.

Growth, in other words, cannot be exponential forever. Eventually, size becomes the enemy of growth. Growth is easy when you’re small. It’s much harder when you’re big.

We see similar “rules” all over the natural world. Small children grow and learn unbelievably quickly in their early years. They “grow like a weed” – how punny. But eventually, that child becomes a “full-grown” adult who, if they’re learning at all, certainly is no longer learning at an exponential pace.

While the governing rules might differ (Mother Nature vs. something economic), a similar phenomenon applies to the business world and thus to the stock market: growth can’t be exponential forever, and growth becomes harder the bigger you are.

Forward Growth, Backward Growth

Let’s go back to the garden.

Imagine I have a bed of fully grown sunflowers —10 feet tall, giant heads, full of seeds.

Next to that, I have a bed of corn. The corn is only halfway grown—3 feet tall, barely a sign of any “ears” yet.

If I wanted to see which crop has the best growing potential, how should I measure it?

The natural tact to measure backward and say, “It’s the sunflowers – look, they’re huge! They’ve grown like crazy this past month!”

But I could also measure forward and say, “The sunflowers are ‘exhausted’ – fully grown! The corn, though, still has a huge potential in front of it.”

The same idea applies to the stock market.

If we measure backward, the best-performing stocks of the past 5 years are the biggest stocks right now (kind of like our sunflowers). Ben Carlson shared this idea and data in a recent post. The right-most columns below show that today’s largest stocks are also the best performers of the past 5 years:

The biggest stocks (on the right) have also had the best recent performance.

But as investors, is it good for us to “measure the sunflowers” after they’re fully grown?!

The wise skeptic would retort, “Jesse – you don’t know if those large stocks are fully grown or not.” It’s true. For all we know, those “sunflowers” could double in size again. We’ll come back to this idea later.

Still, I think it makes more sense to measure from the beginning and ask, “Which stocks will grow most in the future?” The problem is that we don’t have crystal balls. We don’t know what the future will hold.

The middle ground, then, is to combine the past and the present. For example: what if we took the stock market’s values from 2019, ranked the size of those companies at that time, and then tracked their performance from 2019 until today?

That’s exactly what this chart shows:

If we measure forward instead of backward, we see that smaller companies have been the best performers of the past five years (not that large companies performed all that poorly).

Here’s another terrific way of visualizing that idea. I’ve been using the following chart with some clients recently, especially when they ask questions about Apple, Microsoft, or NVIDIA, etc.

The data examines companies when they reach the Top 10 largest companies in the U.S. stock market. The left side of the graphic shows companies before they reach the Top 10, and the right side shows companies after they reach the Top 10. The left shows “future world-record sunflowers as they’re growing” and the right shows “world-record sunflowers once they’ve set those records.”

The chart pulls together our various ideas today.

  1. It’s hard to grow forever. Instead, growth has an upper limit. Once a company has become “one of the largest companies in the US, or even the world,” odds are that its growth is tapped out.
  2. While investing in “full-grown sunflowers” might be appealing – after all, look how tall they are! – the smart money knows investors don’t make money on past growth. They make it on future growth.

I’m not guaranteeing it. The future might be different than the past. Maybe NVIDIA will continue taking over the world. But get this:

  • In the five years from July 2019 to July 2024, NVIDIA’s market cap grew from $100 billion to $3 trillion, a 30x increase.
  • If NVIDIA did the same thing from now until July 2029, its then-$90 trillion market cap would be:
    • as large as every other publically traded company in the world, all combined.
    • about 2x the rest of the entire U.S. stock market, combined.
    • about 3x the annual GDP of the U.S.
    • and roughly ~$90 trillion more than my personal net worth. Ouch.

Uncle Warren, Cousin Rubin

In 1995, Uncle Warren Buffett wrote to his investors:

The giant disadvantage we face is size: In the early years, we needed only good ideas, but now we need good big ideas. Unfortunately, the difficulty of finding these grows in direct proportion to our financial success, a problem that increasingly erodes our strengths.

When you have one garden bed, it’s easy to double in size. Just build one more bed. It’s not so easy when you’re running an entire farm.

Buffett’s company, Berkshire Hathaway, is in the business of buying other companies – great companies, ideally, at fair prices.

But Berkshire is worth $900 billion dollars. They can’t afford to buy a $1 million company that they think will double to $2 million – it’s a tiny drop compared to their $900 billion value. Instead, Berkshire is looking to acquire multi-billion dollar companies. But those companies aren’t flying under the radar. They’re well-known and accurately priced. The opportunity for large investment gains simply isn’t there.

A similar idea comes from Rubin Miller, writing about Nvidia. Rubin said:

The stock market has averaged ~ 10%/year over the last 100 years, so if that continued while NVIDIA averaged 32% (which it has since its IPO in 1999)….

  • In 10 years, NVIDIA would be ~ 27% of the U.S. stock market.
  • In 15 years, NVIDIA would be ~ 68% of the U.S. stock market.
  • In 25 years, NVIDIA would be ~ 420% of the U.S. stock market.

But nothing can be more than 100% of something that it’s a part of.

That’s the impossibility (meaning if anything like this remotely occurred in reality, the entire market’s return would of course be pulled higher than 10%, simply by NVIDIA’s weight and return).

But this is the rub. You cannot compound returns at high rates forever.

On an infinite timeline, anything compounding at a higher rate than something else will eventually completely subsume it.

Rubin Miller

Eventually, in other words, NVIDIA would be so big and the rest of the market so small (comparatively) that “market returns” wouldn’t tell us anything about “the market” – they would only tell us about NVIDIA!

This is not poo-poo’ing on NVIDIA. It can still be a great company. But that’s different than being a great investment. You can be a good company, but a bad stock..

Or, back to our sunflower analogy, here’s a fact: a sunflower grows 100x in height over ~70 days. Then it withers and dies. But if it didn’t die and instead continued 100x’ing its height every 70 days, that sunflower would reach the Moon in just over 1 year.

You tell me. Maybe we’ll soon see a sunflower reach the moon.

But I’m not betting the farm on it.

Thank you for reading! If you enjoyed this article, join 8000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.

-Jesse

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Source: bestinterest.blog

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Learn to manage your money wisely with these straightforward tips to cut spending and budget better. Despite higher incomes, many still struggle with financial challenges and living paycheck to paycheck. Take control of your finances starting today to achieve a more feasible budget.

1. Prioritize Essential Bills and Expenses

Image Credit: DragonImages.

Identify which expenses are truly essential for your livelihood. Prioritize these over non-essential expenses like entertainment or eating out to ensure financial stability and mindful spending habits.

To learn more: What is Zero-Based Budgeting and How Does It Work?

2. Participate in a No Spend Challenge

Image Credit: Shopping King Louie.

Joining a No Spend Challenge not only helps you save money rapidly but also increases awareness of your spending habits, leading to a minimalist lifestyle. Start with a no spend month to jumpstart your frugal living journey.

To learn more: No Spend Challenge: The #1 Fastest Way To Save Money

3. Reduce your Housing Expenses

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Housing costs can burden your budget significantly. Explore options like downsizing, negotiating rent, or getting roommates to lower expenses and free up funds for other financial goals.

To learn more: Get Paid to House Sit and Find Lucrative Housesitting Gigs Easily

4. Be Cognizant of Bad Spending Habits

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Become aware of detrimental spending habits like impulse purchases or overspending on conveniences. Break the cycle by making conscious choices and embracing mindful spending practices for long-term savings.

To learn more: 12 Things I Quit Buying to Save Money

5. Skip the Expensive Coffee Shop

Image Credit: Onurdongel from Getty Images Signature.

Foregoing daily coffee shop visits can yield substantial savings. Just this change alone could save you over $600 a year, demonstrating the impact of small adjustments on your budget.

To find more: 175+ Simple and Easy Frugal Living Tips to Save Money

6. Use Public Transportation to Save Money

Image Credit: RossHelen.

Opt for cost-effective alternatives to owning a car, such as public transportation, cycling, or carpooling. By reducing transportation expenses, you can allocate more funds towards savings and financial goals.

To understand further: Is a Car an Asset or Liability?

7. Take Advantage of Free or Cheap Entertainment

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Embrace free or inexpensive entertainment options to avoid draining your budget. Enjoy activities that don’t require spending money, allowing you to have fun without compromising your financial health.

To learn more: 105 Fun Things To Do With No Money

8. Cut Back on Grocery Spending

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Employ strategies like meal planning, cooking at home, and using discounts to slash grocery expenses. By being mindful of your food budget, you can save money while maintaining a nutritious diet.

To learn more: 100+ Frugal Meals for When You’re Broke or on a Budget

9. Stick to Your Shopping List

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Plan purchases in advance to resist impulse buying. Sticking to your shopping list helps you stay focused on essentials, preventing unnecessary spending and promoting responsible budget management.

10. Start Meal Planning

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Meal planning is a practical approach to budget-friendly eating. By organizing your meals ahead of time, you can minimize grocery costs and reduce food waste, ensuring efficient use of your food budget.

To learn more: Become a Pro at How to Meal Plan for a Month

11. Stockpile Goods That Will Stay Stocked Up Long Term

Image Credit: Panida Wijitpanya from Getty
Images.

Strategically stockpile essential items to save money and ensure preparedness. Focus on purchasing long-lasting goods in moderate quantities to maximize savings without cluttering your living space. Only buy what you plan to use when it is on sale!

To learn more: What is the Best Cheap Food to Buy When Broke?

12. Avoid Impulse Purchases

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By resisting impulsive buying, you create opportunities for significant savings over time. Prioritize needs over wants to safeguard your budget and maintain financial stability, especially during tight financial situations.

Find more ideas to Cut Spending

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Discover practical tips to cut spending & budget wisely. Start saving money effortlessly with these 12 straightforward strategies!

To learn more: 20+ Tips to Cut Spending when Budgeting on a Low Income

Know someone else that needs this, too? Then, please share!!

Did the post resonate with you?

More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!

Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.

Source: moneybliss.org

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Want to hear some good news about mortgage rates that involves them being a lot higher than they previously were?

Yes, I know that sounds absurd, but hear me out. There are now millions more mortgages that feature rates above 6.5%, and many with rates above 7%.

There are also millions less that feature rates below 5% than there were just a couple years ago.

Why is this good you ask? Well, it means the effects of mortgage rate lock-in are beginning to wane.

It also means millions of borrowers might stand to benefit from a refinance is rates eventually drop.

Nearly a Quarter of Mortgage Holders Have an Interest Rate Above 5%

The latest Mortgage Monitor report from ICE released this week found that there’s been quite a shift in outstanding mortgage rates.

While it was quite common for a homeowner to hold a 30-year fixed priced at 2-3% a few years ago, it’s becoming less so today.

In fact, as of May some 24% of those with outstanding home loans had a mortgage rate at or above 5%, up from just 10% two years ago.

At the same time, there were there nearly six million (5.8M) fewer mortgages with rates below 5% than there were just two years ago.

And nearly five million (4.8M) fewer with rates below 4%, thanks to borrowers either selling their homes or in some cases pursuing a cash out refinance.

While the low-rate homeowners shed their mortgages via home sale or refinance, a new batch of high-rate homeowners is beginning to take their place.

Since 2022, four million new 30-year fixed mortgages have been originated with rates above 6.5%, and of those roughly half (1.9M) have rates north of 7%.

In other words, the collective outstanding mortgage rate of all homeowners is rising.

This means it’s becoming less normal to have an ultra-low interest rate and that could mean fewer roadblocks when it comes to selling and increasing for-sale inventory.

Why Is This Good Exactly?

In a nutshell, the shift from loose monetary policy to tight Fed policy in the matter of just a year and change wreaked havoc on mortgage rates and the housing market.

We went from 3% 30-year fixed mortgage rates in early 2022 to a rate above 8% by late 2023.

While the Fed doesn’t control mortgage rates, they made a big splash after announcing an end to their mortgage-backed securities (MBS) buying program known as Quantitative Easing (QE).

That meant the Fed was no longer a buyer of mortgages, which immediately lowered their value and raised the interest rate demanded by other investors to buy them.

At the same time, the Fed raised its own fed funds rate 11 times from near-zero to a target range of 5.25% to 5.50%.

While this was arguably necessary to cool off demand in the too-hot housing market, it created a group of haves and have nots.

The homeowners with 2-4% mortgages fixed for the next 30 years, and renters facing exorbitant asking prices and 7-8% mortgage rates.

This dichotomy isn’t good for the housing market. It doesn’t allow people to move up or move down, or for new entrants to get into the market.

Due to the quick divergence in rates for the haves and have nots, home sales have plummeted.

The same is true of refinances, especially rate and term refis, hurting lots of banks and mortgage lenders in the process.

But as the average outstanding mortgage rate climbs higher, there will be a lot more activity in the real estate and mortgage markets.

Here Comes the Refis (Well, Not Just Yet…)

If you look at the chart above, you’ll see that recent vintages of mortgages were dominated by high-rate mortgages.

The distribution of home loans with mortgage rates above 6% surged in 2023 and 2024 as the 30-year fixed ascended to its highest levels in decades.

While this has clearly dampened housing affordability, and led to numerous mortgage layoffs, it’s likely going to be a cyclical challenge that improves each year.

Over time, the low-rate mortgages will be replaced by higher-rate loans. And if mortgage rates moderate as inflation cools, many millions will be in the money a for a refinance.

So aside from mortgage rate lock-in easing and more homes coming to market, which pays off the underlying loans, we’ll also see more refinance activity as recent home buyers take advantage of lower rates.

In fact, we’ve already seen it as the 30-year fixed is roughly 1% below its October 2023 peak, thanks in part to normalizing mortgage spreads.

Those who timed their home purchase badly (in terms of that mortgage rate peak) have already been able to refinance into a lower monthly payment.

And if rates continue to come down this year and next, as is widely expected, we’re going to see a lot more borrowers refinance their mortgages.

This will benefit these homeowners and the mortgage industry, which traditionally relies upon refinances to keep up volume.

So while times have been bleak these last couple years, it’s all part of the process.

The shift out of cheap money and back into reality should get things moving again, whether it’s an uptick in home sales, mortgage lending, or both.

Source: thetruthaboutmortgage.com

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This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.

Budgeting is such an adulting term.

Nothing can make you feel more like an adult when you need to learn how to budget your money, stop buying frivolous things, and save for retirement.

A budget just sounds like no fun.

Is it possible to learn how to budget money and still enjoy life?

However, the bright side to budgeting (and normally overlooked aspect) is by setting up a budget is you start to live within your means and start your path to financial freedom. Here are all the advantages of budgeting.

Personally, financial freedom is way more enticing!

So, that means a budget is necessary. A budget is key. A budget will change your life forever.

Just FYI…Here at Money Bliss, we like to call it a Cents Plan. Why? A budget sounds constricting. Take your money cents and put it with your head sense to make your Cents Plan.

We will detail what is the proper way to budget for money.

But the question remains how to budget money without pulling out your hair and still enjoy life. (It is easier than you think!)

Do you Need a Budget?

First, let’s answer this age-old debate. Do you really need a budget?

The simple answer is it depends on what you want out of life.

Do you want to live paycheck to paycheck, struggling with money, straddled with debt? Or with financial independence where you control your destiny?

Stress vs. joy. The choice is yours.

With human nature, our tendency is to spend money. While there are some savers in the room, it is typically a learned trait. Society wants quick results and with material items so cheap, it is easy to go overbudget.

Does extra income really solve someone’s money problems?

Last I checked, there are plenty of people who made millions are in bankruptcy because of overspending, not living within their means, and a budget wasn’t a term they used.

Here is a quick test…

If you have read this far into the post, then you need a budget. Keep reading. We have plenty of information to help you succeed. Also, you will learn various ways to budgeting that work for you.

Longer Answer & Must Read: Money Bliss Steps to Financial Freedom – this is the long term answer to “Do You Need a Budget?”

Purpose of a Budget

Okay, so we figured out that you need a budget. But, you aren’t truly convinced about why you need a budget.

What is the reason or main purpose of a budget?

The purpose of a budget is to first decide where you plan to spend/save money and then, see if you followed through on your plan.

Are you under budget? Are you over budget? Specifically, are you making progress to your life’s vision?

That is the role of a budget.

It is a guide for your money. Like we have said many times before you can manage your money or have your money manage you.

Personally, we use a budget to reach financial freedom faster and to make sure we have money set aside to travel. We have chosen to live a little more frugal than our neighbors (some might say much more frugal). However, the trade off for us is to travel now. Not wait until “retirement.”

For us, the purpose of a budget helps us to travel each year plus work our way towards financial freedom.

For you, what is the purpose of a budget? What do you want out of life?

Use on of these methods of budgeting as a guide to develop your budget.

Importance of Budgeting

There are many benefits of budgeting. However, most people struggle with a budget because saying no to yourself can be hard.

Let’s look at the bigger picture.

Do you want to manage your money? Or have your money manage you?

The choice is yours.

A budget is just a spending plan written out in advance.

You manage money your way!

That is a huge importance of budgeting. Personally, I would much rather decide how I want to spend my money. That is one of the biggest reasons we decided to pay off our debt in one year.

The importance of budgeting is to make sure you are living within your means and have the ability to pay for your expenses.

A budget doesn’t have to be complicated. It helps you lower big ticket expenses like housing, food, and transportation and then make sure you have enough remaining for the rest of your expenses.

If debt is a part of your life, then you are able to pay off debt faster by knowing where you spend money (and specifically what is worth spending money on). If you are debt-free, then you can continue paying in cash rather than racking up debt.

By moving towards a budget, then the foundation is laid to build a solid money journey.

You know where and how your money is spent. Then, you’re not left at the end of the month wondering if and when you will run out of money.

Another key importance of budgeting is it forces you to be organized with your finances. Then, you know where your money is going.

Creating a budget shouldn’t be overcomplicated or hard. That is something we will teach you how to do.

Benefits of Budgeting

Too many times people have good intentions of creating a budget and give up too quickly, then they never finally understand the benefits of budgeting.

It will take a few months or paycheck cycles to truly notice the benefits of budgeting (AKA spending less than you make).

You need to learn how to budget money and get into the groove of it.

No matter what we do…we can’t change how fast the days move. This is hard when you are working hard on your budget for the first time and want to see progress faster.

Consistency makes budgeting actually work.

A few of the benefits of budgeting include:

  • Stop fighting about money
  • Ability to reach your goals faster
  • Prioritize spending

Did you realize we only listed a few of the benefits of budgeting? Learn all nine Surprising Advantages of Budgeting your Money. (#7 may save your marriage)

As paychecks roll in and the months go by, you start seeing the bigger and bigger picture on the benefits of budgeting.

How to Manage Money

Now, that you read you need a budget, the purpose of a budget, the importance of budgeting plus the true benefits of budgeting, let’s learn how to manage money.

Specifically, how to manage your money.

Remember you have the choice to manage your money or have your money manage you. The choice is yours.

So, how can you manage your money?

One place to start is look at what others are doing. What makes them successful or not successful.

You can manage your money based off percentages like the Cents Plan Formula.

You can look at the household budget percentages to see how people spend money according to the statistics.

Ask a friend or family member how they manage money. (Some may tell you others won’t say a word.)

You can also go in depth with My Ultimate Money Blueprint.

Just remember, in the end, you want to manage money your way.

Steps on How to Budget Money

Managing money is more than just a budget.

It is about giving you choices in life.

These steps on learning how to budget money are very global. They aren’t specific tactics for budgeting. You can learn that in the 7 steps to making a budget. 

These is the overarching themes that guide you on how to budget your money. Let’s budget your life and change your finances.

1. Life’s Vision

Before we starting truly budgeting, we just tracked our spending. Without fail each and every month, there wasn’t money leftover to do what we wanted in life. Things just didn’t seem fair.

Then, I got this hair-brained idea to pay off all of our debt in 1 year.

Let me tell you…it was the best decision we ever made. You can read about our journey to be debt free.

By paying off our debt, we decided to put us first and what we wanted in life.

Extra money was going towards all of debt each month. So, that meant everything else was hacked to make paying off debt possible.

During that time, we truly understood what we wanted in life, what was important to us, and how we would get there. I guess you could say we began to budget our life.

Do you know what your life vision is? Your why? Your next money goal?

If not, then start here on making money goals.

2. Live Within Your Means

While this seems blatantly obvious, it is one of the hardest things for people to do.

Simply put…         

Income > Spending

Your income is greater than your spending (and hopefully savings is included in that number too).

One of the fastest ways to start living within your means is with a no spend challenge.

Plus it will help you uncover your life’s visions and what truly matters to you.

If you have been spending more than you make, then you are letting money manage you.

By living within your means, then you are managing your money your way.

Learn Exactly… How to Live Below Your Means and Love Life

3. Be Okay Being Different

The comparison trap is real.

With social media, it is hard to escape any type of comparison game. It used to be “Keep up with the Joneses’” and that just meant the neighbors and friends around you. Now, it is comparing yourself to influencers and people you will never meet in your lifetime.

The key to long term success on how to manage money is doing it your way, which means that your priorities will be different than everyone around you. And you have to be okay with being different.

Need ideas to stay on budget? Find 101 Fun Things To Do With No Money.

Need the motivation to live in a minimalist home? Could You Live In a Minimalist Home? (Real Life Minimalists) Hint: We were featured because while less is more.

4. Find a System to Work for You

The recommendation I always make when starting out with a budget is to use paper and pencil. Something tangible that you can touch and feel. Then, it becomes a constant reminder of your new ways of managing money.

Over the long-term with budgeting, you must find a system to work for you. Maybe an app? Maybe a spreadsheet? Possibly a software?

The key is finding a system that will work for you. And if you combine finances, it has to work for both of you.

This is where most people fail.

There are so many options for free and paid budgeting apps today. It may seem overwhelming. But, you can’t go back to other habits.

Today, we use Quicken and a personalized spreadsheet. Thankfully, Quicken does all of the hard work of downloading transactions, categorizing them, and creating reports.

5. Celebrate Successes

This is something that doesn’t happen as much as it should with money goals. Too many times, we are so focused on saving money and living frugally, we forget to live and enjoy life.

You need to stop and smell the roses.

In this case, you need to celebrate your wins along your journey.

Here at Money Bliss, we like to focus on…

Life. Money. Enjoy.

Life is first. You need to enjoy your life and figure out how money relates to your life. You need to budget your life.

Don’t be afraid to celebrate your success. And if you don’t believe us…One of the steps in the Money Bliss Steps to Financial Freedom is about celebrating success and doing something for you.

How to Set up a Budget

Setting up a budget shouldn’t be hard or complicated.

Don’t overanalyze. Don’t give up.

Most people have to work on setting a budget that works for them over a couple of months. Each month making small refinements.

The end goal is to set a budget that works for you.

A High-Level View of Budgeting:

  1. Determine what your money goals are
  2. Figure out your income
  3. Track how much you are spending
  4. Set up a Budget or Spending Plan
  5. Track your progress

Yes, this is a very high-level view of setting up a budget. At this point, you don’t have to divide up into budgeting categories if you don’t want to.

There are plenty of resources on our site to help you finalize a budget that works for you.

Find detailed resources on how to make a budget.

The key to setting up a budget is be realistic.

You want to set yourself up for success – not instant failure.

One of the key ingredients to make you a success is pocket money. Personally, I believe this one category can make or break your budget. Understand how pocket money (AKA slush money) works.

When setting up a budget for the first time, set aside time to work through the budgeting process. A solid budget that will work (remember that is a key ingredient for success) needs to be based on your life’s visions. Not just slapped together in 5 minutes.

Learn How to Budget Money

Learning how to budget money is completely doable.

Budgeting shouldn’t be cumbersome or overwhelming. In the long run, the benefits of budgeting outweigh living paycheck to paycheck or stressed about money.

A budget makes sure your expenses (and savings) are below your income. From there you can decide how detailed you want to get with your budget.

The purpose of a budget is to help you successfully reach your life’s visions. The point where you start managing your money and not being managed by your money.

Further resources on budgeting:

Make sure to download our free budget printables!

From all of the free and paid budgeting apps, here are our top budgeting apps to check out!

This section may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. Please read the full disclosure below.

Empower Personal Wealth, LLC (“EPW”) compensates Money Bliss  for new leads. Money Bliss  is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.

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Your automated financial assistant and budget tracker are designed to put you back in control of your money.

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moneybliss.org

HoneyMoney increases your awareness about your money habits. Being fully aware of your money naturally changes how you spend it.

Great way to use cash flow budgeting. Plus uses “envelopes” to budget.

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Moneyspire is user-friendly personal finance and small business accounting software that brings your entire finances together in one place.

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Source: moneybliss.org