April 19, 2019

Using Your Purchasing Power For Good

Superman can fly. Wonder Woman can deflect bullets with her wrists. Spider-Man can stick to walls. While none of us have superpowers quite like those, we do have one amazing superpower, and it’s called “purchasing power.”

Defining purchasing power is fairly simple: It’s the ability to use the equity, or wealth, you have built up in your home to do things like purchase a second home or add on additional living space. Purchasing power changes over time as you pay down your mortgage debt and as the value of your home appreciates.  Both have a positive impact on your purchasing power.  

So what does Homebot have to do with an individual’s purchasing power?

The unique and powerful abilities of Homebot empower homeowners to save money as well as find opportunities to bring in additional income. While this perk already puts homeowners on a path to financial security and improves their overall purchasing power, the buck does not stop there.

With extra purchasing power, it can be tempting to simply purchase more - let it be a nicer car, an extra vacation, or the newest gadget or gizmo. But the smartest use of purchasing power is to further improve one’s financial health.

Here are some great ways to apply additional purchasing power for further financial opportunity. Within the Homebot digest, users can drill into additional advice within each category by clicking on “details”, furthering coaching the homeowner on how to build wealth with their purchasing power.

Build an emergency fund

According to NerdWallet, an emergency fund is a key to avoiding potential debt and high interest later down the line. A year and a half of covered expenses is what NerdWallet recommends, but three to six months is a good place to start.

It’s important to remember to keep your emergency fund readily available, as well. If the money is needed quickly (it’s called an emergency fund for a reason), it cannot be tied up in bonds or retirements, where it may not be available in time for the bills, or where there could be penalties for using it.

The good news is, an emergency fund can be readily available while still working for you in a high-yield savings account. Credit Karma claims an average high-yield account brings account holders a 1% return a year (or more), which may not seem like much, but it sure beats a .01% return like most traditional banks offer. High-yield savings accounts have the same insurance protection as a regular bank account, and the money is quickly available when needed. A few hundred extra bucks a year is nothing to scoff at for next to no extra work or financial risk.

Pay off debt

Paying monthly minimums on debt will keep you out of trouble, but that will not help you get ahead. There are a plethora of debt calculators online, such as the CNN Money calculator, that will help you gain a better snapshot of the debt you owe, how long it will take to pay it off with your current payment plan, and most importantly, how much interest you will pay in that time.

Understanding how much of your monthly payments go to interest is a great motivator to apply extra money to pending debts, as it can potentially save significant money in the long run. While extra purchasing power is key to help pay off debt, there are lots of tricks out there to make it go even faster. You can start with negotiating interest rates, and from there, according to Money.com, start with paying off the highest interest rate debt first.

The extra benefit to paying off debt is once it’s complete, your purchasing power grows even more.

Make home improvements

Making home improvements is a cautionary angle for use of your new found purchasing power, hence why Homebot guides users to this decision by highlighting in yellow. When making home improvements that add to overall equity of your home, expanding liveable space and building out a new bedroom or bathroom, these improvements may lead to increases in overall wealth.

The highest value home improvements, to build wealth, are going to those that have the greatest curb appeal. Alternatively, lifestyle home improvements, like a new bathroom flooring or gourmet kitchen, albeit may make you enjoy your home more, may not have a beneficial long term financial impact. Homebot will always guide homeowners back to their trusted advisors, lenders and agents, to help make some of these decisions together.

Invest in yourself

When looking to apply purchasing power, sometimes you don’t even have to look beyond yourself. One of the best ways to improve your finances is by increasing your earning potential. Purchasing power can allow you to invest in education, health, a career coach, classes, and networking events. Utilizing money for these kinds of investments can open a wealth of new opportunities for even more purchasing power down the road.

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