Tag: Personal budgeting

With a record number of travelers expected to drive this July 4, here’s how to save on gas

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A record 43.2 million people are expected to travel by car this July 4 holiday, according to AAA, the motoring and leisure travel membership organization.

The good news for those drivers is that gas prices around the country are lower than they were last year.

The national average for a gallon of gas is $3.54 as of July 3, down from $4.81 one year ago, according to AAA.

Last year’s high prices prompted politicians on the state and federal level to call for gas tax holidays.

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Though gas prices are currently still high compared to historical averages, drivers have no plans to cut back on road travel, according to AAA.

That’s as this summer is proving to be a particularly popular travel time. The busier season has not been without complications, including mass flight disruptions leading into the July 4 holiday.

A recent Bankrate survey found 63% of adults plan to take a summer vacation this year, up from 61% last year.

“People want to go somewhere, they want to do something,” said Ted Rossman, senior industry analyst at Bankrate and CreditCards.com. “There’s still a lot of pent-up demand that backed up during the pandemic.”

That demand has helped push categories like airfares and hotels higher this year, Rossman noted.

Bankrate’s survey found 80% of travelers are planning to adjust their plans due to higher prices.

Opting to drive instead of fly was one of the more common changes, according to Rossman, in addition to choosing cheaper accommodations or destinations and traveling for fewer days.

Travelers who are hitting the road by car or other vehicle may also look for ways to cut costs on gas.

1. Be proactive about finding lower prices

Those hitting the road this weekend may want to fill up if they’re passing through the least expensive markets, according to AAA’s recent ranking of the top 10 least expensive markets.

That includes Mississippi, with prices around $2.97 per gallon; Louisiana, $3.08; Alabama, $3.10; Tennessee, $3.10; Arkansas, $3.11; South Carolina, $3.17; Texas, $3.18; Oklahoma, $3.22; Georgia, $3.23; and North Carolina, $3.25.

Drivers everywhere may save by using apps to help them find better gas prices, such as Upside or GasBuddy, according to Rossman.

2. Look for a good gas rewards credit card

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Some credit cards may give you up to 5% cash back on gas, according to Rossman. That includes brands such as Chase Freedom Flex and Discover it Cash Back, he said, which are offering that rate between July and September.

Sam’s Club also offers certain cards that will allow consumers to earn money back on gas.

It is also worthwhile to check the perks your existing credit cards may offer, Rossman said.

“You may have a good gas rewards credit card and not even realize it,” Rossman said.

Of note, it is generally best to avoid gas-branded cards, which may come with high 30% annual interest rates and limited discounts on gas purchases, he said.

3. Try stacking discounts

Drivers should also look to stack offers where they can. For example, a credit card may offer 5% cash back on gas, and a gas station app may provide a 10% offer per gallon, Rossman said.

“That’s two ways to save instead of one,” he said.

4. Double-check your car rental coverage

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Rental cars are also comparatively cheaper this year, Rossman said.

If you’re thinking of renting a car, be sure to double-check whether your credit card may already offer insurance coverage.

“A lot of times, credit cards have various travel perks built in that people may not even realize they have,” Rossman said, which may also include provisions for trip delays or cancellations as well as lost or delayed luggage.

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July 3, 2023
Mortgage points may help homebuyers lower monthly costs amid high interest rates. How to know if this strategy is right for you

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As interest rates have climbed, homebuyers have been confronted with higher borrowing costs.

That has led more home purchasers to opt for one strategy, purchasing mortgage points, as a way to defray higher monthly payments.

Mortgage points let buyers pay an upfront fee to lower the interest rate on their loans. In some cases, sellers will help to buy down rates to help ease transaction costs.

Almost 45% of conventional primary home borrowers bought mortgage points in 2022 to reduce their monthly mortgage payments, a trend that has continued into this year, according to recent research from Zillow.

That is up from 29.6% in 2021, when interest rates were lower.

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The 30-year fixed-rate mortgage currently averages 6.7% according to Freddie Mac, up from 5.8% a year ago. The 15-year fixed-rate mortgage now averages about 6%, up from 4.8% a year ago.

This week, the Federal Reserve decided to pause the interest rate hikes it has put in place to combat high inflation.

As rates stay higher, those who are in the market for a home lose purchasing power. Some experts have urged buyers to consider purchasing mortgage points to lower their monthly payments.

Stephanie Grubbs, a licensed real estate agent at the Zweben team at Douglas Elliman Real Estate in New York, recently did exactly that when one of her clients lowered their asking price.

“This fabulous apartment just had a price reduction, which means you can use those savings to buy down your rate,” Grubbs wrote in the updated ad.

Grubbs, a former financial advisor, said her firm started bringing up the strategy more when the Fed started hiking interest rates.

“In an effort to try to be creative, we talk to sellers about offering to buy down a rate,” Grubbs said.

Other experts say buyers purchasing mortgage points can be a great strategy for the right situation.

That goes particularly if a buyer can afford the extra upfront costs.

Being able to lower that monthly payment can really help give some more wiggle room in people’s budgets and help them reach affordability.

Nicole Bachaud

senior economist at Zillow

Mortgage points refer to the percentage amount of the loan. Typically, one point is worth 1% of the loan value, according to Nicole Bachaud, senior economist at Zillow.

If the loan value is $300,000, one point would typically cost $3,000 and lower the interest rate 0.25 percentage points, she said.

“Being able to lower that monthly payment can really help give some more wiggle room in people’s budgets and help them reach affordability,” Bachaud said.

In addition to higher upfront costs, home buyers should also weigh other factors before buying mortgage points.

Set a timeline for living in your new home

“For most instances, it is definitely a considerable cost savings to be able to buy down on points,” said Kamila Elliott, a certified financial planner and co-founder and CEO of Collective Wealth Partners, a boutique advisory firm in Atlanta. Elliott is also a member of the CNBC Financial Advisor Council.

However, if you buy points and then refinance, that will not allow enough time for your upfront payment to appreciate, Elliott said.

Another important consideration is your timeline for how long you plan to live in the home.

With rates and home prices high, that means closing costs are also elevated, Elliott said.

Consequently, if you move before three to five years, you may take a bigger financial hit, she said.

“There could be a huge loss if you can’t stay in that property long enough to have those expenses amortized out over the time that you’re there,” Elliott said.

Consider other alternatives

If you have extra money when buying a home, you may instead choose to increase the size of your down payment.

This can be advantageous because it creates more equity in the home, Bachaud noted. It may also lower your monthly payments.

If that extra money is enough to bring your down payment to 20% of the home purchase price, that would eliminate the need for private mortgage insurance, which adds to monthly costs for mortgage borrowers who put down less than those sums.

However, you may see more of an effect on your monthly expenses by buying points rather than increasing your down payment, Elliott said.

It costs less for a seller to buy down somebody’s mortgage than it does for them to take a price reduction.

Stephanie Grubbs

licensed real estate agent at Douglas Elliman Real Estate

A point may cost $3,000 to $4,000, for example. But putting those sums toward a down payment likely will not make much of a difference on your monthly costs, Elliott said.

If you want to make sure your mortgage payment doesn’t exceed one-third of your take home income, then paying down on points could be the better option, she said.

In some situations, a seller may offer to buy down the rate, a concession to help offset costs for buyers. Grubbs said she has discussed employing this strategy with clients in her real estate practice.

“It costs less for a seller to buy down somebody’s mortgage than it does for them to take a price reduction,” Grubbs said.

Homebuyers may want to consider pursuing a 2-1 buydown, a mortgage that provides a low interest rate for the first year, a slightly higher rate in the second year and a full rate for the following years.

A 2-1 buydown may also sometimes be seller financed, according to Bachaud.

Talking to a loan officer can help you decide the best decision for your situation, Bachaud said.

Factor in the unknowns

How well any homebuying strategy fares in the long run depends on one big unknown: how the Federal Reserve will handle interest rates going forward.

The latest projections from the central bank call for two more rate hikes this year.

While today’s rates feel high, Elliott said she often reminds people that homebuyers in the 1980s would have loved to have had access to 6% mortgage rates.

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June 17, 2023
Thanksgiving travel rush is back with some new habits

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The Thanksgiving travel rush was back on this year, as people caught planes in numbers not seen in years, setting aside inflation concerns to reunite with loved ones and enjoy some normalcy after two holiday seasons marked by COVID-19 restrictions.

Changing habits around work and play, however, might spread out the crowds and reduce the usual amount of holiday travel stress. Experts say many people will start holiday trips early or return home later than normal because they will spend a few days working remotely — or at least tell the boss they’re working remotely.

The busiest travel days during Thanksgiving week are usually Tuesday, Wednesday and the Sunday after the holiday. This year, the Federal Aviation Administration expects Tuesday to be the busiest travel day with roughly 48,000 scheduled flights.

Chris Williams, of Raleigh, North Carolina, flew Tuesday morning with his wife and two kids to Atlanta, Georgia, to spend the holiday with extended family.

“Of course it’s a stressful and expensive time to fly,” said Williams, 44, who works in finance. “But after a couple years of not getting to spend Thanksgiving with our extended family, I’d say we’re feeling thankful that the world’s gotten to a safe enough place where we can be with loved ones again.”

Although Williams said the family’s budget has been tight this year, he’s capitalized on the opportunity to teach his kids some personal finance basics. His youngest, 11, has been learning how to budget her allowance money since March and is excited to buy small gifts for her friends on Black Friday or Cyber Monday. “Probably slime,” she said, “with glitter.”

The Transportation Security Administration screened nearly 2.3 million travelers on Tuesday, down from more than 2.4 million screened the Tuesday before Thanksgiving in 2019. On Monday, the numbers were up versus 2019 — more than 2.6 million travelers compared with 2.5 million. That same trend occurred Sunday, marking the first year that the number of people catching planes on Thanksgiving week surpassed pre-pandemic levels.

“People are traveling on different days. Not everyone is traveling on that Wednesday night,” says Sharon Pinkerton, senior vice president at the trade group Airlines for America. “People are spreading their travel out throughout the week, which I also think will help ensure smoother operations.”

AAA predicts that 54.6 million people will travel at least 50 miles from home in the U.S. this week, a 1.5% bump over Thanksgiving last year and only 2% less than in 2019. The auto club and insurance seller says nearly 49 million of those will travel by car, and 4.5 million will fly between Wednesday and Sunday.

U.S. airlines struggled to keep up as the number of passengers surged this year.

“We did have a challenging summer,” said Pinkerton, whose group speaks for members including American, United and Delta. She said that airlines have pared their schedules and hired thousands of workers — they now have more pilots than before the pandemic. “As a result, we’re confident that the week is going to go well.”

U.S. airlines plan to operate 13% fewer flights this week than during Thanksgiving week in 2019. However, by using larger planes on average, the number of seats will drop only 2%, according to data from travel-researcher Cirium.

Airlines continue to blame flight disruptions on shortages of air traffic controllers, especially in Florida, a major holiday destination.

Controllers, who work for the Federal Aviation Administration, “get tested around the holidays. That seems to be when we have challenges,” Frontier Airlines CEO Barry Biffle said a few days ago. “The FAA is adding another 10% to headcount, hopefully that’s enough.”

Transportation Secretary Pete Buttigieg has disputed such claims, saying that the vast majority of delays and cancellations are caused by the airlines themselves.

TSA expects airports to be busier than last year and probably about on par with 2019. The busiest day in TSA’s history came on the Sunday after Thanksgiving in 2019, when nearly 2.9 million people were screened at airport checkpoints.

Stephanie Escutia, traveling with four children, her husband and her mother, said it took the family four hours to get through checking and security at the Orlando airport early Tuesday. The family was returning to Kansas City in time for Thanksgiving after a birthday trip to Disney World.

“We were surprised at how full the park was,” said Escutia, 32. “We thought it might be down some but it was packed.”

She welcomed the sense of normalcy, and said her family would be gathering for Thanksgiving without worrying about keeping their distance this year. “Now we are back to normal and looking forward to a nice holiday,” she said.

People getting behind the wheel or boarding a plane don’t seem fazed by higher gasoline and airfare prices than last year or the widespread concern about inflation and the economy. That is already leading to predictions of strong travel over Christmas and New Year’s.

“This pent-up demand for travel is still a real thing. It doesn’t feel like it’s going away,” says Tom Hall, a vice president and longtime writer for Lonely Planet, the publisher of travel guides. “That’s keeping planes full, that’s keeping prices high.”

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Associated Press writers Hannah Schoenbaum in Raleigh, North Carolina, Margaret Stafford in Kansas City and AP video journalist Terence Chea in Oakland, California contributed to this report.

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David Koenig can be reached at twitter.com/airlinewriter

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November 23, 2022