Posts tagged with "finance"

Green Car by Mina Tocalini for 360 Magazine

China’s EV Industry Growth

1.3M Electric Vehicles Were Sold In China In 2020 – Projected For 51% Increase By 2021

China has become a relatively rich market for Electric vehicles (EVs) in recent times, and companies like Tesla have pounced on the opportunity. China posted a record number of EVs sold in the country in 2020, despite the global downturn of the automotive industry due to the COVID-19 pandemic. According to data presented by TradingPlatforms, 1.3M EVs were sold in China in 2020– a rise of 8% YoY, but is projected to grow by over 51% in 2021 to almost 2M.

EV Enters Mainstream– China One of Promising Markets, Despite Negative Effects of Pandemic

EVs have entered the automotive mainstream in recent times with Tesla setting the tone for affordable and stylish EVs. In 2019, the global EV market was valued at just over $162B and is expected to see tremendous growth in the next decade. The global EV market is projected to have a compound annual growth rate of 22.12% in the period from 2019-2026, and rise to a value of almost $803B in 2026.

China is a particularly strong market for EVs, where a record number of EVs were sold in 2020. However, recent policy changes around the EV industry in China, and the more recent Coronavirus pandemic, have slowed down the strong momentum EVs once generated. Despite this, the number of EVs sold in China still saw a modest increase of 8% YoY from 2019-2020 to a record 1.3M units sold.

Demand is also expected to rebound after 2020’s sharp downturn for the entire industry. EV sales are projected to increase by over 51% to almost 2M EVs sold. Automotive industry expert Chris Jones noted: “Prospects are very good for China’s EV market in 2021. There is already an excellent network of standardized public EV chargers in China, good government support and now a return to strong consumer demand.”

SAIC-GM-Wuling and Tesla Carried Chinese EV Industry Through Turbulent Time

Two brands and their vehicles carried the Chinese EV industry through a difficult period caused by the pandemic: SAIC-GM-Wuling and Tesla. The Tesla Model 3 was the most popular EV in China for a time until the Wuling Hong Guang Mini EV entered the market in the middle of 2020. As of July 2020, the Tesla Model 3 was the most registered new electric car in China with the Wuling Hong Guang Mini EV already following closely behind.

An estimated 11,000 Model 3’s had been registered by that period while 7,250 Wuling Hong Guang Mini EV had already been registered despite deliveries only starting in the same month. By the end of 2020, SAIC-GM-Wuling had become the most popular EV brand in China with an estimated 177,000 units in car sales compared to Tesla’s 137,460 units.

The two brands offer two very different EVs, yet found that their shared success that carried the Chinese EV market through a difficult time. Jones further notes: “If it had not been for the huge success of these two very different EVs, the Chinese EV market would have declined in 2020. Between them, the two models represented one in five of all EVs sold in China.”

You can read more about the story with more statistics and information at TradingPlatform’s website.

 

 

Mini Tocalini illustration for hair salon and Barbershop marketing for 360 MAGAZINE

SNAP AND SHARE

Black Salon and Barbershop Owners as Social Influencers

Wil Shelton, CEO and Founder of Wil Power Integrated Marketing 

All marketers understand the importance of sharing images and messages with their online communities. But what if your online community doesn’t reflect enough diversity for African Americans to engage? African American salon and barbershop marketing can breathe life into a campaign and enable brands to piggyback on the connection Black barbers and hairstylists already have within their communities—including those that are online. 

These cultural catalysts are considered to be taste-makers within the African American community because they are always the first to know about new trends, products, and sports or news information that matters to their customers. When they share an in-store promotion, their customers take it as a recommendation from a trusted source. And that’s when the word-of-mouth marketing really starts to take effect.

African American customers who happen to be in the shops are thrilled to be a part of this seemingly spontaneous, infused in-store experience, which turns another day at the salon into a behind-the-scenes sneak peek at the next big craze that’s about to blow up. In-store marketing means that not only do these customers get to be in the know before everyone else, they score some dope merch to prove it. 

You can be sure they leave that salon or barbershop ready to get everyone they know excited, too. But in-store marketing activations don’t end there. Because African-American-owned salons and barbershops tend to have huge online followings on social media sites such as Instagram.

In fact, almost all Black salon and barbershop owners are savvy social media influencers and often have hundreds of thousands of social media followers. You can see why smart brands are competing for their recommendation. Even better, most African American barbers and salon owners are more sophisticated in non-traditional marketing than a lot of senior media planners and buyers. But this hasn’t happened by chance! They are entrepreneurs who have had to teach themselves how to promote their stores and being seen as on-trend is part of the allure.

Shop owners have a history of doing more with less. In short, out of a lack of resources, urban barbershop owners have had to be nimble and develop the skills to become their own Black marketing creatives, media planners, and strategists.  

Barbers and stylists are engagement experts, and what they have accomplished can’t be devalued, because they have the power to monetize the culture and narratives in their shops and elevate the marketing strategies of the brands with which they choose to work. Even after COVID-19 hit, they have found ways to pivot and thrive. 

African American men and women gather weekly to spend money on self-improvement and discuss what’s new. This culture predisposes them to the idea of receiving brand messaging from the chair. Even as social media has expanded the realm of influencers, barbers and hairstylists have maintained and, in most cases, built on their role as taste-makers to become the micro-influencer stars. 

They’ve done it by leveraging their strong social-media engagement skills to develop an ever-widening circle of influence. This phenomenon is nothing new, but, interestingly, COVID-19 has put salon and barbershop owners in the spotlight, as people realize the critical role they play in their lives. This makes it more relevant than ever to leverage their influence to reach African American consumers.

About the Author 

Wil Shelton is the CEO & Founder of Wil Power Integrated Marketing, a full-service agency offering traditional and digital marketing services to reach multicultural audiences in the beauty and grooming industries.  

Has COVID Clouded Your Retirement Picture? 3 Tips To Plan Clearly

Some people planning for retirement may do most of the right things in terms of saving and investing. But they don’t have a crystal ball and cannot foresee exactly how much money they will need in their non-working years – or for how long.

That uncertainty – magnified by the financial effects of COVID-19 – is one reason why it’s important to always keep the distant future in mind when planning and to consider all options that address those potential needs, says John Smallwood, president of Smallwood Wealth Management and author of It’s Your Wealth – Keep It: The Definitive Guide to Growing, Protecting, Enjoying, and Passing On Your Wealth.

“Too often, people are siloed in their view of their financial plan rather than focusing on the big picture,” Smallwood says. “Sometimes, it’s because they believe in a pitch that one magic product or investment is going to save their retirement.

“The pandemic causes some people to look for fast solutions, but there is no magic wand that you can wave and save your financial plan. The ‘magic’ that is going to help you is to put multiple products and multiple strategies together in an integrated way that is unique to you.”

Smallwood says those either starting or reevaluating a financial plan should consider these points:

  • Avoid cookie-cutter solutions. Because every person’s circumstances are different, a one-size-fits-all approach in financial planning doesn’t make sense for the future retiree, Smallwood says. “Whether it’s a mutual fund, insurance policy, annuity, a stock option, 401(k), or something else, the truth is that banking entirely on a single product or type of investment is setting you up for financial failure,” Smallwood says. “There are always popular products being pushed, but cookie-cutter solutions don’t take into account that every client has different financial pressures. Single products are often focused tightly on rate of return, but they don’t look at everything that’s happening in a person’s life or at erosion principles, which are actually taking away more wealth than is being accumulated in many cases.”
  • Know how to minimize market volatility. Smallwood says having measurable goals and a realistic view are important to success with a financial strategy. And part of that strategy includes understanding and minimizing the impact of market volatility on your money. “One way to make a sense of it all is to know the difference between average rate of return, sequence of returns, and actual return,” he says. “Average rate of return is over the life of an investment. Sequence of returns is the order in which your investments provide you with a return. Actual return is the actual amount of money gained or lost during a quarter or year compared to the initial value of an investment.”
  • Don’t get caught up in chasing returns. “Financial success does not come from chasing returns or selecting a magic product or asset class,” Smallwood says. “It comes from having a balanced plan, and then stress-testing that plan for weak areas to see how taxes, feeds, inflation, medical expenses, market volatility, college expenses and other variables can impact wealth potential. People who chase returns typically buy an asset class, or they buy a fund based on its past performance. If it doesn’t do well, they sell it, and they buy the next hot-performing fund. That’s how they fall into the trap that keeps eroding their wealth.”

“To be successful with your retirement plan,” Smallwood says, “you need to keep an open mind, understand your uniqueness, and not follow the crowd in terms of what are the right solutions for you.”

About John L. Smallwood, CFP®

John L. Smallwood is a senior wealth advisor (www.johnlsmallwood.com) and president of Smallwood Wealth Management and affiliated companies, providing investment consulting and financial plan design for corporate executives, entrepreneurs, and professionals. He is the author of It’s Your Wealth – Keep It: The Definitive Guide To Growing, Protecting, Enjoying, And Passing On Your Wealth, and a previous book, Five Ways Your Wealth is Under Attack.

Tech illustration by Sara Davidson for 360 Magazine

Tech Industry Billionaires

70% of the Top 10 Billionaires Generated Their Wealth from the Tech Industry.

Data researched by Trading platforms UK indicates that 70% of the top ten richest people amassed their wealth from the technology industry as of March 1, 2021. The top ten wealthiest individuals control a fortune of $1.14 trillion in total, with tech players accounting for $855.9 billion.

Amazon founder Jeff Bezos is the wealthiest person globally with a fortune of $181 billion, followed by Tesla CEO Elon Musk at $174 billion. Microsoft founder Bill Gates ranks third with a fortune of $135 billion.

The report explains some of the underlying factors leading to the tech sector’s dominance of the top ten rich list. According to the research report:

“The dominance of the rich list by the technology industry figures also points to the sector’s resilience in times of crisis. Technology rose to prominence due to its ability to offer solutions to help people cope with the coronavirus crisis. For instance, during the health crisis, most billionaires in the sector like Amazon’s Jeff Bezos amassed more wealth as more people leveraged on e-Commerce platforms amid the lockdown and stay at home measures.”

The U.S. and China together host 49% of the top 500 billionaires globally.

Additionally, the findings reveal that the United States has the highest number of billionaires globally at 156, while China ranks second at 86. The two countries, therefore, account for 49% of the top 500 billionaires globally.

Germany is third with 28 billionaires followed by Russia at 24. Hong Kong and France follow, with each having 17 billionaires. The United Kingdom and India each have 16 billionaires. Canada is ninth with 15 billionaires while Sweden is tenth with 11 billionaires.

The analysis also shows that the tech industry has the highest number of billionaires globally at 84. Industrial ranks second with 56 billionaires followed by diversified at 50 while the consumer has 43 billionaires. Finance has 37 billionaires, while entertainment has the least billionaires at 10.

For further statistics and information, please visit this website.

Money illustration by 360 Magazine

LVMH Market Cap Increase

LVMH Market Cap Soars to €265 Billion, Tops Nestle as Highest Valued Company on European Stock Market

Luxury conglomerate LVMH is among the key beneficiaries of investor optimism. According to the research data analyzed and published by Finaria, luxury conglomerate LVMH’s market capitalization stood at €264.55 billion as of February 26, 2021. That made it the highest valued company on the European stock market, overtaking Nestle which had CHF 267.57 billion (€242 billion).

Based on a HH Journal report, LVHM’s share price increased by 65.4% between April 2020 and February 2021. During the same period, European luxury rival Richemont posted a share price gain of 74%. Hermes stock shot up by 54.7% while Kering’s soared by 22.1%.

Fashion and Leather Goods Division Accounted for 86.5% of LVMH 2020 Profit

LVMH, the world’s largest luxury group, owns 75 primary brands across five divisions. Fashion and leather goods, the largest of these, accounted for a 46% share of Q1 to Q3 2020 revenue. During the period, the segment’s sales fell by 11% but started showing signs of recovery in Q3 2020, with a 12% uptick.

The performance of the fashion and leather goods division improved further in Q4 2020 when its revenue soared by 18% to €7.3 billion. For the full year 2020, the segment’s organic revenue only declined by 3%, compared to its 24% decline during H1 2020. It thus accounted for 86.5% of LVMH’s profits for the year 2020.

Overall, LVMH group sales in Q4 2020 totaled €14.3 billion, down by only 3% YoY. Asia contributed to its strong performance with a 21% increase in regional sales. In contrast, sales in Europe fell by 24%.

For the full-year 2020, LVMH’s revenue sank by 16% to €44.65 billion while its net profit fell by 34% to €4.7 billion. On the bright side, the group completed the acquisition of US jeweler Tiffany at $15.8 billion. In 2021, analysts project an increase of 18% in revenue and a 67% uptick in earnings for LVMH.

The full story, statistics and information can be found on Finaria’s website.

Cryptocurrency by Heather Skovlund for 360 Magazine

German Alternative Currency Development

Just 43% of Germans Still Trust European Central Bank, Cryptocurrencies as Alternative Currency Benefit from Development

  • Only 43% still have faith in the European Central Bank
  • Confidence in decline since autumn 2018
  • Lack of trust a potential driver for Bitcoin & Co’s price rallies

A mere 43% of German citizens have confidence in the European Central Bank (ECB). Trust in the European Union institution has been falling since autumn 2018–and the pandemic seems to be fueling the trend even further. As can be seen in a new infographic from Kryptoszene, skepticism could be one of the reasons behind Bitcoin & Co.’s rally.

Citizens’ confidence in the ECB rose between 2016 and autumn 2018, but has been fading since then. The central bank’s specific policies aside, there is a growing mistrust in the stability of the financial and monetary system.

This development seems to be working in cryptocurrencies’ favor. 5% of professional investors are convinced that distrust in the current monetary system is a strong price driver, with the value of Bitcoin rising by around 412% within the last 365 days.

Meanwhile, Germans also seem to be relying increasingly on cash. As shown in the infographic, just under one in five Germans believe that people hold cash in order to protect themselves from bank and state failures.

“Trust is a central bank’s most precious asset. This has been damaged recently, possibly in part due to loose monetary policy in response to the corona crisis,” according to Kryptoszene analyst Raphael Lulay. “Although the damage does not seem to have reached a critical level just yet, alternative currencies are already benefiting.”

To read further and see more statistics, please visit Kryptoszene.de’s website.

About Kryptoszene.de

Kryptoszene.de is a news and information platform that publishes cryptocurrency forecasts, investment news, background reports, analyses and instructions for buying and trading cryptocurrencies and other assets.

Money illustration for 360 Magazine

China’s Social Commerce Sales

China’s Social Commerce Sales to Soar by 36% to $363 Billion in 2021, Ten Times the U.S. Figure

Though the U.S. social commerce market is growing at a rapid pace, China is not likely to lose its position of dominance in the near future.

According to the research data analyzed and published by Finaria, the total social commerce sales in China was worth $242.41 billion in 2020, accounting for 11.7% of online sales. It will grow to $363.26 billion in 2021 and account for a 13.1% share of the eCommerce market.

The U.S. will take the lead in retail sales in 2021, with $5.506 trillion against China’s $5.13 trillion. But China’s eCommerce sales will outperform the U.S. by a $2 trillion margin.

52% of China’s Retail Sales Will Happen Online in 2021

The total number of social buyers in China was estimated to be 357.2 million in 2020. It is forecast to increase to 392.2 million in 2021, 420.0 million in 2022 and 446.8 million in 2023.

The commerce market’s performance is partly attributable to China’s smartphone-driven culture. Most social buyers U.S.e mobile devices to shop and most digital storefronts start out on mobile layouts.

WeChat’s Mini Programs is among the most popular platforms for social commerce. In 2020, the platform facilitated transactions worth 1.6 trillion yuan ($250 billion). That was double its 2019 transaction value. WeChat hosts around 2.3 million Mini Programs, compared to Apple App Store’s 1.96 million and Google Play Store’s 2.87 million.

Based on a study by WeForum, China accounted for over 50% of global online retail sales in 2020. The share of online sales in the country’s retail sales went from 20% in 2016 to 44.8% in 2020. Comparatively, the UK had a 27.7% share while the U.S. had 14.7%.

Lastly, according to eMarketer, 52.1% of China’s retail sales in 2021 will take place online. It will be the first time that a country records more sales online than offline. South Korea will follow with a 28.9% share while the UK will be third with 28.3%. The U.S. will have a 15% share.

More statistics and information can be found on Finaria’s website.

Money illustration for 360 Magazine

Top Five Tech Billionaires Worth More Than 80 Poorest Countries Combined

The COVID-19 has played a significant role in wealth redistribution, with tech companies and their founders emerging as the biggest winners. While aviation, real estate, and hospitality industries have been pushed to the bottom of the global rich list, the tech industry billionaires have witnessed the largest wealth gains in the last year.

According to data, the combined net worth of the five wealthiest people in the US tech industry hit $567 billion in February, more than the gross domestic product (GDP) of the 80 poorest countries combined.

Jeff Bezos’ Wealth Surged by 65% Year-Over-Year (YoY) and Hit $187 billion in 2021

As the COVID-19 spread, the world has relied on many technological tools across different sectors­–from business and education to commerce and health care. Tech companies that have provided the best solutions amid the pandemic witnessed the most significant revenue surge, while their founders got richer, to the tune of billions.

Amazon products have become one of the most demanded in the world during the pandemic, as it keeps providing tech items, groceries, and entertainment to people amid lockdown. Because of the high demand for its services, the company had to hire an additional 175,000 workers to keep up with surging demand.

According to the Forbes billionaire list, the COVID-19 has helped Amazon founder and CEO Jeff Bezos to grow his wealth by $74 billion in the last year, with his net worth reaching $187 billion this month. The International Monetary Fund data shows this figure is closest to New Zealand and Iraq’s GDP, which ranked 52nd and 53rd globally with $193.5 billion and $178.1 billion, respectively.

Bill Gates, the Microsoft founder, is the second wealthiest person in the US tech industry, and globally. The net worth of the billionaire working with the WHO and drug makers to defeat the coronavirus is currently standing at $120billion. Statistics show Gates’ wealth grew by $22billion in the last year and is now closest to Morocco’s GDP, which ranked 59th globally.

As the fifth-largest tech company globally, Facebook has also witnessed impressive growth in 2020. The Facebook shares rose by 26% in the last year, pushing its CEO’s fortune up by $39 billion to $93.7 billion. This figure means that Mark Zuckerberg’s wealth is $700 million above Puerto Rico’s GDP, which stands at $93.9 billion.

The chairman, chief technology officer, and co-founder of software giant Oracle, Larry Ellison, and co-founder of Google, Larry Page, ranked as the fourth and fifth tech billionaires globally, with $84.9 billion and $80.4 billion in net worth as of this month. Their wealth is the closest to Sri Lanka and Dominican Republic’s GDP, which ranked 66th and 67th globally, with $81.1 billion and $77.8 billion, respectively.

Top Five Tech Billionaires Worth more than GDP of Sweden, Thailand or Belgium

According to Forbes and International Monetary Fund data, the cumulative wealth of the top five tech billionaires also surpasses the GDP of several countries considered to be economic powerhouses. For example, their combined net worth is bigger than the GDP of Austria, Norway, or United Arab Emirates, which ranked 28th, 33rd, and 35th globally with $432.8 billion, $366.3 billion, and $353.9 billion, respectively.

Statistics show that the five tech billionaires’ wealth is the closest to Poland and Sweden’s GDP, which ranked as the 23rd and 24th economies globally. The two countries’ gross domestic product stood at $580.9 billion and $529 billion in 2020.

How Bitcoin can Positively Impact Your Small Business

Bitcoin (BTC) is the most popular cryptocurrency that is present in blockchain technology. This means all the transactions that are made with bitcoin are stored in a ledger that consists of different blocks in the blockchain. The majority of the people only heard about bitcoin, but they don’t know about it in detail. Also, there are plenty of aspects related to BTC which you must know in order to make a deal with it. 

Bitcoin trading is the act of buying bitcoin at a low rate and then reselling it at a higher rate to make profits via the margin. It’s crucial to choose a reputable platform. There are numerous platforms present, and among them, all the best one is the https://bitcointrader2.com. It’s well known for Ethereum (ETH) trade but its facilities also trade other cryptocurrencies. By making a deal with BTC, everyone becomes able to trade it and gains the potential to earn from it. Everyone needs to understand the importance of the platform they use while performing BTC trade.

Major impacts of Bitcoin on small businesses

The main impacts that the Bitcoin can have on small businesses are:

Reduce the risk of transaction fraud

One of the major impacts of bitcoin on small businesses is that by accepting it as payment, the risk of fraud or cyber threats are reduced. The entire payment process is based on blockchain technology which provides high-level security. Also, as it is a digital payment system, so there’s no risk of losing money like when you have cash in your pocket.

Transaction speed is fast, and fees are low

When small businesses invest in bitcoin, they receive low fees on all transactions. Whether the transactions are huge, the amount of fees remains low, and there is no tax required. The transactions made with BTC are also completed fast. They require only 2-3 seconds, unlike in the case of other currencies that require a few days.

Acquisition of new customers

When small business start accepting bitcoin payments, they tend to gain more customers. It’s because the number of people who are investing and trading cryptocurrencies are increasing day by day. They are in search of the best platforms for investing or making purchases. 

Negligence of paperwork of all kinds

There is no need to make a deal with any kind of paperwork which they have to pay with other currencies in the bank, etc. Its because it is a digital payment system, so users only have to require their wallet and the right address at which they have to make payments.

Easy access to the world market

Once a business starts accepting bitcoin payments, it gains access to the word market easily. Bitcoin helps them to save time and money on transactions, which is more time and money to use to grow your business.

Bitcoin can Benefit Your Business

Trading Bitcoin can be a daunting task. It’s important for people to learn about the basics of trading Bitcoin to get top-notch results. Moreover, individuals should take time to learn tips and strategies to become successful in bitcoin trading.

The most important thing for beginners to pay attention to is selecting the most reputed exchange for buying BTC as well as choosing the best trading platform. You need to look for a reputed and reliable platform where you are getting top-notch services. Using this knowledge you can make good profits but easily improve your business. 

Real Estate article illustration by Rita Azar for 360 magazine

Break into the Housing Market

In the mid-2000s, observers expected millennial homeowners to be few and far in between. This new generation faced stagnant wages, crippling debt issues, and an unfavorable market. Flash forward more than a decade later, and we see a different picture.

The Wall Street Journal notes, a wellspring of new buyers from the millennial market has carried the housing industry this year. Last year, this demographic represented more than half the new mortgages. By July 2019, they also made up 38% of homebuyers. Home ownership aspirations among millennials continue to grow even in 2020, thanks to low interest rates. The COVID-19 pandemic, however, also led to massive unemployment. Its impact on millennials’ finances will no doubt slow down demand from this market.

If you’ve a stable job and need a little more elbow room, now could be the best time to buy a home. But let’s not get ahead of ourselves. And even if you had to put your house-hunting aspirations on hold, don’t fret. The first steps often begin long before you even look at the listings.

The Advantages of Home Ownership

There is no real answer to the classic rent or own debate. What works best for your situation will depend on your finances and lifestyle. Some people prefer the mobility offered by renting. Others love the stability provided by an owned home. When it comes to price, it’s a different ball game.

The longer you live somewhere, the more it makes financial sense to own the property. Fixed-rate mortgage payments have one big advantage over rent. You pay the same amount for the entirety of the mortgage. Rents, meanwhile, can rise over time. If rents rise too high, it might be cheaper to buy a house!

As a general rule, you can compare the costs of renting vs. owning by multiplying your rent by 200. This is the equivalent of staying in place for 16 years and three months. For instance, let’s assume your rent costs $1,500 a month. In 200 months’ time, you could’ve paid for a modest home worth $300,000. And this is already assuming that your rent stays the same.

Complicating factors include the median home price in your neighborhood. Renting might be justified if the houses in your neighborhood are too pricey. If you have the option of moving, then a cheaper home somewhere else might be more practical.

Refining Your Budget

Whoa, there. Close that tab and stop looking at house listings. Before you fall down that rabbit hole, let’s examine your budget. This much-needed reality check can help you make the right financial decisions. The last thing you want is repeat the same mistakes people made two decades before.

Your budget will play a key role in deciding when you can buy a home. How much mortgage can you fit into your regular budget today? Will your budget have room for savings afterward? Examine the costs of home ownership and compare them to your current needs. In the meantime, focus on pressing financial matters like emergency funds and debts. You must make these considerations before deciding to buy a home. While you wait, set aside as much money as you can for a down payment.

Defining Your Down

The down payment is among the most important expenses you’ll make in the homebuying process. It lowers your starting loan-to-value (LTV) ratio. Your LTV is the percentage of the home paid for by the mortgage and thus owned by your lender. For instance, if you paid a 10 percent down payment, your LTV ratio is 90 percent. The remaining 10 percent is your home equity, the amount you do own. The greater your starting home equity, the smaller the sum you need to borrow.

A sizeable down payment cuts down your expenses in other ways. You’ll also avoid private mortgage insurance (PMI). This is an extraneous fee slapped onto your mortgage payment to protect lenders from the risks of default. It does nothing to help you build equity!

By law, PMI payments stop after your LTV ratio reaches 78 percent. But why waste your money until then? Instead, avoid paying PMI altogether by having a down payment worth at least 20 percent of your home’s price. You can save more money by removing that one unnecessary cost.

Remember, prices are not static. Real estate markets often follow an upward curve. Be aggressive when saving and adjust your down payment goals. If you expect real estate to climb by 3 percent each year, plan accordingly. If your savings goal is 5 years away, aim to make 16 percent more than your target amount.

Analyzing Your Home Needs

It’s easy to get carried away with a dream home. But don’t buy into it easily. Choose a home based on meeting your immediate and anticipated needs.

The ideal home will vary from person to person. If you like to keep things simple and manageable, then a small home might be right for you. A standard, four-bedroom family home is good for the average nuclear family with two kids. Even if you don’t expect another child, the extra bedroom could serve a variety of purposes. It can be a guest bedroom, a room for your parents, or a home office. If you have or expect a big family, a bigger home is in order. If you love the countryside, a rural property might be the thing you’re looking for.

Home offices in particular have become important considerations for homebuyers. Thanks to the advent of telecommuting, millennials needn’t live close to the city center to work. Companies, including tech giants like Twitter, now recognize the advantages of remote work. This trend grew further in the wake of COVID-19 and may likely continue into the future. A home office keeps your professional and personal lives distinct when telecommuting.

While you can always go to cheaper suburban or rural areas to buy a bigger home, this isn’t always advisable. A long stressful commute to work can have adverse effects on both your health and your daily budget. And don’t think having “more house for your money” is a bargain. One UCLA study has found that most rooms in a standard American house were underused.

Mortgage Options

How much and how long you must pay for a house will vary. It’s natural for you to veer toward the smallest monthly payment option. You want a mortgage that fits snugly into your budget. But this choice comes with its own drawbacks. Loans calculate interest fees from the money you borrowed based on the rate and the term. The longer the term and the higher the rate, the greater the interest costs.

According to Freddie Mac, the most popular mortgage option has been the 30-year fixed-rate mortgage. These have low, regular payments that are easy to fit into the regular budget. It has been around for nearly a century. But is the 30-year fixed mortgage all that it’s cracked up to be? Critics have claimed that this loan product has failed as a wealth building tool for working-class Americans. This is because the interest costs of a 30-year mortgage will always be high. Besides their long terms, they often have steeper rates.

Thus, aim for as short a term as you can afford. Although pricier each month, a 15-year mortgage can help you save more money in the long run.

Let’s look at one example. Suppose you bought a house worth $300,000 and are willing to pay a 20 percent ($60,000) down payment. You have two options for your $240,000 mortgage. One mortgage offered a 15-year term and 2.5 percent annual percentage rate (APR). The other offers a 30-year term but comes with 3.3 percent APR. The examples below do not include escrow payments like taxes and home insurance.Mortgage DetailsMortgage 1Mortgage 2Term15 Years30 YearsRate (APR)2.5%3.3%Monthly Principal & Interest$1,600.29$1,051.09Total Interest Paid$48,052.94$138,393.31

Although you saved $549.20 each month, you still spent $90,340.37 more on your mortgage’s interest.

Some low monthly payment options come with dire financial consequences. Adjustable-rate mortgages may have low minimum payments at first. But that payment does not reduce your mortgage’s principal. Because their rates change with the market, you’ll likely end up paying more in the future.

Other Ways to Save

There’s more than one way to save money on your mortgage. Because of the way mortgage interest is calculated, you can pay extra toward your principal to save money. This is an excellent and flexible way to reduce your lifetime interest costs if you cannot afford a higher monthly payment up front.

Here’s how it works. In the early days of a mortgage, most of your payments go toward paying interest. On your first payment, only a small part goes toward paying your principal balance. With each payment, your balance shrinks. This means less of your payment goes toward interest and more toward your principal. The cycle continues until your mortgage matures. Paying extra to your principal speeds up this process. 

Let’s return to our 30-year example. Suppose, in the 3rd year, you begin paying an extra $100 per month. For this example, we used this extra payment calculator from MortgageCalculators.info.Mortgage DetailsOriginal PaymentExtra $100/ month on the 3rd yearMonthly Principal & Interest$1,051.09$1,151.09Pay-off Time30 years26 years 3 monthsTime Saved03 years 9 monthsTotal Interest$138,393.31$120,129.89Total Interest Savings0$18,263.42

In that span of time, you shaved off 3 years and 9 months from your loan term and saved about $18,263.42 in total interest charges. That’s money you can set aside for emergency funds, retirement, or other important expenses.

Another way you can save is through biweekly payments. This method takes advantage of a quirk in the calendar. There are about 52 weeks in a year and 26 biweekly periods. In effect, you’ve added an extra month to your payment plan. There are several ways to set up biweekly payments. You can discuss the matter with your lender or have a third party do it on your behalf. Both options come with pricey maintenance fees. The alternative is to pay the equivalent of one month’s payment at the end of the year.

Finally, you can refinance your mortgage. This involves paying down your existing mortgage balance with a new one that has more favorable payment terms. Refinancing to a shorter term or lower rate has the potential to save you even more money in the long run. CBS reports that U.S. homeowners can save $160 each month if they refinanced their mortgages. Indeed, many homeowners refinance when rates drop low enough.

Returning to our previous example, let’s look at how much you can save by refinancing. In this example, we’ll assume you’ve paid off 3 years’ worth of mortgage payments. From there, you refinanced to a 15-year term at the cost of $3,200. Your new APR is 2.7 percent. Here’s how much you can save:Mortgage DetailsCurrent PaymentRefinanced PaymentRemaining Mortgage Balance$225,221.50$225,221.50Rate/APR3.3%2.7%Monthly Principal and Interest$1,051.09$1,523.05Interest Due$115,332.99$48,927.27

By refinancing, you can save $63,205.16 in interest minus your closing costs. But to recoup the costs, you must stay in your current home for at least two years and two months. The up-front costs of refinancing make it an unwieldy option for many homeowners. Thus, refinancing is ideal for established homeowners who intend to stay in their homes long-term.

The Bottom Line

If you want to settle down, don’t wait until your rent goes up. While you save up for your down payment, it’s time to review your spending. Look for expenses you can remove to bolster your cash flow. Start by paying extra toward debt. Clearing your credit card bills and other debts serves a dual purpose. By paying extra toward your debts, you save money and increase your cash flow. Making regular, punctual debt payments also improves your credit rating. This will help you qualify for better interest rates when you look for a mortgage deal.

Look out for caveats like prepayment penalties in your mortgage contract. These punitive clauses punish home buyers for paying extra too early. If a prospective lender won’t remove these clauses, take your business elsewhere. If you’ve already signed on, don’t worry. Since 2014, prepayment penalties must only last three years by law.

As with all things worth doing, if you can afford to wait it out, do so. Great savings come to those who wait.