Each step is numbered based upon the priority. In other words, step one should be on track before moving on to step two, and so on. The problem is that many homeowners jump ahead before the prior step are mastered. This typically leads to living paycheck to paycheck, getting stuck in the consumer debt rut, or reaching retirement to find that you are equity rich and cash poor. By following the steps below, you can help ensure you reach retirement having achieved the long-term goals you desire.

Step 1 – Develop a Cash Reserve

The most important step is to have a reserve fund to cover short-term unplanned expenses. Without having cash reserve, shortages typically result in having consumer debt. Once consumer debt is established, it can lead to destructive long-term habits that are difficult to break. If you have a cash reserve, you should never have a need for unsecured debt.

Step 2 – Pay off ALL Consumer Debts

This is the step where you become consumer debt free, with the exception of your mortgage. Revolving and unsecured debts should be paid off first, with car loans and other secured loans being paid off second. Remember that cars are depreciating assets, and you will always have car expenses. If you are able to pay off your car, you can begin to save money to pay cash for your next car.

Step 3 – Create Significant Liquidity

One of the greatest gifts we have is the gift of compounding interest. This is the quadrant that grows and compounds. Even if you are not secure in steps 1 & 2, if possible, you need to develop the habit of putting cash into long-term investment accounts. Once you are secure in steps 1 & 2, make this quadrant your primary focus and watch your net worth rise over time.

Step 4 – Focus on Home Equity – Paying off your Mortgage

Once you have developed a cash reserve, have paid off all consumer debts, and are on track to meet or exceed your retirement goals, then you can put a focus on paying off your home loan.

Personal finance is most often a reflection of habits. If you develop good financial habits, and exercise them over-time, long-term you will likely do well. Not only can you use the four step plan to help you allocate cash flow in the budget, but you should also use the plan to help you to allocate cash and home equity net worth.

If you have specific questions regarding your personal situation, please call or send me an e-mail. Also, if you have a friend or family member in need of advice, I would be honored to help them as well. Having professional advisors to help you manage your investments, mortgage, taxes, and estate is the best way to protect your long-term results.

I know people are suffering.  All too often I am having gut wrenching conversations with families who are hurting financially, relationally, and emotionally as a result of financial downfalls.  Many of the people I have talked to ultimately find peace and acceptance and growth through the process of deleveraging and developing habits of living within their means.  I have learned a great deal from those who have used their painful experiences to create a better future.  The lessons they have taught me are both powerful and insightful, and are certainly worth sharing.  Below is a summary of the top ten lessons from my notes written during countless interviews:

1. Recessions cause you to be more creative and frugal.
2. Tough times force you to make difficult decisions and give up material luxuries. 
3. You learn that the most important things in life are relational not material. 
4. You realize that living beyond your means is not sustainable.
5. It reminds you that real wealth isn’t about the stuff you own.
6. You learn that cash flow management and cash reserves are the most important components in your personal finances.
7. If you are still employed, you appreciate your employer even more.
8. It is wise to spend less than you make and save at least 10% of your income.
9. Tough times can further develop a spirit of gratitude and appreciation for what you have vs. continually focusing on what you want. 
10. At the end of the day, regardless of whether there is a paycheck each month, or money in the bank, family is what matters.  Don’t sacrifice what you want most for what you want at the moment.

While you may not be able to control what happens with the economy, you can control your own mental focus. Usually, this determines whether you feel anxiety and fear or peace and hope.  The many who have grown through tough circumstances have found that by releasing the pressures of living an unsustainable life, they discover the possibility of a new future.  Difficult decisions must be faced.  Rather than avoid making the tough choices, I encourage you to face them head on, without delay.

It is my hope that each of you who are hurting will find peace and comfort in your circumstance.  If there is anything I can do to help, please let me know.  I appreciate your friendship and the trust you place in me as your mortgage planner.

When shopping for a mortgage, there is far more to consider than interest rate. Like the price of a stock, mortgage rates can change from minute to minute. A rate quote provided at 10:00a.m. can be null and void by 10:15 a.m. This can make one lender appear to offer higher rates when in fact the difference is only a change in the market.

What to look for in a Lender?

Three of the most important qualities to look for in a lender are experience, advice and life-long relationships.

Experience - This is easy to measure by asking the following questions: How long have you been in the business? And, “How many mortgage loans have you closed?” The higher the volume lenders tend to have the best systems and processes that ensure accurate and efficient transactions.

Advice - An advisor by definition is a leader. If a loan officer is quoting a rate and simply following your direction, you are working with an order taker, not an advisor. If the lender does not offer any additional insight or value, that is an indication of a lack of expertise and knowledge.

Life-Long Relationships - An advisor’s role stretched well beyond the close of a transaction. A true Mortgage Advisor will have an intentional system to systematically ensure you are ALWAYS in the best mortgage loan based on the market and your personal situation. The cheapest rate on the wrong strategy can cost you thousands in the long urn. Changing markets and Annual Mortgage Reviews can provide opportunities to reduce the amount of interest you pay over time, which allows you to increase your focus on wealth creation and building investment assets.

The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. Knowing how to shop for a lender can make the difference between working with an amateur who serves as an order taker vs. a professional lender that provides meaningful advice. A Professional Mortgage Advisor will save you thousands of dollars, and provide you with a peace of mind knowing that your home loan is always properly structured. To experience the power of advice and care, email me at scott@scottphippen.com or call my office at 801-501-7950 to arrange for a fifteen minute mortgage review. In addition, you may also choose to fill out the simple form below and we will be in touch with you as soon as possible.

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Utah’s Economy

Fannie Mae is offering a 3.5% incentive for buyers who purchase and close on a Fannie Mae-owned home between January 28 and April 30, 2010. To read more and gather more details simply read the flyer below. In addition, feel free to contact us to see if the home of your dreams is owned by Fannie Mae and would qualify for this program!