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The Shock of an Escrow Shortage for First-Time Homebuyers

April 17, 2023 By MelissaB Leave a Comment

Woman adding a quarter to a piggy bank.

When my husband and I bought our first house nine years ago, our budget was stretched to meet the monthly payment, which included escrow. One year later, I experienced the shock of an escrow shortage. I couldn’t believe I was getting a bill telling me I had to pay an additional $600 or increase my mortgage payment by $50 a month. Unfortunately, I’ve learned I’m not alone; many first-time homebuyers do not realize their mortgage payments will likely increase yearly.

What Is Escrow?

When you buy a home, you also likely have an escrow account. The bank collects money—in addition to your principal and mortgage payment—to set aside to pay your home insurance and property taxes. You don’t need to pay for these items yourself when they come due. Instead, the bank uses your escrow funds to pay them.

What Is an Escrow Shortage?

Nearly every year, your property taxes and home insurance increase. When this happens, your escrow account will need more money to make the payment. The bank will pay on your behalf, but you’ll have to cover the shortfall with either one lump sum payment or splitting the shortage into 12 equal payments and increasing your monthly mortgage payment by that amount.

How We Handled the Shortage

Woman with a surprised look on her face looking into an empty wallet

After our first year of home ownership, I was shocked to see the escrow shortage bill. Our money was tight, and I didn’t want my monthly payment to increase. However, I didn’t have the money for a one-time payment, so I opted to increase my monthly payment. I hated paying more each month but didn’t have an alternative.

The second year, I was better prepared for an increase. I had enough money set aside to make a one-time payment because the last thing I wanted was to increase my monthly mortgage payment for another year.

After six years in our home, we could refinance and drop our private mortgage insurance (PMI). Then, I could choose to pay my own house insurance and property tax payments rather than using an escrow account, which I did. Because I did that, my monthly mortgage payment was guaranteed to stay the same throughout the life of the loan. I prefer to set aside the money and serve as my escrow. Then, the money I set aside can earn interest while it accrues before the payment is due.

Final Thoughts

Not everyone who has the option to pay their property taxes and house insurance on their own choose to do so. Some people like the convenience of having the bank make those payments through escrow. After all, you never have to worry about missing a payment if you utilize escrow.

However, if you are a first-time homebuyer, ensure you know how escrow works to avoid the shock of escrow shortage. Then, if you’re prepared, you can have money set aside to make the one-time additional payment rather than increasing your monthly mortgage payment.

Read More

Escrow Accounts: A DIY Primer

Making an Offer on a House

Mortgage Insurance: Annoyance or Helper?

Filed Under: mortgage Tagged With: escrow, escrow accounts, mortgage

My Credit Card Rewards Were Stolen!

April 3, 2023 By MelissaB 1 Comment

Person Holding Money and a Credit Card Above a Laptop

I do an excellent job of keeping my credit secure. Over 14 years ago, my husband and I froze our credit; we only thaw it for a day or two when someone needs to make a credit inquiry for a new line of credit. In addition, we use a credit monitoring service, and I check our credit cards at least once a week to record transactions in our budgeting software, You Need a Budget. Yet, despite my best efforts, my credit card rewards were stolen!

How I Discovered the Theft

I thought about traveling internationally and decided to check my rewards balance. I knew I had tens of thousands of points, but I couldn’t remember how many. So imagine my surprise when I looked and saw only 9,000 points!

I looked at my redemption history and saw a 30,000 redemption for $300 worth of gift cards. The redemption took place on March 1st. I had been in my credit card account at least three times since the redemption, but I didn’t notice the theft because I didn’t check the rewards points. I’m embarrassed to admit that it took me three weeks to realize someone had cleaned my account of $300 in rewards points.

Called the Credit Card Company Immediately

I immediately called the credit card company. While the agent was friendly, she asked me several times if I had redeemed them and didn’t remember or if my husband had redeemed them.

I live in New York, but the redeemed cards were addressed to my name in Houston, Texas. I told the agent that I never redeem my points for gift cards; she could look through my history and see that.

Steps the Credit Card Company Took

Two credit cards on a table in front of a laptop.

In the end, the credit card company took two steps.

First, they put my 30,000 reward points back in my account.

Second, they canceled my current credit card and sent me a new one.

Steps I Took

I also took steps to protect my account further.

First, I went to my other two credit cards, confirmed the correct number of rewards points, and then I cashed them out.

Second, I changed my passwords for all my online credit card accounts.

Third, I am investigating signing up for AwardWallet. This free program helps people manage the points for the many reward programs they signed up for. Best of all, users can set an alert to be notified if the balance changes. This program will help me realize the theft immediately instead of three weeks later.

Final Thoughts

While thieves have compromised my credit card several times, I was shocked to discover they stole my credit card rewards! I never thought of those as ripe for theft, but they are. Hopefully, I can ensure my credit card rewards are not stolen again by taking more protective steps. However, if they are, hopefully, I’ll realize the theft more quickly than I did this time.

Read More

How YNAB Changed Our Finances

Make Improving Your Finances Your Part-Time Job

How to Freeze Your Family’s Credit

Filed Under: credit cards Tagged With: credit card rewards, credit card theft, identity theft

4 Meals from the Pantry to Save Money

March 20, 2023 By MelissaB 1 Comment

Woman looking at her pantry shelves and grabbing a jar

If you’re like me, you may find it harder and harder to stay within the grocery budget as food costs skyrocket due to inflation. So I try to find nutritious recipes that aren’t expensive. In addition, to save money, I try to have one week where I don’t make a complete grocery shopping trip and instead only buy some fresh fruits and vegetables and make my meals from the pantry to save money. Doing this allows me to use up what I have and stretch my grocery dollars.

Our Favorite Meals from the Pantry to Save Money

These are the pantry meals we make during the weeks I skip grocery shopping:

Spaghetti

My kids don’t mind a pantry meal when the meal is spaghetti. So I buy pasta and pasta sauce when they’re on sale, and I purchase canned mushrooms at Costco. I mix them together for a quick, cheap meal.

We recently upped our spaghetti game by making Pizza in a Bowl (I left out the creamed soup and only used half the cheese.) I was amazed at how this meal stretched—we had it for two meals!

Breakfast for Dinner

Omelette with mushrooms

Another favorite is breakfast for dinner. We might have omelets with green peppers and cheese and a piece of toast. Or, if we have many bread heels in the freezer, we make French toast and eggs. Sometimes we make a breakfast sandwich with ham, egg, and cheese on toast or an English muffin. Another economical recipe is Ham, Broccoli & Cheddar Frittata. (If money is tight, I leave out the ham, and it still tastes good.)

Broccoli, Potato, & Cheese Soup

I recently found this delicious recipe for Broccoli, Cheddar & Potato Soup. I like it because I can use frozen broccoli. (This recipe and the broccoli frittata recipe are the only ways I enjoy eating frozen broccoli.) Like Pizza in a Bowl, this recipe stretches and easily feeds the four of us for two meals.

Fried Rice

Another frugal yet filling meal is Chicken Fried Rice. We use a rotisserie chicken from Costco and save the bones to make homemade chicken stock. Since rotisserie chicken at Costco is only $4.99, the meat is cheap, and we add rice, frozen vegetables, a few eggs, and seasoning.

How We’re Able to Keep Our Meals Frugal

For years, I’ve stocked up on items when they’re on sale, so I pay the lowest price for groceries. We have a pantry in our basement, two deep freezers, and two refrigerators so we can keep a full supply.

When ground beef is on sale, I may buy 20 or 25 pounds. We have food intolerances and can’t eat dairy, so when our favorite vegan cheese, Daiya, goes on sale, I may buy 20 bags. Then I won’t buy any more until it’s on sale again. If we run out before it goes on sale, we do without until the next sale.

Shopping this way makes having a pantry cooking week easy.

Final Thoughts

Keeping within our allotted grocery budget is getting more challenging every month. One way we rein in expenses is by making meals from the pantry to forego a weekly shopping trip once a month.

Read More

Our Favorite Small Ways to Save Money

8 Tips to Stop Food Waste

5 Tips to Save on Groceries This Year

Filed Under: budget, Frugality, Saving Tagged With: food, food costs, frugal grocery, pantry

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