For many Americans, paying bills simply has become routine. In other words, we don’t really think as much about many of the bills we have on a monthly basis and instead set up automatic online payments or set reminders to take care of things at a certain period each month. While efficient, this isn’t always the best path to take, and the reason is that everyone should have a better understanding of what they’re paying and what certain terms of such are.
For example, according to a recent survey from Bankrate.com, it’s estimated that nearly a quarter of all Americans don’t even know what their mortgage interest rate is. That’s a problem – and it could literally be costing Americans big time, especially in periods when there’s ample opportunity to refinance to a lower overall rate.
Take a $200,000 home for instance on a 30-year fixed-rate mortgage. If you’re currently paying a 4 percent interest rate and are able to refinance to a 3 percent interest rate, you’d likely save at least $100 per month and tens of thousands of dollars over the life of the loan. But if you don’t know what your interest rate is, how do you know when it’s time to refinance?
This topic is especially relevant now, as interest rates have plummeted amid the COVID-19 pandemic in an effort to keep the economy moving forward as much as possible. However, it’s also worth noting that you can’t just refinance your home to take advantage of a lower interest rate when rates are low. You need to make sure that your credit score is in good or excellent shape to qualify for these best rates in the first place. Again, knowing what you’re currently paying in interest is a crucial first step in this process.
Mortgage interest rates aren’t the only important personal finance information that many Americans report being in the dark about. According to a separate survey, it’s estimated that only about one-third of Americans know what a 529 college savings plan is. For reference, 529 plans are offered via prepaid and savings plans and can be put toward a child’s college education, K-12 schooling or even an apprenticeship program. They offer various tax advantages and are ideal to begin saving toward as soon as your child is born. Again, if you don’t know what they are or what your options are, then it’s difficult to start one.
The bottom line is that it can pay – and we mean that quite literally – to carve out some time at least once a year to carefully assess some of your long-term investments and finances and see where any adjustments can be made to either save money or put your family in a better position moving forward. And being that we’re getting to the end of the year, there’s no time like the present to begin this assessment and start a new year off on the right foot.
