How can you make sure you get the best car insurance for your needs without breaking the bank? Here’s what you should know to save money while staying safe on the road.

What To Look for When Shopping for Car Insurance

Whether you are shopping for your first car insurance policy or are looking to switch providers, there are some key things to look for when you compare providers.

Price

The price is the first thing most people consider when shopping for insurance. Obviously, this is a significant factor, and you should compare several companies to find the best price.

We know about companies like GEICO, Aflac, Allstate, State Farm, Esurance, and a handful of others from commercials. Some claim to save you “15% or more” with one call. Others will compare your rate with other companies.

There is no right or wrong way to review rates. You can call in and get a quote or do it yourself online. Either method has advantages and disadvantages regarding time, speed, and discounts.

It's important to note that, depending on where you live, a factor that could impact your rate is your credit score. Some companies use a soft inquiry to get your score, which does not impact your credit report. Others do a hard inquiry, which impacts your report and can lower your score.

If you get multiple quotes, ask how they pull your credit first. This way, you can safeguard your credit.

Coverage Quality

All insurance companies are not equal. If you read customer satisfaction surveys and check company reviews, you will find that some of the older, high-service companies like Liberty Mutual and Allstate score higher than the low-price sites.

Make sure that your plan gives you extensive coverage. I have only researched quotes for plans with low deductibles (about $250) and high coverage that offer uninsured motorist, medical, and comprehensive vehicle coverage.

Some companies can offer a lower rate because they offer less extensive coverage. You have to decide for yourself which is more important, but I prefer to err on the side of having better coverage.

Customer Service

If you ever had to file a claim, it can be a miserable process based on the insurer you choose. Dealing with approved shops, quotes, rental cars, repair schedules, surveys, deductibles, and customer service representatives can be a nightmare.

When you read online customer satisfaction reports, certain trends emerge. You will easily find which companies have good service and coverage and which will leave you angry, upset, or frustrated.

How Does Being a High-Mileage Driver Impact Rates?

Driving can cost a lot of money. Between car payments, maintenance, fuel costs, and insurance, using your vehicle can be pricey. It pays to look for ways to save on transportation costs whenever possible.

This is especially true if you drive a lot since your insurance rates can see an impact if you qualify as a high-mileage driver.

What Qualifies as High Mileage Driving?

Simply put, mileage influences car insurance premiums because more time on the road means a higher risk of accidents or damages. On the flip side, if your car spends most of the time in the garage, it’s not very likely to be the source of an insurance claim. 

If you’re making a long commute daily, your accident risks are objectively higher, resulting in higher premiums.

According to statistics, the average American motorist drives around 13,000 miles annually. If you fall in the range of 10,000 to 15,000 miles yearly, your premiums are unlikely to see a hike. If you drive over 15,000 miles in a year, you may qualify as a high-mileage driver. 

How Much More Do High-Mileage Drivers Pay?

How much more will you pay if it turns out you are a high-mileage driver? Let’s look at some average statistics from The Zebra:

Average six-month premiums by mileage include:

• 0 – 7,500: $1,710
• 7,501 – 10,000: $1,760
• 10,001 – 15,000 miles: $1,795
• 15,000+ miles: $1,826

While this is a fairly marginal change in premiums, you should also be aware that premiums can vary by state. For example, in California, rate hikes for high-mileage drivers could go up to 30% (as compared to 1% to 3% for high-mileage drivers in other states).

How Can High-Mileage Drivers Lower Their Insurance Rates?

There are a few things high-mileage drivers can do to lower their insurance rates. These include:

• Finding a cheaper insurer: It pays to shop around for a better deal. Online tools have made it easy to compare insurance rates between companies and find a better rate than you have now.
• Maintaining a clean driving record: A driving record free of accidents and traffic violations is one of the most dependable ways to keep your rates low (or at least prevent them from getting higher). Do your best to drive defensively.
• Take advantage of discounts: Insurers commonly offer discounts and other perks for things like being a good student, driving safely, bundling your insurance policies, or prepaying. Get in touch with your insurance company and find out what they offer.
• Change your coverage: If your car is fully paid off and worth less than $4,000, consider dumping your collision and comprehensive coverage. Your liability insurance should be sufficient for your needs.
• Buy a cheaper used vehicle: Older cars tend to attract lower rates as their value depreciates. Now might be a good time to trade down by purchasing a used vehicle.
• Take a defensive driving course: Some insurance companies will lower your insurance if you can prove you completed a defensive driving course, reducing your risk of an accident on the road regardless of how much you drive.
• Drive less and lower your mileage: While this might seem like a no-brainer, it could be worth looking into how you could drive less often. If public transportation or biking is an option, consider giving that a try.

Should I Install a Telematics System?

One major way car insurance companies offer their customers lower rates is telematics. A driving tracker installed in your car will collect usage data telling the insurer how much you drive, what time of day you drive most, and what your driving behavior is like.

If the data collected shows you drive safely, you can use that data to negotiate a lower rate. Plus, many insurers will give you a discount simply for letting them collect that data in the first place. 

For some, this might be a privacy concern. However, it might be the solution if you are looking for another way to save money.

Are There Insurance Options for Low-Mileage Drivers?

Yes! In fact, your car insurance could go down by half if you are a low mileage driver and switch to Metromile.

Pay-per-mile insurers like MetroMile realize that you probably will not get into a car accident when your car is sitting still, so you shouldn’t have to pay as much if your vehicle is parked.

With pay-per-mile, you pay a lower fixed monthly rate plus a few cents for every mile you drive. If you drive more, you pay more. If you drive less, you pay less.

Anyone who drives less than 10,000 per year could save money with pay-per-mile. 

What About AAA Membership?

While an AAA membership won’t cover you in terms of insurance, many people have heard about it and wonder if it’s worth the cost. I’ve found that it can be a helpful investment that provides extra peace of mind on the road and additional financial perks.

Here are the benefits of using the service.

Hotel Discounts

While I originally got AAA so I could tow my car, I use the hotel discounts much more often than anything else I get from AAA. I find that I save around $10 per night when using a AAA discount. If I spend at least six nights in a hotel annually, I cover the cost of the lowest membership level.

When looking for hotels, remember that AAA is not always the cheapest, but it usually is. I was at a wedding once and found that the AAA rate was lower than the wedding rate by about $20 per night. I have also seen deals where AAA is more than other offers. 

Just do your homework to ensure you make the right choice.

Emergency Services

Getting your car towed is expensive. My AAA plan gets me towing services, tire changes, jump starts, lockout service, and gas if I accidentally run out.

I have actually only used AAA roadside assistance once, for the tow the day I signed up. In this regard, I am really just paying for peace of mind. You never expect your car to break down, but it can happen.

Travel Services

AAA's free maps, travel guides, and travel info are beneficial. I have planned weekend getaways, road trips, and other short vacations using information products provided to AAA members for no extra fee.

I once planned a weekend getaway to Disney World and used AAA for a discounted travel package. It doesn't come up all that often, but it is useful enough when I need it that I get some value from the travel services.

The Bottom Line

If you do your homework and consider your driving habits, you can save money on your car insurance. Evaluate what kind of coverage you need based on your vehicle and how far you drive each day, and then choose the best insurance policy for your needs.

How can you make saving money a habit? What goals should you set? And can saving help you get rich (albeit slowly)? Spoiler alert: the answer is YES.

How to Make Saving Money a Habit

Personal finance experts often throw around the term “pay yourself first.” You may have heard that phrase before, but you might not know how to actually do it. Here are some steps you can take to put this popular finance advice to work and get on the road to saving money.

Create a Budget

The word “budget” has negative connotations for many people. For some, it means being unable to spend money freely or being tied to something impractical. I know that’s how I used to view budgeting, but it could not be farther from the truth.

Having a budget lets you see what money you have coming in and where it’s going. If you do it correctly, a budget will show you areas where you spend too much money and how to convert that overspending into savings.

Track Your Expenses

Tracking your expenses is really part of the budgeting process, but you can further define where your money is going when you track your expenses. What I am referring to here is keeping track of every cent you spend. 

I know it sounds tedious, but it can be done. If you have a smartphone, you can easily record spending when you’re on the go with handy apps. If you don’t have that option, keep receipts and record them on a piece of paper or a spreadsheet each day.

This practice will help you see where each cent is going and where you can cut back as you decide how much to put into each spending category. Make sure you budget for bills you can’t live without, like rent/mortgage, utilities, food, phone, internet, your car, and insurance.

Automate Your Saving

I was introduced to this practice years ago. Many banks today allow you to electronically move money into a savings account at no cost. You can do this weekly, monthly, etc.

My bank transfers money to my savings twice a month, and I don’t have to do anything. This allows me to save automatically without feeling the money coming out of my account.

Put Some Cash Aside For Fun

If you don’t have fun, what’s the point? You should always spend consciously and only put your money into things that you get value from, but if you don’t budget for it, you won’t have the money when you need it.

Fun money is important and should generally come out of your checking account. You could also spend fun money on your credit cards to get sweet travel rewards, but make sure you only spend as much as you can pay off each month in full.

Saving Money Is a Discipline

Saving money can be difficult for many people. I know it was for me in the past. Don’t allow that to be an excuse or hold you back. 

Maybe you can only afford to save $50 per month. That’s great, start with that! As time passes, you’ll hopefully be able to save more. In the present, take hold of the discipline of saving until it becomes a habit and is second nature for you.

Set a Savings Goal

Since you now know how to start saving money, take a few minutes to decide on a saving goal and implement a savings plan. Having a savings goal can even help you stick to your habit of making saving money a priority.

Here are some worthy goals to consider pursuing.

Emergency Fund

At a bare minimum, you should have an emergency fund. Most finance folks suggest you save at least three to six months of expenses to ensure you can survive a job loss or unexpected expense. I agree 100%. 

If you don’t have three months of expenses easily accessible in the bank, you might end up in a tough spot if your income disappears.

Having cash on hand is also essential in case an unexpected emergency arises. Sometimes, that emergency is a broken furnace or water heater. Other times, it is a new set of tires or a bad transmission.

The easiest way to build an emergency fund is by setting an automatic transfer in your bank account. A great option for this is Capital One 360. Capital One 360 has competitive savings account rates and allows for easy transfers. 

Build an Extra Cushion

Once you reach your emergency fund goal, you shouldn’t stop saving. I passed my emergency fund goal and started saving in my liberty fund, a bank account that will cover almost anything that comes up.

I may use it for a down payment on a new home, rental property, or car. If anything happens with my company, I can easily live on that money for a long time.

Saving for Retirement

Retirement is the biggest savings goal you will ever have in your life. When you retire, you need enough assets to cover the last ten, twenty, or fifty years of your life. Many factors come into play when determining how long you will be retired. Whatever your plan, you need to be ready.

A common guideline is that we will need to replace 70% of our income in retirement. Calculate that goal and how long you expect to live on retirement income to determine what you need. Or, you can use this retirement calculator from AARP.

When it comes to saving for retirement, take 100% advantage of all employer 401(k) matching. If you get a 100% match on 3% of your pay, put at least 3% of your pay into the 401(k) plan.

Next, put money into your Roth IRA. The maximum you can contribute to a Roth IRA each year is $6,500 if you are less than 50 years old.

Beyond that, you can always put more into a 401(k), up to $17,000 annually. The same rules apply to 403(b) plans from non-profit employers.

You Can Never Have Too Much Money

Something to remember when you are saving and budgeting is that you can never have too much money. Warren Buffet didn’t get rich by spending all of his income. He lives in the same house he bought for $31,500 in 1958.

If you save a lot, you are in great shape. Not saving enough is a common regret for people in their 30s, 40s, and beyond when working toward financial freedom.

Save Money and Get Rich By Doing It Slowly

My “get rich slowly” experience began when I was $20,000 in student loan debt. I was hardly earning enough to live in my lavish apartment, and then the student loan bills started to come in. I was scared. How was I supposed to survive, let alone save money?

Then, I was handed a Dave Ramsey lesson pack. There were seven steps to wealth, and they were laid out like this:

1. Save up a $1,000 emergency fund
2. Use the snowball method to pay off all consumer debt
3. Save up three to six months' worth of expenses in your savings account
4. Invest 15% of your income into Roth IRAs and pre-tax retirement
5. Save for children’s college education
6. Pay off your home early
7. Build wealth and give

This process was not a speedy one. After three years, I paid off all of my consumer debt, saved up my six months of expenses, consistently invested 15% of my income for my retirement, and worked toward paying off my home early. 

Because of my decisions regarding frugality, I amassed between $3,000-$4,000 each month after my living expenses were taken care of. It took a while, but think about what my future will look like!

My future holds things like no mortgage payments, disposable income of up to $5,000 monthly, real estate investments, income increases, and much more.

I do not say all of this to toot my own horn. I am writing it out because it is possible for anyone!

The problem with this plan is that it is NOT fast. You will need discipline. My advice is to find someone with a similar goal. If you can find this person and hold each other accountable, you will likely find your pockets overflowing with money in the future.

The Bottom Line

Saving money is an integral part of ensuring your long-term financial wellness. From cutting costs on expenses to putting money away for your financial goals, you can make a big difference in your financial health when you make it a priority to save money.

The process might seem overwhelming at first. However, by making savings a habit, setting savings goals, and understanding that getting rich won't happen overnight, you can set yourself up for financial freedom.

Beyond that, you must know how to use your card safely and effectively. Here’s what you need to know to choose and manage a new credit card.

Why You Need a Credit Card

I once wrote a post explaining why you need to stop using credit cards. That is not entirely true. Understanding the risks and dangers of using credit cards irresponsibly is essential, but it is also important to understand and take advantage of the benefits.

Reason #1: Your Credit Score

The first reason you need a credit card is your credit score. If you are in your 20s or 30s, you are likely renting your home. When you want to purchase a car (with a loan) or buy a house (with a mortgage), you need a good credit score. 

You probably can’t pay in full for a new car or have the entire cash amount needed for your first home purchase. The first thing a bank will look at when deciding on a loan is your credit score.

A credit score is not generated overnight. It is not created in a month or a year. Building a good score takes years, though it can take only weeks to destroy it. 

I have had perfect credit since I was 18, when I got my first card. During that time, I used and paid off my cards in full every month. I have taken out a car and student loans, ensuring I am always early on my payments.

I paid off my car loan and student loans early and have never missed a payment date for any credit card or loan. In fact, I have paid my cards off in full each month and never paid a cent of interest.

Reason #2: The Perks

When I started this blog in 2008, I hesitated to use my credit cards too much because I have seen what happens when people spend more than they can afford. However, I’ve learned that using cards responsibly can lead to good credit and amazing perks.

I’ve written about my experiences with my favorite credit cards, which I have used to get free flights to Europe and around the United States, free hotel nights, and other perks.

How To Choose a Credit Card

There are a few things you should consider when choosing a credit card to make sure you opt for the one that is best for your needs.

What You Qualify For

Before applying for a credit card, you need to know your credit score. Many credit cards will have minimum credit score requirements to be approved.

Since your credit score can be impacted by inquiries into your score (which happens when you apply for a credit card), it’s important to only apply for cards you know you qualify for. This way, you don’t needlessly hurt your credit score when applying for a new card.

Interest Rates

While the interest rate may not be a significant issue when choosing a card if you plan to always pay your card in full each month, it does come into play. You should always see a table like the one below when looking at credit card terms.

This is a standard disclosure for all cards and is an example of a Bank of America credit card. Notice the major important numbers, including interest rates for standard purchases, balance transfers, and default.

The default APR will go into effect if you make late payments or do not follow standard credit card procedures. Variable rate information discusses potential rate changes in the future. The grace period is how long you have from the billing date to pay.

One good resource for understanding the dozens of pages of disclosures is the Credit and Charge Card pamphlet from the Federal Reserve of San Francisco.

Fees

There are some key fees you should evaluate before choosing a card. These can include:

• Annual fees
• Foreign transaction fees
• Late fees
• Balance transfer fees

Why is it important to understand these fees? Because they will directly impact how valuable the card is to you. For example, if you choose a card with an annual fee but the rewards you receive don’t exceed the fee, the card isn’t worth it.

Or, let’s say you travel internationally frequently and plan to use your card overseas. If this is the case, avoiding cards with foreign transaction fees is wise.

Rewards

One of the big considerations when choosing a card is the rewards it offers. I’ve had a few conversations with friends about cash back credit cards vs. miles credit cards and recorded a video blog post to explain which one I think is better.

Full transcript:

“Hi everyone, this is Eric from Narrow Bridge Finance here with my first video podcast, video blog post rather, so welcome. We’re excited to have you.

So, I’m here today to talk to you about the difference between cash back credit cards and rewards credit cards with miles and points. I talked to a few people about this lately, and some people think the cash back’s better, some people think miles is better, so I wanted to clear up the difference and explain a few things about it.

So, first, I want to talk about the benefits of cash back credit cards. They’re pretty simple, you get the idea. You spend money, a certain percent you get cash back in your account, you get that as a check, you can spend that however you like. It’s money in the bank. Pretty straightforward.

Miles and points are a little more complicated. There is often big signing bonuses, you get more miles one place than another. There’s a lot of different options; you can use the points for expensive flights, cheap flights, first class, coach. The miles have a lot different value structure than the cash, which is pretty straightforward.

And myself, I prefer to use miles and points. Why? As one example, I went to Israel last year, 100% covered by miles other than $200. Less than $200 a person. I know that’s pretty crazy, right? I flew a kind of complicated route from Denver to New York to Germany to Israel, but I got to the other side of the world for less than $200 a person, so I was able to take my girlfriend with me on a great trip to my cousin’s wedding.

So I think the value of those miles, where I could get a flight that might have been $1200 a person, so $2400 total, I could get for $400 total. Now, you might think, “Well, if I spend enough money on my cash-back card, I’ll have enough cash to buy those flights.” You know, that might be true, but it takes a lot longer depending on how you do it. Because most cash-back cards give a flat 1% back, maybe two, three, four, even 5% on some bonus category, whereas on my special mileage card, you can get five times on whatever you spend on office supplies or your cell phone bill in points.

So, for every $200 phone bill you pay, you get a thousand miles, and I know a thousand miles doesn’t sound like a lot, but that adds up pretty quick. For example, I’m going to Las Vegas tomorrow for the weekend. YEAH! Party in Las Vegas! It cost me $5 out of pocket and about 11,000 miles on Southwest. I was able to do that by spending on my Sapphire Preferred card, transferring just the number of miles I needed, and getting that flight and everything squared away. So I think the miles card and miles credit card options are much better than cashback, and that’s why.

If you have any questions, feel free to comment, and I’ll be happy to answer. Have a great day.”

Why You Should Skip Store Credit Cards

My first job in high school was at Target, and I was one of the top employees in the store for selling Target credit cards. Since I can do simple math, I just told people what the 10% they could save would be for large purchases. 

People would almost always take the savings on large purchases. If you could save $100, I bet you would say yes.

However, we must remember why not to apply for these types of cards, including:

• Complexity: Simplicity is important in finance. I am a big advocate of automated and simple personal finance. One less card makes life easier.
• Most offers are limited: At Target, you save 10% one time. A one-time deal is an excellent tool to pull you in but is a short-lived reward.
• You may spend more: This is pretty self-explanatory. If you can spend, you might do it.
• Impacts on your credit score: New credit lowers your credit score. It takes a while for that new credit to be “incorporated” into your credit report and for your score to go back up.
• High Interest Rates: Most store cards have rates well over 20%. 
• Bad Terms: Most store cards have questionable terms. The marketing is dirty, and the interest rates are high. They are just not good for consumers.

How Should Millennials Start With Credit?

I attended a FinCon many years ago and was interviewed by the credit reporting agency Experian. They asked me about starting with credit for college students and young professionals. Here’s my advice!

Full transcript:

“This is my 3^rd FinCon, and I’m super excited to be back. Not only is it an opportunity to reconnect with friends and other bloggers around the blogosphere, but I also run the Ignite event here, which brings speakers together for short, quick, fun talks. That’ll be a great night event.

It’s important for millennials to understand and know that when they get out of college, they’re already running full speed towards a good credit score. That actually starts even before they graduate when they take on their first student loan or get their first credit card. So, it’s important to know when you get your first card, that credit card will impact your ability to maybe buy a house later in life, so you have to manage it responsibly right from the beginning. 

A lot of young people get out of college, and they want to go buy everything they can. They think they have a new shiny job, it’s time to go spend, spend, spend. And the easiest way to do that is to put the money on a credit card. They don’t understand that you really have to pay that back, and the interest rates can be quite high. So, it’s important to manage your credit and use it wisely so you’re not paying a lot of interest, and you’re building a high score for your future.”

Should You Get a Smart Credit Card?

EMV, an acronym for Europay, MasterCard, and Visa, the companies responsible for the chip’s design and standardization, is the most common style of smart chip credit card. The small electronic chip is generally 3mm tall by 5mm wide and is embedded into the card.

Each time an EMV card is used, the terminal uses the chip to fully authenticate the card. Card skimmers have become a popular method of credit card fraud since replicating a magnetic bar is easy and inexpensive. The chip prevents that type of fraud and protects against others using high-tech analysis, authentication, and verification.

While EMV wasn’t always a common feature on credit cards, it’s more widely used today. In fact, it’s reported that over 13 million credit cards worldwide have EMV. As a result, it’s more likely than not that your credit card will be a smart card, whether you like it or not!

Ways To Be Smart With Your New Card

Getting a new credit card in the mail can be exciting. That said, it's important to be responsible when your card arrives.

Set Bill Reminders

The first thing you should do when you get a new card is to sign up for online access and turn on email reminders when your bill is due. Setting up a system of reminders will help you keep from missing a payment.

Missed payments result in fees and potentially higher interest rates. They also lower your credit score, which can keep you from getting new credit in the future or raise the cost of a loan.

Pay In Full Every Month

Don’t just pay your bill each month. Pay it in full. Paying your bill 100% in full each billing cycle means you don’t pay any interest at all. You only pay interest on outstanding balances at the end of the billing cycle, so save money by paying it in advance.

Never buy anything you can’t pay for in full with cash, and find a system that works well for you to keep your credit cards under control. I pay my bills in full each payday to make sure I’m always on top of the bills before they arrive and to match my income with my expenses.

Read the Fine Print

The fine print is boring, but ignoring it can cost you big time. You can miss out on great benefits like bonus miles, rental car insurance, free concierge service, purchase protection, extended warranties, and more.

Beyond that, you could miss important terms related to what the card costs you and end up paying unexpected costs and fees. The fine print for credit cards may even protect you from the credit card company if something goes wrong.

Put Annual Fee Reminders on Your Calendar

If your card carries an annual fee, it is important to decide each year if you are getting enough value for the fee to keep the card open.

I have more than one card with a fee, and I put a reminder on my calendar a few weeks before the fee date to decide if I want to keep the card open. If I don't, I call the bank, convert the account to a no-fee version, and throw the card in the back of a drawer.

Keep It Open

Unless it has a high annual fee, always keep your accounts open as long as possible. The average age of accounts and your open credit limit are two factors that impact your credit score, so you should always keep your cards open (unless they cost you money).

The Bottom Line

When you are getting started with a new credit card, be smart. From choosing the card that best fits your needs to always paying your bills on time, using your credit card effectively can benefit your overall financial health.

But what should you know before looking for (or accepting the terms of) a new loan? We answer some common loan questions to help you begin your financing journey.

What Are Balloon Payments?

A balloon payment is a deferred amount paid in a lump sum at the end of a loan or lease. For most people, the balloon payment is usually somewhere in the range of thousands of dollars.

The time value of money shows that deferring payments is beneficial because you can earn interest on your money rather than giving it to someone else to earn interest with. For example, if the loan interest rate is 4.95% and you can earn 5% or more with another investment, you are better off deferring the payment. 

Some people may struggle with balloon payments because they forget to save enough money to make the payment at the end of the loan. Consequently, it’s essential to make sure you save money each month to ensure you can pay off your balloon payment.

If you can’t earn more in interest than your loan interest rate, it is in your best interest to prepay your loan as fast as you can. Otherwise, if you can do better elsewhere, such as the stock market or bond investments, delaying payments as long as possible is best.

What Is Loan Amortization?

Anyone who has ever had a loan has seen the statements updating you on your progress. Early on, it is often disheartening to see that the bulk of your payment went to just the interest, and a small amount went to the outstanding loan balance.

Several important factors determine the amortization schedule, or schedule of payments, including the interest and principal reduction, loan length in years, number of payments per year, beginning balance, and ending balance. 

The ending balance is usually zero, and 12 payments are made yearly. Based on these factors, a loan amortization schedule can be created.

Based on the inputs above, a loan amortization calculator will determine the monthly payment needed for the loan to have the desired ending balance depending on the interest rate, starting balance, and loan terms.

The loan is broken up so that you can see what interest is required and what the principal balance remaining would be after each period. An easy calculator that gives an annual amortization can be found here.

If you understand how loan amortization works, you know about 90% of critical financial concepts. Bonds, loans, and anything with an interest rate use the same formulas to calculate present and future values.

How Can You Improve Your Odds of Getting a Loan?

There are ways to improve your chances of getting a loan, and understanding how bankers underwrite loans to decide whether to approve or deny prospective customers can help. Here’s how you can increase your odds of getting a loan.

Get Your Free Credit Report

Get a copy of your annual credit report for free from annualcreditreport.com. 

Remember that your credit score is more of a screener than an approval tool. If your score is bad, you will be screened out right away. If it is fair or good, you will go through the process below.

Once you have your credit report in front of you, start at the top and cross out any credit account that says “authorized user” next to it. Those are generally accounts for which someone else is a primary user, and the bank assumes that you do not pay for those.

Look for Late Payments

Next, go back to the top of the report and highlight any late payments. The report usually makes it easy to find those in your payment history. Look for a grid with stars representing on-time payments and 30, 60, 90, etc, representing the number of days late.

My report looks like this since I have no late payments.

If you have late payments, highlight them with a bright pink highlighter or circle them with a red pen to denote them as bad. If all payments on the account were on time, put a checkmark next to them.

Ensure every account is crossed out (authorized user), checked off (on time only), or marked for late payments.

Look at Account Balances

Next, you need to look at your balances. Evaluate your accounts and circle any account balances with a black or blue pen or highlight it with a color that is not what you used for the “bad” items. Make sure every balance is highlighted. 

For revolving credit accounts, such as a credit card, highlight the credit line amount as well. Add up all your balances and credit limits separately and write them at the bottom of the report.

The account below has a balance of $299 and a limit of $2500. Look for something like that as an example.

Then, highlight all the minimum payments on your installment loans, such as a car loan, mortgage, or any loan with a fixed payment and end date. Add those up and write that number at the bottom.

Calculate Your Credit Utilization

Divide your outstanding credit card balances into your credit limits. This gives you a utilization percentage. In the $299/$2500 example above, you would have an 11.9% utilization rate, which most banks accept.

Any number over 25% might hurt your chances of getting a loan. Anything over 75% will almost certainly disqualify you. If your total outstanding revolving balance is over $10,000, you will probably have a tough time getting a loan as well.

Now, multiply your outstanding revolving balances by .1 to give you 10% of your balance. For example, 10% of $299 is $29.90, or about $30. That is what most banks will assign you as a minimum monthly payment. 

Add that to your installment minimum payment, and you will have a total debt servicing payment amount. For example, if you have $300 in revolving balances and a car loan that requires a $220 monthly payment, your debt servicing payment is $250 monthly.

Calculate Your Debt-to-Income Ratio

Write down your monthly regular income. You can include child support, alimony, or social security if you receive payments. Then, subtract your monthly rent or mortgage payment and fixed expenses from that number. 

Next, divide your debt servicing number by your income after fixed expenses. That gives you a debt servicing ratio. If you have a $250 payment and your monthly income after fixed expenses is $2000, your ratio is .125. Any number below .1 is excellent.

Many banks would consider any number below .3 acceptable. If you are over .5, you probably will not get the loan.

Evaluate Your Findings

Look at the whole picture. Past performance is the best prediction of future performance. If you have many late payments, high balances on your credit cards, or are using 90% of your available credit, most banks will not give you a loan. 

A single issue might be overlooked, but the big picture is what will make or break you.

How Can You Find an Unsecured Loan?

When I worked in banking, customers regularly asked about unsecured loans. While many banks do not offer personal loans, there are ways to find unsecured loans if you know where to look.

Credit Unions

Many credit unions offer their members personal loans. These will have a higher interest rate than a mortgage or auto loan because the credit union is risking that you will not pay them back. They have no collateral or recourse if you stop paying. 

A recent, unscientific survey of credit unions put the average interest rate around 12% for this type of loan.

Big Banks

Credit unions are not-for-profit institutions that have their member's best interests in mind as they operate. Big banks are in it for the profit. They may offer personal loans if you are a low-risk borrower and think they can make money.

A quick search online will give you options for banks near you.

Social Lending

A newer option, but certainly one worth considering, is looking to a social lending site. These sites offer competitive rates for unsecured loans. They are crowd-funded by investors who choose your profile on the site.

If you are compelling and have a good risk profile, you can usually get a loan quickly and pay a lower rate than banks or credit cards.

Credit Cards

Credit cards are the default personal loan, though most people don't think of them that way. However, most credit cards charge extremely high interest rates compared to other loans. You can easily pay over 20% annual interest on a credit card.

I suggest avoiding this option unless you already have a great interest rate on your account.

Is 0% Financing Helpful?

When done correctly, you can rule 0% financing to come out on top. It doesn't matter if you have the money saved or if you don't have the money saved. Here's how you can benefit from 0% financing.

If You Already Have the Money Saved

Let's take a look at the numbers. Assume you have $15,000 saved up in a car fund and are buying a car that costs $15,000. When you pay for it in cash, the $15,000 is out the door, and you own the vehicle.

If you get the car for 0% interest with a 25% down payment, you spend $3,750 on day one. From there, you can keep the remaining $11,250 for five years.

What is $11,250 worth over five years? If you are responsible and keep it in a savings account, you can earn at least 1% per year with a savings account. With compounding interest, after five years, $11,250 becomes $11,826.55.

By saving the money, you get $576.55 in interest over five years. That is not chump change. Even after taxes, you get to keep about $430.

This works with any zero-percent interest offers. Whether you are shopping for a car or furniture, make sure to stash the money in savings to earn the interest you would have been giving away.

If You Don’t Have the Money Saved

If you don't have the money already saved up, you should take advantage of a 0% offer. Why pay interest when you can borrow money for free?

However, use the 0% to your advantage to create a “loan sinking fund” just as businesses have “bond sinking funds.”

To create your fund, start a new savings account with the goal of having the right amount of money to pay off the entire loan when the 0% period ends. We will stick with the car example from above for the numbers.

Use a time value of money calculator to plug in your situation to find your specific savings amount.

If you know you will need to pay back $11,250 at the end of five years, work backward to find what you need to save every month to have that at the end. Without interest, you need to save $187.50 per month. 

With interest, you only have to save $182.78. I know it's only $5 per month, but every dollar counts.

If you put away the entire $187.50 in the 1% savings account for five years, you pay off the loan, plus you have a bonus amount saved up thanks to compounding interest. Your saved amount after the 60 months is $290.

The Power of Savings

Albert Einstein is famously (and likely incorrectly) quoted as saying, “The most powerful force in the universe is compound interest.”

Whoever coined that quote was on to something. As you can see, saving money with interest while borrowing without interest allows you to save real money.

What Happens When Loans Move to New Lenders?

Sometimes, people with student loans, mortgages, and auto loans get a letter that their loan has been transferred to a new lender. This can be a surprising letter to receive in the mail, but it happens for important reasons and should not cause you extra stress.

Why Loans Move

When a bank accepts a deposit from you, it records the deposit as a liability on its balance sheet. Federal banking regulations allow the bank to lend out most of those balances in the form of loans.

However, a portion of those balances must be held to return to their customers when they want to make a withdrawal. This cash balance that the bank must maintain is called the reserve requirement.

When banks want to make more loans than their reserve requirement allows, they can sell those loans to other banks, financial institutions, or investors to free up capital. This also offloads the risk of defaults from the bank, so some banks sell loans to reduce risks.

When a bank sells a loan, it gets a payment for the outstanding loan balance. In some cases, they also get a premium for future interest payments. If the loan is particularly risky, the bank might sell it at a discount to avoid future loan losses.

What To Know if Your Loan Transfers

When your loan transfers, the loan terms are the same. You owe the same amount each month, and you are legally bound by the same promissory note that you signed to start your loan.

If you are set up for autopay, you may need to set up your payments again for the new servicer. Otherwise, if the same bank still services the loan, you do not need to make any changes.

When you make payments through your bank's bill pay, you must add the new servicer so the right institution receives your payments if your servicer changes.

It is critically important for your credit to update your information and set up payments for the new lender. You don't want a late payment to hurt your credit score.

Should You Take a Loan From Your 401k?

Most anyone with a 401(k) account can “borrow” funds from their retirement account. The IRS allows you to withdraw money from a tax-deferred 401(k), stipulating that you pay it all back within a certain period to avoid tax penalties.

In general, it is a horrible idea to take money out of a 401(k) until you are retired. This is mostly a psychological issue, not a financial one. I am in the mindset that my 401(k) funds do not exist. Those funds are not accessible until I retire. Period.

From a financial perspective, it is easier for many 401(k) borrowers to skip paying it back and take the tax hit. This is often a lower dollar amount than paying the fund back.

The Finances of the Situation

Mechanically, it is probably better to take out the money to pay off the 27% credit card. If you would pay yourself back at the rate you were paying the credit card companies, taking the money out is a slam dunk.

However, there are alternatives to a 401(k) loan that you might consider. The first thing I would do is call the bank and ask for a lower rate. It is often that simple.

If I could not get a lower rate, I would look around for balance transfer opportunities. Do you have other credit cards that would let you do a balance transfer? If you will save more than the transfer fee by moving to the lower rate, go for it.

In the event you are a homeowner, you can take out a “second mortgage,” which would be secured to your home and offer a much lower interest rate. However, your home is at risk if you don't pay that loan.

If you have never looked into social lending (also called peer-to-peer lending), you might be surprised by a good deal from sites like Lending Club or Prosper. Depending on your credit score, you might get a great rate compared to a credit card.

How Can You Make the Most of a Loan?

Here are some recommendations for people who use loans to ensure they make the most of their financing without hurting their financial future.

Read the Terms 

It's important to know what to expect with a loan. Companies that lend money provide literature that is essential to read to avoid surprises.

Be sure to review all of the terms of your potential loan before committing to borrow any sum of money, and review the terms regularly to ensure you don't violate them.

Shop Around for Interest Rates

Make sure you understand the interest rate associated with your loan. The interest rate is the additional cost on top of the money you borrow. 

When paying back your loan, the lender will profit off your interest charges, so it's best to shop around for the lowest rate possible. Short-term loans usually have higher interest rates, but getting a rate that works for you is possible.

Borrow Only What You Need

Most credit and lending industry experts, like Don Gayhardt Of Curo, recommend only borrowing the amount of money you truly need. A short-term loan is best used sparingly when you only need a little cash to fulfill your financial responsibilities.

Like any loan, your cost increases if you borrow more. Borrowing a small amount that is just enough to help you stay financially fit can be more beneficial than taking out a larger loan.

Make Timely Payments

Borrowers need to pay back their loans in the allotted time. Missing a payment or having a late payment can negatively impact your credit.

For a short-term loan, a missed payment may also mean a higher interest rate or more penalties and fees that don’t help your financial situation.

Pay Off Each Loan Completely

For short-term loans, in particular, it's essential to pay them off as quickly as possible. You can try various payoff strategies if you have other monthly obligations. This way, you don't have to worry about taking out a second loan if another financial emergency happens.

It’s better to get a clean slate and clear your debt burden as fast as possible to prepare to build up your savings over time.

Make Arrangements During Tough Times

Sometimes, consumers experience a financial disaster before paying off their loans. If this happens to you, and you can't make your loan payment, talk to your lender about an extension or other arrangement.

Not all companies will agree to change the terms of your loan for a short period of time, but it is worth a shot to at least ask.

Budget Your Expenses Effectively

As you navigate the ins and outs of paying off a loan, developing a plan to budget your monthly expenses is vital. See where you can cut costs on your daily spending, and look for ways to add more into your pocket each month to help.

The Bottom Line

Taking out a loan may sound complex or like a bad strategy to afford a big purchase. Fortunately, that’s not the case, and knowing the answers to these loan questions can help you use loans to your advantage.

But what does this mean, and how do you do it? Here’s what you should know!

What is Financial Automation?

Automating your finances means using technology to manage your money more efficiently. This can include setting up recurring fund transfers so you don’t have to think about your money. From your paycheck to your mortgage payment, you shouldn’t have to do a thing.

Many people don’t realize you can automate more than your direct deposit. You can set up transfers between your accounts or automatic bill payments to other banks and companies. You can automate everything!

In my financial life, I have automated investments, savings, credit card payments, auto loan payments, student loan payments, and mortgage payments.

Automating means you don’t have to worry about moving your money around or going to the bank. Everything simply happens for you the way you set it up.

How To Create an Automated Plan

In order to automate your finances, you have to create a plan. Luckily, this process doesn’t have to be too complex!

Draw an Automated Money Map

To visually see where your money is flowing, I suggest drawing an automated money map. You can make it fancy and draw it out with a computer or do it by hand to make it quick and easy.

Your map should be a step-by-step diagram tracing how your money comes in and goes out each month. It should start with your direct deposit paycheck and end with bills and savings.

To understand how it should look, look at my example map below. These are all made-up numbers for what a typical automated plan should look like.

Automate Your Account Tracking

Once you have done a full account inventory, it is time to make tracking your accounts and organizing your statements easier. I use a few free tools to keep my accounts and transactions organized, and it only takes a few minutes to set them up.

Empower

Empower is my personal finance hub. It is a free tool that gives you your account balances, recent transactions, spending patterns, and an investment analysis all in one place.

Signing up is an easy, fast process. Once you are signed up, link Empower with your online banking, credit card, and investment accounts. Empower takes care of the rest.

Empower will refresh your data with each account's newest balances and transactions every time you log in. Rather than logging into each bank website whenever you want to check in on your money, you can log in to one site.

Empower also offers a mobile app for iOS and Android so that you can check your balances on the go.

When I signed up for Empower, I did a deep dive into the fees on my investments and found ways to save over $300 per year on mutual fund fees in my retirement accounts. This free tool is well worth using!

Award Wallet

While you are automating your finances, keep it going with your travel rewards tracking. If you enjoy travel, it is part of your personal financial circumstances. As a result, you should treat your travel rewards like money.

For my miles and points, I use AwardWallet. AwardWallet is a free site that works like Empower for tracking frequent flyer miles and hotel points.

It is easy to set up and helps me track my balances and expiration dates.

TripIt

Since we are already talking about travel, I use one other site all the time that is free and saves me time when tracking my actual travel. TripIt automatically imports my flight and hotel information from my Gmail account and creates an itinerary complete with directions, weather forecasts, and anything else I need to know.

Having everything all in one place makes it much easier to keep track of my travel and anything that will impact it.

Automate Your Paycheck and Savings

If you get paid every week, every other week, or twice a month, you can save yourself a lot of trips to the bank or time depositing checks on your phone by automating your paycheck with direct deposit. 

Most employers offer direct deposit and may even allow you to split your check between multiple accounts. If you don't split your paycheck between multiple accounts, consider setting up automated recurring transfers from your primary checking account to savings accounts to ensure you are working toward financial goals.

If your bank doesn’t offer free online transfers, it is time to look for a new bank. One of the most popular online checking accounts is 360 Checking from Capital One 360.

Set Up Autopay

Chances are, you have a bunch of bills to pay each month. For example, I pay my mortgage, credit card, power, phone/internet, student loan, and utility bills each month. All but one offers autopay (also known as direct debit), which is an automatic direct monthly withdrawal from my bank account.

Direct debits can be used for any monthly payment. People who are short on time and busy with work or their day-to-day lives often find direct debit to be a significant time saver. Instead of spending an hour or more to pay a bill, you can make a phone call or use online banking to authorize the payment.

The most obvious perk to automated payments is the “automated” part. Beyond that, you may have the option to get a discount by using autopay. Both of my student loan providers gave a .25% interest rate deduction for the duration I used autopay. 

However, if you do not look at your bank accounts and you are hit with a bill payment you forgot about, you might overdraft. As a result, you'll want to be careful with autopay and check your account balances each month to ensure you can cover your bills.

To set up direct debits, you can:

• Authorize the collector to get the money from your account by phone or email
• Instruct your bank to allow the debit to happen from the collector
• Enter your payment information into the collector’s payment portal

Here are some bills you can put on autopay.

Credit Card Bills

Auto-pay is the easiest way to ensure your credit card is paid on time. With auto-pay, the credit card company automatically pays the bill with an automated monthly withdrawal from your account.

If you get nervous about that, you can also use your bank's bill pay. Each payday, I go into my bank's bill pay and pay my bill in full. However, if I didn't, I would get an email reminder from my bank to go in and pay my outstanding bills before the due date.

As another line of defense, you can use Empower to get reminders before your bills are due.

Utilities

Most utilities allow you to use autopay or your bank's bill pay, just like your credit card company. However, I don't like that route because I don't get any reward points from paying out of my bank account.

Instead, I registered for auto-pay using my credit card. I get an email reminder each month before the bill hits my account. I have a high credit card limit, so I never worry about missing a payment or exceeding my limit.

Other Bills

Whether you have to pay for a doctor's visit or a car repair, each biller has different rules about how you have to pay. Some make you pay online, others require a check. To deal with these, I set up a calendar reminder in Google Calendar to email me before it is due.

If I can pay by check, I add it to my bank's bill pay so that it automatically sends it on the right day. Otherwise, if I have to pay online, I make sure to take care of it with plenty of time before the due date just to be safe.

The Bottom Line

Why is it important to automate as much as you can when it comes to your finances? To save time and effort in the long run! You shouldn't have to spend much time working on your money. It should be simple and automated. Your money should work for you.

Fortunately, there are ways to make sure buying a wedding gift doesn’t drain your budget. Here’s how to give a gift to the happy couple without breaking the bank.

How Much Should You Spend on a Wedding Gift?

I don’t mind buying a wedding present or gift card for a friend. But knowing how much to spend and what to get can be challenging. I recently read that the average wedding gift costs $70.

Many experts have rules about how you should decide what to spend on a wedding gift, but I think you have to figure out your own way to determine what you can afford and what is appropriate.

Here are the guidelines I use:

• I usually spend about $50 to $60 for a good friend from high school or college.
• For a lifelong friend or someone I consider to be a very close friend, I usually spend about $75.
• I spend about $100 for a close friend who knows all my deepest, darkest secrets.
• If I bring my wife to the wedding, I add about $25.
• This has increased over time as my income has increased. When I was right out of school, I usually spent about $50 no matter what, as that is what I could afford.

The Knot suggests these pricing tiers:

• Coworker or distant family friend or relative: $50-$75
• Relative or friend: $75-$100
• Close relative or close friend: $100-$150

Ultimately, the general rule is nothing less than $50, with a reasonable maximum being $150 to $200.

What Gifts Should You Buy?

Once you set your budget, how can you decide what to buy? There are a few simple ways to give a gift that will be both appreciated and cherished.

Stick With the Registry

If you are on the fence about what to get the bride and groom, stick with the tried and true wedding registry. Many couples have a registry, which makes it easier to choose what gift to buy. If you get something from the list, it’s hard to go wrong!

When I got married, this was 100% true. We were totally happy with every gift of money or item from our registry. Other gifts were very hit-and-miss.

Don’t DIY

Most wedding experts don’t recommend going DIY or crafty on this occasion unless you can make something you know they will use. 

For example, let’s say you are an experienced woodworker. If the couple has a cutting board on their registry, you could make them a custom cutting board with their initials on it.

Otherwise, save the DIY gifts for Christmas or a birthday. 

Combine Practical and Fun

Wedding gifts should be practical but also fun. You want to create an experience for them! Think of things the couple likely won't buy for themselves but something that would be useful and provide value and luxury in their lives.

If they like to cook, kitchenware or fancy kitchen tools are always a great option. You could also give a nice warm blanket or silky sheets. 

When you know their beverage preferences, consider indulging them in a Keurig or a cocktail tray, recipe book, and martini glasses. Or, if you know they are music or theater lovers, buy them a membership to the orchestra or the local theater.

Make it Memorable

You want your gift to be memorable and an extension of your friendship, so incorporate some of their interests and passions as well as some of your personality into the gift.

For example, if you are friends with the bride and you both enjoy making candles together, get a candle-making kit featuring a scent from one of the bride and groom's favorite places to travel.

Other Costs Associated with Attending a Wedding

While a wedding gift is one unavoidable aspect of attending a wedding, there are a few other costs to be aware of to minimize their impacts on your wallet.

PTO

If you are attending a wedding that isn’t nearby, you will likely need to take paid time off from work (or miss out on pay for a day or two if you are self-employed). While this isn’t a typical cost, it is still something to factor into your budget.

There are a couple of ways you can accommodate for this. The first is to try to minimize the number of days you need to take off by opting for departing flights that leave later in the day, not costing you a full day of work.

Another solution is to turn the destination wedding into a vacation to maximize your PTO. Instead of taking one day off, take a few so you can enjoy the city you are traveling to without having to rush to see all the sites. That way, you’ll return to work feeling rested and refreshed.

Clothes

You can’t attend a wedding wearing your regular, day-to-day clothes. Depending on how casual or formal the event is, you’ll likely need appropriate attire to wear. This can get expensive!

Before you start shopping, check your closet to see if you already own anything that would suffice. Maybe you have an old suit tucked away that just needs dry cleaning. Or, you may have a dress you wore to a different event that will also work for an upcoming wedding.

Travel Expenses

If you are attending a destination wedding, flight, hotel, and rental car can easily approach $1,000, depending on the destination. Once you factor in meals, bar visits with friends, airport parking, and other incidental costs, $1,000 becomes conservative. 

Try to save money on these expenses by splitting the room costs with another guest, seeing if flying in and out of a different airport nearby might be cheaper, or opting for flights at less ideal times to get better deals on airfare.

The Bottom Line

With the right strategies, you can ensure attending a wedding is fun while minimizing the impacts on your bank account. Being smart about a gift budget and your wedding gift to the newlyweds is a critical part of the process.

But what is retail arbitrage, and how can you make money doing it? Here’s everything you need to know to get started!

What Exactly is Retail Arbitrage?

The dictionary defines arbitrage as:

“The simultaneous purchase and sale of the same securities, commodities, or foreign exchange in different markets to profit from unequal prices.”

That might be a little dense for most of us, so let me simplify it. The basic idea of arbitrage is finding something you can buy at a lower price and sell elsewhere for more.

This is most commonly seen when people take advantage of a difference in a buy price and sale price of foreign currency or stock prices in a short time period. Currency arbitrage is probably the most popular way to make money fast on a small margin with arbitrage. 

Super wealthy investors and professional traders may find an arbitrage opportunity on a currency where they can make a fraction of a cent several billion times in a deal. But 1/10th of a cent a billion times is a 1 million dollar profit.

Unfortunately, most of us don’t have millions of dollars, let alone the ability to quickly make a billion 1/10th pennies. We need to look at smaller markets with less competition where we can buy something at a low price on one website and sell somewhere else for a profit. 

This is where retail arbitrage comes in. I like to call it eBaytrage, but you can also call it flipping items. It’s where you find retail items for sale at a low price that you can afford. Then, you resell them for a higher amount.

How To Find Things To Sell Online

When you are searching for things to sell via retail arbitrage, look for a product that is selling super cheap but has a high demand. For example, I have successfully resold digital cameras but have yet to buy a computer with a higher capital investment and less liquidity.

I know people resell more expensive goods and products, but you have to be an expert to know you are not getting ripped off on the buy and won’t get stuck with something you can’t sell.

But where can you find items to sell? These are some of the top places to find low-cost items you can flip to make money.

Craigslist

Craigslist is a popular place for people to unload their junk with little effort, which often translates to free. I once found a desk on Craigslist that I picked up for free. It sat in my garage for a few months before I found a buyer who wanted it for $50. 

From start to finish, the whole process took an hour or so of my time. $50 for an hour’s work that I would have probably wasted watching TV is not bad if you ask me.

The tricks to finding items on Craigslist are perseverance, a big truck or van, storage, and patience. I have two full encyclopedias that I have been patiently waiting to resell. Every couple of months, I give it a shot. Maybe I should lower my price, or perhaps I just need to be patient.

eBay 

People are always trying to sell collectibles and miscellaneous goods on eBay. If you can find an item that is below the market price, you can likely buy and resell it. Just be careful that the item is in new or excellent condition and well below the market price. 

You often have to beat the market to resell, and you need to beware of thin margins. Plus, you don’t want to get stuck with a product you can’t sell or have to sell for less than you paid. 

To take advantage of eBay for sourcing when finding products to sell online, you have to be a true expert in the products you are buying.

Woot

If you have never heard of Woot, you are missing out. It is a discounted product website that gives one deal each day, and you can buy up to three of whatever is being sold. 

These products often come at a steep discount, but sometimes they do not. You have to do your research.

Every once in a while, you might be lucky enough to see a “Woot Off.” A Woot Off is the equivalent of a Las Vegas casino for online shopping. The site hosts a series of short Woots that last until the item sells out. Once it is sold out, the next item begins. 

This can be an opportunity to stock up on products to resell. However, Woot reselling is popular, which means you will have competition and potentially lower profits.

SlickDeals

SlickDeals is one of my favorite deal websites. It is the deal crowd-sourcing home of the Internet and is updated constantly throughout the day with new tips. 

Most deals are for some sort of electronic item, but I have seen many exceptions. I once bought a digital camera through a Slick Deals tip and sold it on Craigslist for a profit of about $25.

Garage Sales

One man’s trash can indeed be another man’s treasure, so going to garage sales can be an excellent strategy if you are looking for things to sell online. People who are clearing out their homes are likely willing to part with items for a low cost.

If you find something valuable at a garage sale, you can resell it for much more than you paid for it.

Big Box Retail

Every big store has sales that provide great opportunities to snatch an item quickly. For example, you could consider buying and selling for a profit from Office Depot since they have heavily discounted supplies. 

Stores need to sell off inventory to make room for new stuff. If you can time it right, that can turn into money in your pocket.

Reselling Products Online for a Profit

Once you’ve found cheap items to sell, you have to find buyers. The easiest way to do this is to take advantage of selling platforms to promote your items for sale.

These are some of the best sites to use if you want to try your hand at retail arbitrage.

Craigslist

Not only is Craigslist a great place to find items to flip, but it’s also the first place you should list your inventory. Since you can list and sell for free on the site and you can avoid shipping costs because everyone is local, this is the best place to sell items.

Be sure to include a high-quality picture and a great description to increase the odds of a sale. When someone contacts you to buy, you might have to do a little price negotiation, so you may want to increase the price slightly to make up for this.

If you do sell on Craigslist, remember to be safe. Meet at a public place like a coffee shop, only take cash only on delivery, and always avoid giving out your phone number or home address if you can.

Amazon Fulfillment

When you just want to get rid of your retail arbitrage items today and worry about the money later, Fulfillment by Amazon allows you to ship your junk over in a big box all at once. When it sells, Amazon ships it out to the final customer for you.

If you already have an Amazon account, getting started is easy. Sign up as an Amazon seller and add the Fulfillment by Amazon service to the account.

Next, get your boxes and the stuff that you want to sell. Pick your first box (you list items by the box, so it is important to stay organized) and determine what will fit inside. Go to Amazon Seller Central and choose “add a listing” from the inventory menu.

Follow the prompts to add your item, list its condition and selling price, choose to sell it using the Amazon fulfillment service, and where you are sending the box from. You can keep adding as many items as you can fit in the box. 

After you are done adding items to your box, choose the option to “work on shipment.” Follow the prompts and make sure your inventory list matches what is in the box. Choose SPD for your shipping option and send it from the Amazon partner carrier.

Print your packing slip, stick it in the box, and seal it. Enter the box size, dimensions, and weight on the next page. You will be charged for shipping, so try to be accurate to ensure you are charged correctly and the carrier accepts your shipment.

Finally, print your label and attach it to the box. From there, schedule a pickup from the carrier or just take the box to a shipping store. Amazon will take care of the rest for you.

eBay

There’s a reason I like to call retail arbitrage “eBaytrage,” and it’s because eBay is an excellent option for both buying and selling items online. The platform makes it easy to list items for sale and is one of the most well-known platforms on the web for shopping.

Keep in mind that with eBay, you will pay a fee when your items sell, which can eat into your profits. Be sure to factor that in when you are determining your pricing.

Strategies to Succeed with Retail Arbitrage

If you want to maximize your success and profits with retail arbitrage, there are some key tricks to follow. Here are some things to remember to make the most money from the items you resell.

Relist Items

Keep relisting items and make them look valuable. By listing your items again, you can get them to the top of the search results and make them look like they haven't been sitting around for a while.

Older listings will get less interest than newer ones, so relisting is critical.

Take Good Photos

Photos can truly make or break your listings. Having no photos at all will likely prevent you from selling your items, while poorly lit or blurry pictures can also be problematic.

Make sure the photos of your items are clear, well-lit, and show whatever you are selling from multiple angles to ensure buyers know exactly what they are purchasing. 

Write Great Descriptions

Writing excellent descriptions of your items can also be critical to selling items. Include everything a potential buyer might want to know in your item’s description, including the brand, size or dimensions, condition, any flaws or defects, color information, and more.

Again, buyers want to know exactly what they are purchasing before they shell out their money. A thorough description lets you find the right buyers and get the best price for your items.

Price Items Competitively

Retail arbitrage can be competitive, and you likely aren’t the only person selling the items you are flipping. As a result, it’s important to do your research so that you can price your products competitively within the market.

Pricing your items too high will send buyers to other sellers. Listing them for a price that’s too low may help you sell them faster, but you will be missing out on potential profits. Do your research to find a happy medium.

Bigger Stuff Can Earn More Money

I have met people who own a large SUV or truck and pick up free or low-cost furniture on Craigslist for resale. You can often find items people are trying to unload on Craigslist due to moves or furniture upgrades. 

Check out the “free” section on Craigslist on weekends, and you might be able to find free desks, dressers, tables, and couches. Do a little cleaning and list it again for a fair price.

If you don't have a truck, maybe you can find a friend to partner with. When you pool your resources, you can make much more together than you could ever make alone.

Clean Up Your Items

No one wants to buy dirty items, so take a few minutes to wash whatever it is you want to sell. Sometimes, they may even need a little polish or even a quick refinish so they can turn a huge profit. 

This might not be the most glamorous thing you have to do, but it can increase your profit margins.

The Bottom Line

Have fun buying and selling stuff to make money. I can attest that this is a thrilling and fun hobby, but retail arbitrage takes work and has some risks. 

Start small and work up to having a fun business for side income. Don't expect to make a full-time salary flipping items, but know that this side hustle can help boost your budget so you can achieve your financial goals faster.

The answer is a resounding YES! Here are some easy strategies to reduce your costs without leaving the house (and potentially even your couch).

1. Use an Adjustable Thermostat

The highest utility cost in our house is gas. Our central heating system uses natural gas, as most do. Using a programmable thermostat has been one of the biggest ways we've been able to save money at home.

Programing your thermostat can also save you money on heat. You only need to keep the house warm if you are home, so shut your heater off if you leave. Or, if you are asleep, put on extra blankets and turn down the temperature a few degrees.

This trick is twofold. First, it saves you a bunch of money. Second, it saves the environment. It’s a win-win situation!

2. Get Your Inbox to Zero

Some long-time readers may remember a series of posts I wrote called “inbox clutter week.” The goal was to wrangle and manage my emails to have an empty inbox. It inspired me to launch a free week-long course! You can sign up using this simple form:

Missing important emails can cost you serious money. If you miss a notification from your bank or credit card company, you could lose hundreds of dollars due to missed payments and late fees, not to mention the implications this can have on your credit score.

Plus, having tons of marketing emails landing in your inbox can cause you to spend money on things you don’t need. Hit the unsubscribe button, and then delete those unnecessary emails.

Inbox clutter can also suck up a lot of time and cause completely unnecessary stress. Avoid the stress and save money with better inbox management.

3. Watch Your Bills

I was once charged for Comcast cable TV equipment that I had returned, but it wasn't credited to my account. Fortunately, the Comcast customer service rep on the phone found a record of my return and credited my account.

Another time, I checked my bank statements and saw that I had been charged twice for my monthly bill with Qwest. On a separate occasion, one of my doctors told me once that he had spent months paying for insurance on a car he didn’t own.

The moral of these stories? Sit on your couch and review your statements for a few minutes every month. If something looks wrong, call the company.

It is not rocket science and can save you a ton of money.

4. Hire (or Don’t Hire) a Maid

A clean house is essential to peace of mind, but sometimes it’s hard to find the time to clean. As a result, some people wonder whether or not hiring a maid is worthwhile.

In my area, maids charge about $30 per hour. Do you value your time at more than $30 per hour? If you are paid more than that at your job, then the answer is yes. Or, if you can take on side gigs that pay more than that per hour, the answer is also yes.

However, consider if you use every hour productively and ask yourself if you can find two hours to clean your home. You must decide what your time is worth and whether it is better to use your time to clean or your money to have your house cleaned.

If money is super tight, it's likely best to DIY. But, if you know you can use the time you spend cleaning more productively to increase your wealth, a maid could be worth it by saving you time that you can use to earn more money.

5. Secure Your Online Life

This tip is an unorthodox way to save money at home, but when you are hanging out on the couch after a long day at work, take the time to secure your online life and protect your finances in the process.

Using unique passwords is a critical way to do this. I have custom passwords for almost every website I use. Each one is a randomized alpha-numeric 15-character password. I don't know them, and they are nearly impossible to guess, so a brute-force attack would be futile.

Remembering these passwords is impossible. There is no way to remember one of them, let alone all of them. So, I use LastPass to manage my passwords. That one password to my Lastpass account is the last one I ever had to remember.

By securing your online life, you can save time and potentially money by making it incredibly difficult for hackers to access your accounts. The last thing you want is someone breaking into your online banking and draining your accounts.

6. Save Money Shaving

I hate shaving. The only thing I hate more is the scratchy, pokey, itchy feeling you get when you don’t shave for a few days. So, I shave, and it can get expensive.

While doing the whole social media thing, I saw multiple friends trying out a company called the “Dollar Shave Club.” Once a month, you get a cartridge with four fresh blades in the mail. You can buy basic blades (plus shipping) or premium blades.

Each month, your new cartridges show up like clockwork. Not only can this save you money, but you also don’t need to think about ordering more razors or leaving the house to pick up another pack at your nearest drugstore.

7. Fix Your Leaky Showerhead

I once had a small plumbing issue that needed attention. People often pay $100 just for a plumber to walk in the door. 

Fortunately, I was able to fix my leaky shower head on my own and save money in the process. Here's a quick “how to” video I recorded of the repair. Hopefully, it can help you save money at home if you encounter the same problem!

8. Clear Your Pipes

It's essential to check your radiators regularly and bleed them when necessary. Also, clear your drains and the gutters to prevent blockages that could require an expensive visit from a professional to fix.

One simple and chemical-free method to ensure your drains are clear is to use a homemade baking soda and boiling water solution. Pour one cup of baking soda into the pipe, followed by three cups of boiling water.

Then, you can follow that with a cup of vinegar to create a fizzing action that can dislodge any existing blockages.

9. Refresh Exterior Paintwork

The harsh wind and rain of winter or the blazing summer sun can damage exterior paintwork, so ensure your house's paint is in optimum condition. Sand down paintwork and give it another coat of hard-wearing exterior paint to increase protection if needed.

Don’t wait for paintwork to start flaking before you act. Prevention is always best, and the last thing that you want is for rot to set in on your window frames, doors, and any other exterior woodwork.

10. Check Your Roof Tiles

High winds, rain, and snow mean that your roof can take a beating. Not only can losing tiles off of your roof cause damage to your home and let water in, but falling roof tiles are also hazardous.

Check your roof tiles and ensure they are all secure before they become a more costly problem.

11. Set Up Online Bill Pay

When I changed banks to online-only banking, I knew I wanted to keep my money organized. You all know how I like to use aggregators to keep everything in one place. Unsurprisingly, online bill pay is exciting for someone like me.

Bill pay is not only a cool tool for paying your bills, but you can even get your bills there. Most credit card, phone, internet, TV, and utility providers work with banks to deliver your bill automatically via bill pay.

Once you are set up, you don't have to log into one website to pay for your cell phone, a different site for your internet, another for each credit card, and your other bank's site for your mortgage. You can do those all from one place.

Plus, you can automatically pay your bills, so you never miss a payment. This can help you avoid late fees. So, the next time you are home watching your favorite TV show, set up online bill pay. It's an easy way to save money at home while sitting on your couch.

12. DIY vs. Hiring a Professional

If something breaks at your house, you might be able to fix it yourself. I am not an overly handy guy, but I have installed and removed toilets, changed locks, repaired cabinets, and done a handful of other tasks around the house with no problems.

That said, before you do any work on your house, make sure you have the proper skills. For example, if you are working on anything electrical, it is important you don't injure yourself or burn your house down. If you don't know how to do electrical, don't do it. Call a professional instead.

For more cosmetic-based projects, it might be worth trying to DIY since you won't risk substantial damage to your home. However, the final result might not look as good as hiring a professional.

13. Know When to Buy vs. Rent Tools

If you own your own home, you might like to do upgrades yourself. Chances are you have a standard toolset, but the day will come when you need a more substantial tool for your projects.

For example, let's say you decide to install your own hardwood floor. Buying a flooring nailer would cost you over $400. If you use it for three projects over ten years, you are looking at over $130 per use. A rental will only run about $50-$60 daily, so renting is the better choice.

Alternately, if you do regular woodworking projects, investing in a portable saw for $200 might make more sense. If you use it once a year for five years, you have easily broken even on buying this over renting it.

When you are on the fence about buying or renting an expensive tool, analyze the cost to rent vs. buy. First, come up with a realistic estimate of how often you would really use it. Don't overestimate. You know yourself and how often you actually do DIY projects.

Divide the purchase cost by the number of times you will use the tool over a reasonable lifespan. Then, figure out the price to rent it that many times. If the cost to buy is lower, buy away. If not, you are better off renting to save money.

14. Make Money Cleaning Out Your Home

Regardless of when you do it, cleaning out your home from time to time is important. Some people love it, while others hate it. Regardless, it can be a good practice. Not only can you reduce junk in your house, but you may also find ways to make money while doing it. 

When you find items you no longer want that are in good condition, you can try selling them on sites like Craigslist, eBay, OfferUp, Nextdoor, or Facebook Marketplace. This might not necessarily be a way to save money at home, but it's putting money in your pocket.

You could also donate items you no longer want. While this doesn't have immediate savings benefits, itemizing your deductions could lead to savings when tax season rolls around.

15. Change Your Light Bulbs

Are you ready for an easy project to save money at home and help the environment? Change your light bulbs!

The cost of an incandescent bulb is cheap compared to the energy it uses. While the bulbs cost about $1.25 each, electricity costs about $300 over the bulb's lifespan. They might be cheap to put all over the house, but they are not cheap forever.

Compact fluorescent bulbs (CFLs) cost more upfront than their incandescent predecessors. They cost about $4.00 each, which is four times more than an equivalent power incandescent bulb. However, they only use $70 in power over the bulb's lifespan.

It's also important to note that the lifetime of the two bulbs is different. The life of 42 incandescent bulbs is the same as five CFLs. Each CFL lasts more than eight times longer than the average incandescent bulb and uses far less power.

While 25 incandescent bulbs cost $8,812 over their lives, the same number of CFLs cost $2,244. The CFLs will save you about $6,570 over their lifetimes.

16. Relax at Home

I'm a sucker for a night on the town. I love the lights and sounds of nightclubs. The thumping bass and the pulse of the crowd are a rush! But I don't like the cost of a round of high-priced drinks that can easily break $50 for me and a few friends.

You can save money at home by simply staying home. Rather than chase the parties, I hang out at home with my beautiful wife and have a great weekend without spending a dime. We enjoy movie nights, puzzles, games, and cooking meals together.

17. Save on Utilities

If you want to save money at home by cutting costs on utilities, it is easier than you might think. You can start by improving your windows and insulation. 

Did you know that 42% of energy costs within a home go to heating and cooling? You can seal your windows and doors with caulk and weather stripping to save money.

To step up your utility-saving game, OhmConnect is a free service that helps you save energy and pays you to do it! It will notify you when the power grid is stressed so you can temporarily reduce your energy usage. If you are successful, the company will pay you! 

If you want to cut your water use, you can get a low-flow toilet and put on a low-flow shower head. Water-efficient toilets can save 25% or more of your annual water consumption. Plus, a low-flow shower head can cut your water use in the shower by 50% to 70%.

18. Reduce Cable and Internet Costs

You don't need cable to live. It is hard for some people to believe, but unlike food, water, and shelter, you can do just fine without cable or satellite TV. I cut the cord and saved over $100 per month!

If you don't want to cut the cord, call your cable provider and ask for a discount. Ask to speak to someone else if the customer service representative you are talking to doesn't want to provide one.

In general, most cable companies have deals they can offer current subscribers as “retention discounts.” Customer acquisition costs are high, so if they can keep a customer with a discount, it is cheaper than losing someone and trying to get them back later.

When it comes to internet service, shop around for the best deals. For example, in my area, you could get service from Spectrum for about $50 per month or opt for Verizon at $35 per month. It pays to do your research.

19. Cut Costs on Appliances

When it is time to buy your next appliances to use around the house, get high-quality, energy-efficient appliances. Cheap appliances don’t last as long (or do as good of a job). Investing in quality means you will have a better result that lasts a long time. 

Appliances are also huge energy users. Refrigerators run 24 hours a day. Washers and dryers have enormous energy needs. While it might be a higher cost upfront, finding low-energy-rated appliances can save you a lot of money in the long haul.

The Bottom Line

There are many ways you can save money at home. Sometimes, they take a little effort. Other times, they can be done from the comfort of your sofa.

If you are having trouble staying on budget, consider using one or more of these strategies to keep more money in your wallet!

Here’s what you need to know if you want to use your credit cards to their maximum potential.

What Do the Experts Say About Credit Cards?

A credit card comparison page confirms that consumers should shop around for the best deals. Financial advisors across the board agree that meticulous selection of credit cards is imperative for keeping costs as low as possible to guard against unreasonable debt-to-income (DTI) ratios. 

Be Savvy About Choosing a Card

These days, customers are much savvier about the types of credit cards they are applying for. Cash back, rewards, low-interest APRs, and other options are now being used to reduce the burden of credit card debt as a percentage of overall debt.

People are selecting credit cards with cashback offers (between 1% and 3%), low APRs (0% for 12 months or 18 months), and bigger rewards. 

Pay Your Card In Full Each Month

Pros say that it's imperative to repay credit card balances in full before the end of the month. This is the most challenging aspect of sensible credit card practices. 

The only way to dramatically reduce the burden of credit card debt is to use the savings and rewards offered by these lines of credit to your advantage.

For example, big-ticket purchases on credit cards are typically associated with cash back. By paying it off in full, the discount is the cash back.

Understand that Credit Cards Produce Profits for Banks

Although 166 million people are using credit cards, that number doesn’t do justice to the checks and balances that banks are putting into play to protect themselves against default. Banks rely heavily on their high-yield cash cows like credit cards. 

The U.S. Government Accountability Office reported that credit card debt in the country has reached over $1 trillion. It is in an issuer’s best interest for credit card users not to pay their balance in full each month because this allows them to profit from interest rates.

By understanding how banks profit from credit cards, you can use your card more wisely and ensure more money ends up in your pocket vs. your bank’s coffers.

Why the Experts Use Credit Cards

When used responsibly, credit cards are the best option when it comes to making purchases. But why do credit cards reign supreme above other payment options?

Cash Is Silly

Who uses cash anymore? Not me, and not many people I know. Unless you are overcoming a serious debt issue and like the envelope budgeting method, never use cash unless you have to.

Think about the downsides of cash. If you lose cash, it's gone. There's no recourse. If you use cash, you don't have good records. When you use cash, you don't get rewards. Plus, using cash means that you are not building credit.

Using cash generally doesn’t benefit your financial health.

Debit Cards Are a Bad Idea

Debit cards are a bit better than cash, but not much better. There are a handful of reasons why. The biggest is that your card is linked right to your bank account.

When there are big card data thefts, people who use a debit card are at the worst risk. If someone steals and uses your account number, the money vanishes from your bank account. This can lead to bounced checks, fees, costs, and hassles.

Since it's a card, you can get the money back, but it is a lot of work. Plus, you don’t just get off scot-free. You may still get stuck with fees.

Credit Cards Are Safest

Even if your credit card is involved in a data breach, it’s not a big concern.

Why is this? If it is used, the banks just take the charge off my card, and I fill out a form legally acknowledging that the transaction was fraud. A few minutes of my time is the entire cost to me.

A more practical benefit to using credit cards is that they offer us, as consumers, protection against various things.

Have you ever bought something over $50 only to find it to be defective when you got home or had a dispute with a retailer over erroneous charges? If you have, then using a credit card instead of cash or a debit card avails you to the Fair Credit Billing Act, which can potentially limit your maximum liability to $50.

Beyond that benefit, some credit card issuers will even extend warranties on certain items. We’ve never had to use that ourselves, but I can see how that would be helpful if the computer we bought last year decides to break down on me in the next few months.

Stretch Your Budget

It may seem counterintuitive, but if you use them wisely, credit cards can help you stretch your budget at times. It's less applicable in today's interest rate climate, but it can allow you to play the float between purchasing an item and paying for it.

You can also see this when you travel and need to rent a car or stay at a hotel. If you use a debit card, they’ll place a hold on your card for a certain dollar amount, meaning that you can’t access that money. However, with a credit card, your funds are accessible right away. 

True, the hold falls off when you leave the establishment, but many find it inconvenient to have their cash “frozen,” something you will not encounter when using one of your credit cards.

Big Rewards

Rewards are another important reason to use a credit card instead of a debit card or cash. I took a trip to Israel for about $70 each way. I flew to Portland for $5. Las Vegas, $5. The last time I paid full price for a flight was about two years ago.

It wasn’t a cash back credit card that made this happen. It was a combination of several miles and points cards that made it happen. Ever since I took a trip to London, Paris, and Amsterdam for half price, I have been an enthusiastic travel hacker trying to see the world for free.

One of the best perks of using credit cards is the ability to earn free rewards points that can be used on a wide range of things, from cash to free airline miles. My wife and I churn credit cards, and I can attest that our ability to earn enough for a free trip does make it enticing to continue.

What if earning free trips isn't your thing? That is no problem since many credit card companies will give out rewards such as free cash or gift cards that can be used at various retailers.

I may sound like a cheerleader for churning credit cards. While I do like the benefit, if spending is an issue, then no free trip is worth racking up all sorts of debt in the long run.

Other Benefits

Beyond the rewards and fraud protection, a credit card has other benefits. Depending on your card, those include a complimentary concierge service, price protection, extended warranties, lost luggage protection, additional travel protection, rental car insurance, and more.

Be sure to read through your card benefits to make sure you are not leaving anything on the table.

Is It Ever Okay To Charge More Than You Can Afford?

Standard personal finance advice is to use credit cards responsibly and pay off your balances in full every month. Some experts go so far as to say that you should avoid credit cards altogether if you cannot do that.

But, like most things in life, nothing is black and white. There are a lot of gray areas that blur the lines between responsible and reckless, cautious and crazy. These are areas where we may not be doing the “right thing,” but we’re doing the best we can.

One such scenario is living on credit cards. In an ideal world, living on credit cards wouldn’t be an option. But in this imperfect world, when is living on credit cards the right thing to do?

To Avoid Homelessness

Let’s say you come across hard times. You lose your job or get in an accident, and your whole financial world is turned upside down. In this case, an emergency fund would come in handy, but what if it wasn’t enough? What if you needed extra help yet couldn’t work?

In some cases, you may have the option of moving back home with your parents or staying with friends for a bit. But, depending on your situation, doing those things is either really inconvenient for you or them or simply impossible.

If you don't have the funds to pay rent and risk being homeless, use your card to get by until you can find a cheaper place or until you get back on your feet.

Feed the Family

Another case where living on credit cards might be the right thing to do is if it means feeding your family or going hungry. My first suggestion, aside from using credit cards, would be to apply for government assistance or food stamps to help survive a financial rough patch.

However, depending on your income and situation, you may not be eligible for assistance. If you are not eligible, have a family to feed, and do not have the funds, use your credit cards to ensure there is food on the table while taking steps to save at the grocery store.

Dealing With a Cash Flow Issue

Sometimes, your cash flow doesn't work well with other deadlines in life, such as rent or bills. For example, if you are self-employed, you can go weeks without a check. In that case, you know the money is coming, but you may not have it when your bills are due.

Many of us have also dealt with the long wait to get paid when starting a new job. It always feels like it takes a full month to get paid. In situations like this, using your cards to cover your bills and pay them on time may be a good option.

Tricks To Avoid Credit Card Fee Traps

Credit cards come with a certain amount of fees. As a cautious customer, you might want to consider paying close attention to “fee traps” to ensure they don't hurt your finances.

Here are some common fee traps that you should watch out for.

Rising Interest Rates

Credit card companies are legally required to inform you about rate changes, but it's easy to miss notifications like this amidst all the junk mail and emails you get daily. They may even implement a rate change for you and have a valid legal reason.

For example, your interest rate can increase if you miss a payment. In February 2010, the passage of the Credit Card Act limited the situations when card companies can raise your rate, but there are still plenty of scenarios where it can happen.

New, Unexpected, or Increasing Fees

There are many things credit card companies can charge you for doing. Having a surcharge on a cash withdrawal or other card usage activities makes sense. But did you know that some cards charge an inactivity fee?

This means that you get charged for not using your card. That's just one example. Watch out for changes to the norm, and read your contract carefully to ensure you know how to avoid card fees.

“Checks and Balances”

Comparing credit cards is more complex than people may think. Too many people glance over the basic details of the card and then apply for whichever one sounds best.

The problem is that there is a lot more to cards than what you see at first glance. Upon further comparison, the card that looks great upfront might be horrible for your finances.

For example, the low APR may sound great, but what if it is hidden in the fine print that the low APR expires after six months and then becomes exceptionally high?

This is what is meant by “checks and balances.” The card will offer something great and advertise that, but there are plenty of negatives to balance out the positives.

The bottom line is that you shouldn’t make a hasty decision about a card because your choice could have a bigger impact than you think. Always read the fine print.

Expert Strategies for Fulfilling Credit Card Bonus Requirements

Many financial experts will use credit cards and sign up for new ones to take advantage of bonuses. These can be a great way to maximize your spending and fast-track your rewards.

However, it's essential to make sure you fulfill the spending requirements to receive the bonus. Here's how to ensure you unlock the full potential of credit card sign-up bonuses.

Buy Gift Cards

The easiest possible solution is to buy gift cards at the grocery store to meet your minimum spend. For gift cards you can use anywhere, like a Visa gift card, you may have to pay a fee of $3 to $5 per $500 card. This is worth it for cards that give you up to 50,000.

If you buy Visa or American Express gift cards, you can use them anywhere at your leisure and rest easy knowing you have already hit the spending requirement for the big bonus.

Otherwise, if you buy one for a store, make sure it is one you shop at regularly and will not spend extra just because of the gift card. Think of Amazon or the grocery store for this.

Open a New Card in Advance of a Big Purchase

When you have a large purchase coming up, such as needing to replace a piece of furniture or buying a new laptop, open a new card with a bonus that aligns with your purchase.

If a credit card company offers a 50,000-mile bonus for spending $3,000 in the first three months of card ownership and you are getting ready to spend $3,500 on new furniture for your living room, put that big purchase on the new card to rack up extra miles.

Use Your Card for Every Purchase

It's much easier to fulfill the sign-up bonus requirements if you put your other cards away and just use your new card for all your purchases. Take your other credit cards and debit cards out of your wallet and only use your new card for a few months so you receive your bonus.

Get Help From Family and Friends

This can be risky, so only do it with loved ones you trust. Ask your family and friends if you can pay their upcoming bills and have them reimburse you via cash, check, or Venmo.

You only want to do this with people you trust because you want to avoid running the risk of not getting paid back once you pay their bill. However, if you have trustworthy family and friends willing to help you, this can help you meet minimum spending requirements faster.

The Bottom Line

Credit cards can be a helpful financial tool if you know how to use them right. There’s a reason why many experts use them in their day-to-day lives, and the benefits of having a card can be substantial when you know how to minimize costs and maximize rewards.

Just make sure to pay your card in full each month and watch out for fees. If you do that, you’ll successfully use credit cards like a pro!

But how can you keep your money safe in a world where data breaches, identity theft, and scams run rampant? Here are some key strategies you can implement today to protect your finances.

1. Keep Your Account Info Private

Unless you have a joint account, there is almost no reason for anyone other than you to have your account information. Account numbers, routing numbers, credit card numbers, and other financial account information should be kept private.

In the event that you do have a shared account, keep tabs on it and monitor for suspicious and unexpected activity.

Do not give your account information to someone so they can run an errand for you. Never give your information out because you think someone may need it. Just keep it secure, and you have nothing to worry about.

2. Beef Up Online Security

We’ve all read stories about someone’s ex breaking into their email or Facebook account. Far worse than your buddy finding your computer unlocked and writing profanities on your Facebook wall is giving someone access to your online life.

Want evidence? Just search for breakup horror stories involving Facebook and Gmail online. You will find plenty of stories.

To ensure my accounts are secure, I don’t even know my passwords except for my Google and LastPass accounts. LastPass generates randomized passwords for every site you use. It has a Chrome, Firefox, IE, and Safari plugin that auto-populates your passwords for you.

Just remembering two passwords is easier and will keep you safe. No one will guess or brute force their way into my randomized, 16-character alphanumeric passwords.

3. Act Quickly If You Lose a Card

Once, I went to the ATM at an airport, and when I went to grab my card later that night, I realized it was gone. I don't know where I lost it, but I did know how to ensure everything was okay.

The first thing to do when you realize your card is gone is cancel it. Canceling your card is free and easy, so don't delay. If someone stole or found it, they can use it until it is canceled. You could be liable for the charges if you didn't make an effort to report your lost card immediately.

Over the next few days, make sure to check your charges daily. Some charges do not show up right away, and if the card was used, you can tell the bank to start the fraud process. If you don’t watch for problems, you might end up on the hook for your thief’s purchases.

If the card is canceled and you don’t see any unauthorized charges for three or four days, you are most likely safe and will not see any problems.

Also, if you use your card for any monthly bills, update the merchant with your new card number so you don't get hit with accidental late fees.

4. Don’t Fall for Scammers

Identity theft is on the rise in the United States, and there are a few things to watch out for so you can avoid scammers.

Keep in mind that no one from your bank will call you to ask for your Social Security number or anything else. They already have all of your information. If your bank or any other financial institution needs to know your private information, they will not call you to ask for it. 

No one from any bank will ask for your online login information. They already have it because they are the bank. If anyone asks you for login information besides a bank or trusted financial planning site like Empower, you know they have bad intentions.

Beyond that, you did not win a lottery in the United Kingdom, nor did a dead person in Nigeria leave you a fortune. If someone says that you will get lots of money and only need to wire or send them a smaller amount to get access, they are lying. 

5. Browse Safely

When you sign into online banking or any website that deals with your money, make sure your browser says https rather than just http. The s stands for secure and indicates that the site uses Secure Socket Language (SSL) to ensure encrypted transmission across the web.

Anyone can access and steal your information if you don't have an SSL connection and use public Wi-Fi. A clever hacker can also pick up your info, but SSL keeps you safe.

In addition, do not log in to a secure site with your important information on a public, non-secure wireless network. Keep your banking and shopping to your secure, home wireless network or a wired network you trust.

6. Shred Your Documents

Always shred any mail that has your name and address. Furthermore, shred credit card applications you receive in the mail.

Your name and address are all someone needs to cause you a headache and possibly cost you a lot of money. They can make up the rest of the information.

I have the Royal HG120 12-Sheet Cross-Cut Shredder in my home office and highly recommend it.

7. Take Inventory of Your Cards and Accounts

Make a list of all the cards you carry in your wallet or purse. Keep it somewhere safe so you can cancel your cards immediately if they are ever lost or stolen.

It's also wise to have a complete, up-to-date inventory of your current financial accounts and review statements for them each month. This way, you can ensure there have been no unauthorized charges or fees.

8. Protect Yourself From Yourself

Sometimes, you can be a threat to your own finances. This can be especially true if you are a big spender, go on frequent shopping sprees, pull out your credit card when you get emotional, or your home is filled with items you rarely use.

If any of those categories apply to you, you can safeguard your finances using a few key strategies. The first is keeping a spending log. This lets you track the money you spend and the places you spend it so that you can tell precisely where you need to cut back.

Next, create a budget to help you to balance your spending with your income. This ensures that you leave room to save money and pay bills. If you'd like some help with your budgeting, there are plenty of sites out there that can help you.

Finally, get some accountability. Tell a friend or a family member you'd like to work on your spending habits. If someone else knows about your goals, they can follow up with you to make sure you are achieving them.

9. Deal With Data Breaches Quickly

In 2022, there were over 1,800 data breaches in the United States. This is when hackers break into a company's computers and steal customer information.

If you have received word from a place you’ve shopped, your bank, or the media that your data was leaked in a data breach, don’t panic. Everything will be fine.

When fraudulent charges are made on your credit card or debit card, you are not liable for the charges. Your cardholder agreement protects you from fraud. The merchant and your bank share some liability for the fraud. In most cases, the bank will cover the fraudulent charges.

However, you should still act immediately to protect your money. Contact your bank to request new cards, and check your statements to ensure there are no unauthorized charges. If there are, report them immediately.

10. Know the Differences Between Credit and Debit Card Safety

When it comes to credit cards, I'm never worried about fraud because my personal assets are protected with a credit card. If you ever see fraud on your credit card account, notify the bank immediately. They will remove the charges from your account.

In the event your debit card information is stolen, that is a whole different story. It is essential that you demand a new account number right away, even if the bank does not offer one.

If someone gets ahold of your debit card number, they can drain all the funds from your bank account. While you will get the money back after filing a fraud claim, it can take weeks or months before you get your money back.

This is one of the reasons I encourage people to use credit cards for all purchases.

The Bottom Line

It doesn’t take much time or effort to protect your finances. By following these easy steps, you can ensure your money is safe as you work to improve your financial health.

Don't let all your hard work to grow your wealth go to waste. Take the steps needed to safeguard your finances today!

However, it can be overwhelming to launch a website if you don’t know the first thing about making one or ensuring its success. Fortunately, it’s not as complicated as you might think.

I’m breaking down everything you need to know about how to start a successful website.

Build Your Website in Five Minutes

While building a website might seem overwhelming, putting together a basic site is quite simple. In fact, it only takes about five minutes to do!

Choose Your Domain Name

Your domain name is what visitors will type into their browser when they want to visit your website. Think of it like your address for the internet. Generally, it will end in a .com, .net, .org, or one of dozens of new options like .club, .plumber, .business, .money, and .academy.

The most reputable and recognized top-level domain is .com. If you can get the exact name of your business (or your own name) as a .com, that is the best option for you. If you can’t, you’ll have to get a little more creative. 

As an alternative, .net and .co are the best backup options for a business. I also like .me for personal sites and businesses built around you if you can’t get your name .com.

Some hosting companies include your domain registration in your hosting purchase. Others require it to be purchased separately. If you want a domain but are not ready for hosting yet, expect to pay about $7 to $12 per year for a domain name.

I registered my first domain with GoDaddy in 2006 and still have an account with them today.

Select Your Hosting

If your domain is your website’s address, hosting is your website’s house. It is actually a physical computer server sitting in a data center. 

For most new websites, the best option is shared hosting, where multiple websites share the same server. As your site grows (or if you want multiple sites in the same account), expect to upgrade to a larger shared hosting account to meet your needs.

Eventually, if all goes well, you will have enough traffic (and revenue) to justify moving to a virtual private server. This is a fancier hosting setup where you have more dedicated resources. However, this milestone is well down the road when you’re brand new.

Shared hosting ranges from a few bucks a month to about $20 per month on the high end. Here are a couple of popular options to choose from:

• SiteGround – This is where I send all of my web design and development clients, and for good reason. The servers are well-maintained and very fast. Customer support is top-notch. They don’t overcrowd their servers to the point that you get bad service, and they do it for a very competitive price.
• Bluehost – Bluehost is popular because of its low cost. However, poor customer support and poor performance can be problematic with this provider. They’re cheap, but you get what you pay for.

Hosting Registration

Because I like SiteGround best, I will walk you through the setup process there. The video below shows me setting up my account and launching a brand-new website in under five minutes.

Check out this video, where I go through the entire process in under 5 minutes! Really! In this 4-minute and 59-second video, I take you through all the steps to getting a site up and running.

SiteGround offers three shared hosting plans.

• StartUp – This plan is best for brand-new sites and includes hosting up to around 10,000 visitors per month for a single site.
• GrowBig – This plan is suitable for up to around 100,000 visits per month and includes enhanced support, caching (site speed), a free year for a wildcard SSL certificate (https), and free backups.
• GoGeek – This is the most powerful of SiteGround’s three hosting packages. It includes 40GB of storage and can power about 400,000 visits monthly. It includes advanced developer tools and staging sites, fewer accounts per server, and PCI compliance for credit card payment processing.

In the video, I signed up for the StartUp plan. I opted to skip two options along the way, but they are good to understand before you choose.

• Domain Privacy – If you choose this option, your information will be kept private from whois searches. Unchecking this option will make your registration information public on the web.
• HackAlert Monitoring – This service scans your site for malicious code and hacks daily. There are some free, third-party services that we can use for WordPress sites, but if you are brand new and uncomfortable with this, it doesn’t hurt.

Install WordPress

Once your hosting account is activated, the next step is installing WordPress. WordPress is an easy-to-use content management system (CMS) that lets you log into your website to create and publish content.

In SiteGround, setting up WordPress is easy. Just open the “My Accounts” tab and click the orange button to access your CPanel. CPanel is the interface for your web hosting server space.

In CPanel, look for the “AUTOINSTALLERS” section and choose WordPress. On the next page, click “Install Now” to choose your options.

In the first box, you can choose whether you want to have www at the start of your website name.

Keep in mind that you should only choose https if you have an SSL certificate. If you choose https and don’t have that certificate, visitors to your website will see a warning message. When in doubt, do not use https. You can always add that later on.

In the next box, choose your domain from the dropdown box.

In most cases, leave the third box blank. If you enter anything else there, it will be added to your website URL. For example, if you enter “store” in that box, your site will live at yoursite.com/store.

In the next section, choose your website's public name and description. If you don't know what WordPress Multisite is, leave that box unchecked. Then, choose a username and password for your site and an email you can use for password recovery.

You can skip the plugins and installing a theme. Under advanced options, leave those alone. SiteGround takes care of that for you.

Finally, click “Install.” On the next page, you'll find your login information to get logged in and start customizing your site.

Protecting Your Business by Investing in Domain Names

I've shared how and why I spent $1,000 to buy EricRosenberg.com. This came about a year after I paid $500 to buy this domain, PersonalProfitability.com.

Some people may think it is crazy that I've spent $1,500 on domain names, not counting the many other annual domain fees I pay each year. The oldest transaction in my Quickbooks for domain expenses is from December 2013, and I've spent thousands on domains since.

I consider this a significant investment in my online brands and real estate. There is nothing more valuable online than a well-formulated .com domain. I own eric.money and eric.business, which I don't do anything with. But my primary focus is on my .coms.

The Value of a .com for a Business Owner

As a business owner, your domain is one of your most important assets. Whether your business is focused on the web or is a part of the brick-and-mortar world, if you don't have a website, you might as well not exist.

Businesses must consider social media, online listing and review sites like Yelp and TripAdvisor, and, most importantly, their own .com website. Remember, getting your website up and running takes only five minutes.

A business website doesn’t have to be complex. Some of the most effective business sites are simple. In fact, some businesses only need a site that gives a summary of what they do and contact information. 

Ultimately, investing in domains that include your name or your company’s name can ensure that your customers end up on the right website vs. a competitor site. This can be critical to growing your client base and ensuring your customers keep returning to your business.

The Value of a .com for Personal Use

Before I spent $1,000 to get EricRosenberg.com, my online business lived at NarrowBridgeMedia.com, while my personal site was EricRosenberg.me. I decided that, at this point, I am my business, so I merged them into one.

However, having a personal website is still very important for most people.

If you were hiring someone for a job, what is the first thing you would do before deciding if an applicant is worth an interview? After scanning their resume, you would Google them. 

What comes up when someone Googles you? If it is anything other than yourname.com or something similar, it’s time to make some changes!

When you are an entrepreneur or side hustler, your personal website is the hub of your online earning and a place for people to find out what you’re up to. If you are a regular employee, your website acts as an online resume that you can use to present yourself and your skills.

If you don’t own your own name online, you’re doing it wrong! I registered my daughter’s name’s .com website when she was a few weeks old to ensure she would always have it. There is no real estate more permanent today than a personal website, so use that to your advantage! 

Check out other popular options like .net, .me, and .co if the .com is not available.

Getting a .com Domain for $10 is a Bargain

I used to own a blog in a community of many .blogspot.com and .wordpress.com sites. I was blown away by how many people were willing to spend hours and hours writing a blog every week but wouldn't pay $10 to get their own domain name!

You can get domain names through your hosting company, but I prefer to keep them separate and use nameservers to point the domains where I want. 

I opened an account with GoDaddy when I bought my first domain on March 29, 2007, for $7.17. My account there is still active, and they offer competitive prices for nearly any possible domain extension. Search for your domain at GoDaddy to get started.

Get a Domain ASAP to Establish Yourself Online

If you don't own your name, your business name, or run your website through anything other than your own .com, .net, or other awesome domain name, it's time to invest. You can get a permanent piece of the internet for such a small amount of money.

At $10 per year, you pay less than three cents per day for a domain. That’s like leave a penny, take a penny cheap.

Don't wait! Head over to your favorite registrar to pick up your domain names today. If you are starting out, you can get a great deal with GoDaddy.

Make Your Online Business Profitable Fast

If you will use your website to generate revenue online, making your site profitable is easier than you may think. You can do many things to increase your profits and make money fast.

By following these tips, you can start seeing a return on your investment quickly.

Figure Out What Makes Your Business Unique

Determining what makes your online business unique is the first step to making it profitable. What do you offer that no one else does? What can you do better than anyone else?

Start by brainstorming a list of your unique selling points. List every aspect of your business that makes it special. Then, start promoting these features to your target audience. Let them know what sets you apart from the competition. 

You can capitalize on your uniqueness and sell more products or services with this information.

Set Up a System for Tracking Expenses and Revenue

If you want to make your online business profitable, you need a system to track expenses and revenue, such as those found on AWS Marketplace services. This will help you see where money is spent and how much profit you make.

Without this information, it will be tough to make changes to increase your earnings. Your business has to make more money than it spends to be profitable.

Use Social Media To Reach New Customers

Social media is a great way to reach new customers and connect with existing ones. If you are not using social media to promote your business, you miss a huge opportunity. 

By creating a solid social media presence, you can attract more customers and make more sales. Every successful business has an active social media presence these days.

Invest In Quality Tools And Resources

If you want to succeed, you need to invest in quality tools and resources, such as AWS Marketplace services. Many great products are available that can help you save time and money. 

By investing in the right apps and tools, you will be able to increase your profits and run your business more efficiently. There are many valuable tools, so do some research and find the right ones for your business. An efficient business is a profitable business.

Delegate Tasks

As your business grows, it will become increasingly difficult for you to handle everything yourself. It is important to delegate tasks to other people to make things easier on yourself to make things easier. This will free up your time to focus on more important things. 

As a business owner, you need to focus on the big picture and be able to handle the more significant tasks. Delegating tasks will allow you to do this.

Take Some Time For Yourself

Finally, it is essential to take some time for yourself. If you are constantly working, you will eventually burn out. This will make it difficult for you to be productive, and you could even make mistakes. 

You can recharge and come back stronger than ever before by taking some time for yourself. Taking a timeout is not a sign of weakness. Instead, it is a sign of strength. It shows that you can take care of yourself and your business.

The Bottom Line

Whether online or offline, any business or side hustle takes a lot of time and effort to be successful. However, there are some things that you can do to make your business more profitable by using a website.

Don’t be overwhelmed by the prospect of creating a site for your company. If you follow these tips, you will be well on your way to success!

We’ve found some unusual ways that you can cut costs and boost your budget so that you can achieve your financial goals more quickly!

1. Make Your Own Beer

I am a beer fan. It is a weakness. It tastes good, and it is fun to drink. However, beer can get expensive.

A cost-effective, fun way to drink beer is to make it yourself. I made a batch with a couple of friends once for $20 each. That $20 gave us each a portion of five gallons of beer. Half of the $20 went to buying beer bottles. 

One of my friends had the equipment we needed. If you don’t have a friend with the right equipment, this can be an investment that can save you money in the long run, especially if you are a frequent beer drinker.

As a bonus, this hobby can generate a small income if you turn it into a side hustle.

2. Get a Streaming Stick

For Chanukah one year, I asked for and received a Roku. Roku is like a cable box for the internet. My box brings in unlimited Netflix streaming videos and music from Pandora. It can be set up to do much more.

With a streaming stick, you can consider cutting the cord on cable to save money. This could save you $100+ per month.

3. Plan In Advance

If you enjoy going out with friends, it can be costly. Bars can never be totally frugal, but you can work it out to cut costs by asking for the drink specials and planning in order to avoiding cabs or ridesharing services. 

For example, I went out one night with friends and was able to plan in advance, having a roommate drop me off at the bar and then splitting the cost of a ride home with other friends I was meeting. This saved each of us money on transportation costs.

4. Force Yourself to Live Paycheck to Paycheck

I live paycheck to paycheck, but not in the way you think. It is something I do intentionally and is one of the more unique ways to save.

There is only enough money in my checking account for two weeks of spending. Everything else goes into a savings account each payday. This follows the idea of paying yourself first.

Every paycheck, I automatically take out a designated amount for my 401(k) and my Roth IRA. Once the cash hits my bank account, I automatically put $250 per paycheck into debts I’m trying to pay off. I then manually take a step to pay myself by putting $200 into my savings account.

Then, I live off of whatever is left. Some weeks, money can be tight, forcing me to evaluate my spending and lifestyle. I have cut back on eating dinner out and spending on things like movies and hobbies, but this benefits my financial health in the long run.

5. Buy Discounted Gift Cards

If you regularly make purchases at any major chain store or online website, you can save 6% or more (up to 30%) using sites like GiftDeals.

GiftDeals has gift cards for companies like Southwest Airlines, Barnes and Noble, Best Buy, Gap, Home Depot, iTunes, Target, and Morton’s Steakhouse. There are hundreds of options.

Other sites, such as GiftCardRescue and Gift Card Granny, offer a similar service to help you save. These sites also allow you to sell unwanted gift cards for cash, adding extra money to your budget.

6. Get Cheap Wine

I love good wines, but they can be expensive. To save money, I looked into services like Winc. Like most wine clubs, Winc sends you a monthly wine selection. 

If you go to the liquor store and buy three good bottles, you can easily spend $10 to $20 per bottle plus tax. You also spent the time driving, shopping, buying, and driving home. It is nice to have someone do it all for you.

Winc costs $60 per month for four bottles and has free shipping. They only charge tax in some states. Compared to the liquor store, you could save $5 or more per bottle and find something more unique and better from Winc.

7. Invest Your Coffee Money

If you go to Starbucks daily on the way to work, you are spending about $5 a day, or $25 per week, on coffee that you can probably get at your office for free or make at home for a lower cost. Over a year, that could amount to $1,250.

Now, assume you invest that $1,250 per year instead of spending it. Saving it without investing a cent at zero interest would net you $43,750 if you start at 30 years old and save $5 every weekday, 50 weeks per year, until you are 65. 

If you invest that at a modest 5% return, which is less than the average of the S&P 500, you would have $118,545 (assuming that you invest the $1,250 once per year). At a more aggressive 7%, you would have $184,892 when you retire.

8. Pack Your Lunch

Buying lunch every day costs $5 to $10, on average. Let’s say $7 to make it simple. Bringing your lunch costs money, but it’s less than the cost of eating out. If you spend $2 to make your lunch, you save the same $5 per day as you did by skipping your latte.

If you utilize both habits and invest, double the numbers above. $369,784 sounds pretty sweet!

9. Save on Gas

I recently shared the best mobile apps to better your life, and one of them can help you save on gas. GasBuddy gives you a crowd-sourced list of local gas stations and their prices. You can choose stations near home, work, or along your route to find the best prices.

Assuming you don’t have to go far out of the way, you can easily save $2 to $5 per fill-up. If you fill up once a week like me, that is $100 per year on the conservative side. Over 35 years, that $100 a year can become almost $10,000.

10. Drink More Water

Do you order a Coke every time you go out to eat? Or maybe you order a Diet Coke to save on calories (but add on cancer)? Those drinks are also taking a big chunk of change from your money. At a minimum of $2 each, even with free refills, the cost can add up over time.

Water costs nothing and has no calories. It is also good for you. According to research by MSN, switching to water could save you $977 annually.

11. Save Money on Hair Care

For almost 15 years, I have cut my own hair (not me personally, but my wife does the dirty work). I bought two pairs of clippers in that time frame, so I no longer have that expense.

My wife has also started taking herself and our kids to a local hairstyling school to get their hair cut. What used to cost us at least $45 to get my wife’s hair cut every few months now covers all of their haircuts and usually leaves a little money left over. 

It may not be glamorous, but their hair looks the same. Plus, we get to save money that can be applied to other areas of our budget.

12. Avoid the Grocery Store

I recently wrote about how to save money at the grocery store, so this tip might seem contradictory, but hear me out. It’s easy to make a quick trip to the store if you run out of something. No harm, right? That is, after all, exactly what grocery stores want you to do.

Every once in a while is okay, but these little trips can add up if done regularly. Rectify this by having a list when you go and cut down your number of trips. This will force you to become a wiser shopper.

You’ll notice that it will become easier to save money when you’re doing your grocery shopping. If you have to run to the store, just take the cash you need for the item so that you’re not tempted to spend more.

13. Comparison Shop

Whenever we have to buy something for the house, whether small or large, I always look for how I can save money on that purchase. Thankfully, the internet makes that easy.

Whether you check out a coupon site like RetailMeNot or go to Amazon, you can almost always find either a coupon or someone else selling the same item for cheaper. This allows us to save money that can be used for other things in our budget.

14. Use Employer Benefits

Many people miss out on the benefits they get from their employer. A paycheck and vacation time are nice, but your employer likely offers more than that.

Check out your employer’s 401(k) plan. It will help you save in the long run, but it also lowers your tax liability.

Also, look into other benefits your employer offers, like wellness plans, education reimbursement, parking/transportation reimbursement, and more. These can help you save money on gym memberships, tuition, and parking/transportation costs associated with your job.

15. Treat Yourself

This may sound counterintuitive, but treating yourself helps you stay motivated to reach your goals. Set up little savings milestones to achieve on the way to a major savings goal, and give yourself a small reward each time you reach one!

16. Use Your Phone to Shop Smarter

A while back, I went to a local computer specialty store to research some items I needed to buy. I was surprised by how helpful my phone was in researching prices and other factors that influenced my purchase decisions.

I asked one of the employees for his recommendation on what products I should buy. Before I trusted him, though, I wanted to do my own research. I pulled out my phone and scanned the boxes for the one that I was told was the best and the one that was cheapest.

Surprisingly, the “best option” was not rated highly in consumer reviews. The cheapest option was $60 cheaper than Amazon.com and had fewer ratings, but they were more positive than the “better” brand.

Ultimately, I was reminded how important it is to do your own research before you buy an item. Pull out your phone before you head to the register and do your due diligence to save money.

17. Avoid Impulse Spending

If you have to run your credit card for over $100, I suggest using the two-week rule. This rule says that if you see something you want, which means you don’t absolutely need it to live, and it costs over $100, you wait two weeks to decide if you really want it.

If you forget about it, you made the right choice to leave it on the shelf. When you still want it but can’t justify the cost, you know you made the right choice not to buy. If you still really want it and can afford it, go ahead and buy it.

18. Impulse Spend the Smart Way

Sometimes, impulse purchases can’t be avoided. As a result, it is essential to know how to do it the right way.

Splurging on small items (in moderation) can be okay if you are the type of person who gets a rush when you make a purchase. These little splurges can discourage you from buying more expensive items that hurt your budget.

It’s critical not to give in on the big-ticket items. You must implement the two-week rule for these larger purchases to ensure they are items you actually need and can afford, not just items you want.

19. Save Companies Money

Sometimes, saving companies money can save you money. My favorite example of this is paperless billing.

Companies spend hundreds of thousands of dollars every month sending out paper bills and processing paper checks. They are always looking to cut costs, and one of the most logical ways to do that is to help customers move to paperless billing.

How does this help you? First off, it saves you a stamp. That is 66 cents, or whatever they cost today, that you can keep every month. This equates to $7.92 per year at current rates. If you pay a separate power, phone, and cable bill, that is $23.76 per year.

Assuming you subscribe to these services from when you are 20 to when you are 70, that is $1,188 over your lifetime. This just accounts for the stamps. You also have to pay for the checks. Over 50 years, that is 1,800 checks. At $6 per box of 200 checks, that is another $54.

20. Create a Values-Based Budget

Every day, you choose what to spend money on. Some of the things you spend money on are needs, but some are wants. To save money without feeling like you are giving up everything, you need to create a values-based budget.

A values-based budget focuses on the things that provide value in your life and cuts out the things that don’t serve you.

Oftentimes, we may think we spend money on our values. But, if you want to know what you actually value, look at where you are spending your money. For example, if you love books but spend money on video games instead, your budget and values are misaligned.

To reconcile your values and spending, create a list of things you value. This includes things that make you happy, bring value to your life and relationships, and make your life easier.

Once you have created a list with your values, make room in your budget for them and ruthlessly cut out other unnecessary items. 

21. Automate Everything

Saving money can feel like work, but automating your finances is a great way to simplify things. I am a huge proponent of automating your savings. Before moving to New York for graduate school, I saved $14,000 using the power of automation.

Each paycheck, I would automatically contribute $600 to my savings account. Since it was automatic, I didn’t even have time to miss it. Saving money, like anything else you want to master in life, requires persistence and positive habits. 

For me, automating my savings ensures that I am sticking to my goals and putting myself first.

22. Make Saving Money Like a Game

Imagine you are playing a game where the goal is to save as much money as possible but still buy the things you want.

This is a real game I like to play any time I spend money. When I think about it this way and know what I’d do with the money saved (pay off debt + travel), I am motivated to look for deals.

If you are doing any shopping, look for coupon codes and other cost-cutting deals on sites like RetailMeNot first. When you want to go out for dinner, save some money and use Groupon. If you still want to enjoy nice luxuries like a massage or pedicure, go to a beauty school.

The Bottom Line

These unique ways to save money can boost your budget with minimal effort. Adding them to the more traditional strategies you use to cut costs can fast-track your savings.

When you save more money, you can reach your financial goals and improve your net worth faster. Consider trying a few of these creative money-saving strategies today!

But how do you navigate the financial aspects of purchasing a car? Should you buy new or used? How do you find a loan?

I break down what you need to know when you are buying a car so you can get on the road without breaking the bank.

New Car Myths Debunked

Typically, when people want to buy a car, they know that purchasing a brand-new vehicle is a bad idea. However, because they really want a new car, they trick themselves into believing that it would be the logical choice for them, even though it's more expensive.

When people start thinking of why they should buy a new vehicle, this list is typically what they come up with.

1) New Cars Are Safer

Somehow, people get the notion that the current car they are driving is not safe. If your vehicle is less than 10 years old, it is probably perfectly safe.

But, if you own a 1960 Chevy Corvair, you should probably upgrade to a safer car. That said, it still doesn’t have to be a brand-new vehicle.

2) New Cars Get Better Gas Mileage

This might be true, but instead of dropping $40,000 to save $500 a year, why not buy a used Honda Civic that gets 35 miles per gallon and will cost you way less? Buying that new car to save on gas just doesn’t make all that much sense in this case.

3) I Will Drive My New Car Forever

Even though people don’t typically drive a car for more than five years, they somehow get themselves convinced that they will get their money’s worth out of a new car because they will drive it until it simply won’t run anymore. This hardly ever happens. 

After a few years, you will get bored with your car and start drooling over the new ones. It is best to buy a used car so you don’t have to feel bad about selling it and buying something different after a couple of years.

4) New Cars Are More Reliable

Some cars come off the line and are reliable, but there are always those new cars that are mechanically worse than many of the used Hondas and Toyotas.

The problem with buying a new vehicle is you don’t know if your car will be one of the reliable ones or one of the lemons. If, however, you purchase a used car, you can read up on the many years of reliability results.

5) Payments Are Affordable

Do you realize why the payments are so cheap for new cars? It’s because they extend the loan for multiple years! 

After all of those years, you will not only overpay on your vehicle because you bought it brand new, but you will also have paid thousands of dollars in interest.

Beyond that, new cars are more expensive not just at the time of purchase but also in terms of registration and insurance costs. While you might save on maintenance costs in the short term, all these added costs negate those potential savings.

Are New Cars a Good Investment?

When I worked at a bank, I noticed something interesting. All of the officers had cars worth less than the regular employees. I knew officers made more than non-officers, but I always wondered why people who make less have cars worth more.

One day, I found out why. One of the guys made a comment about it, saying, “Cars are depreciating assets.”

While the officers did not have flashy cars, they all had nicer homes and condos. The non-officers almost all rented.

If you buy a car for $25,000, it is worth less every day. If you buy a home for $500,000, it will generally be worth more. Cars go down, homes go up.

When deciding what to do with your money, do not put it in cars unless you can afford cars that go up in value (like a McClaren F1, only $1 million). But for most of us, real estate or securities are a much better option.

How Does a New Car Impact Your Net Worth?

We know that new cars are not good investments, but vehicles have become a status symbol that lets others know we are successful. For this reason, many of us overextend on our auto purchases. In turn, this kills our net worth.

To show you exactly how much your new car is impacting your net worth, let’s set up a scenario. Let’s say you own a home, a new car, a retirement fund, and you put away some cash each month for a rainy day. 

With the rising value of your home, retirement fund, and savings account, you would expect your net worth to rise, right? Well, that all depends on your vehicle. If you buy a brand-new car, your net worth won’t be on the rise any time soon.

Let me illustrate this:

• Your $100,000 home increases in value by 1% each year
• There’s an 8% annual increase to your $20,000 401k
• You add $100 a month to your savings account
• The brand new $30,000 car you purchased is depreciating each year

Here’s what happens to your net worth over the course of 5 years:

Your net worth doesn’t decrease, but it only increases by $3,000. That’s absolutely terrible!

What if you purchased a $5,000 used car instead of a $30,000 new car? Here’s how that would impact your net worth:

By changing the type of car you drive, you could improve your net worth by over $16,000! 

Plus, consider how much you would pay for insurance on your brand-new car. It’s certainly a lot more than if you had owned a $5,000 car! No matter how you look at it, a new car kills your net worth.

Purchasing Options When Buying a Car

Now that you know it’s important to avoid buying a new car in order to protect your net worth, you might wonder how to pay for a used vehicle. You can consider a few different financing options when purchasing a car.

Pay in Full

The best way to buy a car is to pay outright in cash. This will be the least expensive option since there is no interest or fees associated with the purchase.

However, unless you have a ton of money sitting around, this may require you to buy a less expensive car. It is up to you whether or not this strategy is worthwhile.

Leasing

Another option is leasing, but I would not recommend leasing a car. I will say that again to make sure you heard it. Do not lease a car! 

Leasing is renting, so you have no ownership in the car. At the end of the lease, you have nothing and must return the vehicle.

Take Out a Loan

A third option is to take out a loan. While many people hate debt, this is actually the most common strategy people use when buying a car.

The good news is that installment loans like car loans are the fastest way to improve your credit score. My score went way up when I had a car loan. 

Loans require a down payment and a good credit score. Plus, there are interest payments, which means you pay more than the actual retail value of the vehicle over the lifetime of the loan.

Keep this in mind when you consider this option, and make sure your credit score is as high as possible to reduce your loan's interest rate.

How To Shop for a Car Loan

Taking out a loan to buy a car is the route most people will have to take. If you fall into this category, it’s important to shop wisely and ensure you get the best rates. 

Here’s how to shop for a car loan.

Determine How Much You Can Afford

Look at your budget to see how much you can pay for a down payment and how much you can pay for your loan monthly. These are two critical factors that will impact your options in terms of what cars you can buy.

A critical rule to remember is not to buy more car than you can afford. If you don't follow this rule, you may end up in deep debt.

Find a Car

Once you know how much you can afford to put down and pay monthly for a car, you can shop for vehicles within your budget. Ideally, you’ll want to consider a nice small car with good gas mileage. 

Obnoxious SUVs and trucks are bad for the environment and can cost you a lot of money in gas expenses. Consequently, smaller cars can be the way to go when you want to protect and grow your net worth.

See What the Dealership Recommends

After you find a car you’d like to buy, the dealership will likely suggest a bank, credit union, or their finance subsidiary for a loan. Do ask the dealership what their best rate is. 

While it’s okay to consider their financing offer, don’t immediately accept it. Keep it in mind as an option, and take the time to compare it to other financing options available.

Do Your Research

The dealership's financing option likely won't give you the best rate possible. As a result, you must do your own research.

When you shop around for a car loan, do not give each bank your detailed information. Every time you fill out an application, even if you don’t take the loan, you will get a hard hit on your credit report. One or two is not a big deal, but five or seven can lower your score.

When you fill out the first application, ask for your credit score. The bank cannot give you a copy of the report, but they can let you look at the report and score. This will be helpful when you shop around.

Then, ask other banks what their best rate is and what credit score you need for the rate. Also, find out what fees there are to get the loan. Some are imposed by the local government, while others are banking fees.

Choose a Lender and Make a Down Payment

Once you settle on a loan, your credit union or bank will work out the details with the dealership or broker. You might have to deliver papers between the two.

At this point, you will have to pay your down payment to the dealer. The bank will pay the dealer for the rest of the car and keep the title until your loan is paid off. A larger down payment means lower monthly payments and lower total interest costs over the life of the loan.

How to Pay Off Your Car Loan

Once your car loan is active and you've driven off the lot with your car, you must start working to pay off the loan as quickly as possible. This can reduce the amount of money you pay in interest over time, which, in turn, can improve your financial health.

Remember to do the following as you work toward paying off your car loan.

Pay On Time Each Month

It is critical to pay every loan payment on time. If you don’t, you might get hit with late fees, which can eat into your budget. It may also take you longer to pay off your loan, costing you more in interest in the long run.

Beyond that, late payments do not reflect well on your credit report and can hurt your score. 

If you are worried about forgetting to make your monthly payments, setting up autopay with your lender or through your bank can be a helpful safety net.

Try to Make Extra Payments

Whenever you can put extra money toward your car loan, do it. For example, if you get a raise at work or take on side gigs, use that money to make an extra payment on your loan.

The faster you can pay off your loan, the less you pay in interest. This means you are saving money and growing your wealth.

Shop for Lower Rates

Just because you have a lender doesn’t mean you are stuck with that provider for the duration of your loan. It’s important to keep an eye on rates and shop around to see if you can get a better rate to save you money.

While this may seem like a hassle, it could save you hundreds of dollars in interest over the course of your loan.

What To Do After You Pay Off Your Car Loan

Once you pay off your car loan, you will have extra money in your budget to use for other expenses or financial goals. But, after you identify exactly how much you were paying toward your loan each month, what are some of the best ways to reallocate that money?

Pay Off Other Debts

Back when I paid off my car loan, I followed my debt snowball to my student loans. Your debt snowball might look different from mine (for example, maybe you have high amounts of credit card debt), but you can use your extra money to pay off your other debts faster.

Believe it or not, paying off your debts is one of the best ways to increase your net worth. So, once your car loan is paid off, start working toward getting rid of your other debts!

Save for a Rainy Day

If you've been living paycheck to paycheck, the money used for your car payment could go into an emergency fund. This can help you escape that stressful cycle while ensuring you don't end up in debt due to having insufficient funds to cover emergency expenses.

Invest

One of the best ways to improve your net worth is to invest. If you’ve paid off your car, you can use your extra funds to invest and grow your wealth!

Fortunately, it doesn't take thousands of dollars to get started with investing. You can buy fractional shares of stocks with certain apps or find other unique ways to invest your money.

The Bottom Line

If you are in the market for a car, you can get on the road without breaking the bank. The process of purchasing a vehicle might seem overwhelming, but it truly doesn’t have to be.

By understanding the importance of buying used vs. new, being a savvy shopper when it comes to loans, and being diligent about paying off your loan, you can stay in the driver’s seat and steer your net worth in the right direction.

We have the scoop on how to handle money and dating like an expert.

Dating Etiquette: Who Pays and When?

I recently had a conversation with a friend (a girl) about money and dating. It got me thinking about gender roles when it comes to money and dating.

First Date

My opinion: The guy pays for everything.

Her opinion: The guy pays for everything.

This is going to be a fairly standard answer across the board unless you are an uber-feminist or a broke guy. I fully believe that the guy needs to step up and pay for every cost on the first date.

Ladies, if he does not offer to pay for everything, he is either a deadbeat or not that into you. Either way, he is not worth date number two if he can’t man up and pay the bill.

Second Date

My opinion: The guy usually pays for everything, but he might allow the girl to pay for dessert.

Her opinion: The guy pays for everything.

We are getting into a gray area on the second date. A girl should not come across as a user, so she should not suggest an expensive date and expect it all to be paid. When I was dating, I never did expensive second dates, so I was always happy to pick up the tab.

If we went for ice cream (or something similar) after dinner, I always offered to pay. If she insisted on paying, I let her take the tab as long as I paid for dinner first.

Third Date

My opinion: The guy usually pays, but splitting parts or her paying for small parts is acceptable.

Her opinion: The girl can pay but probably should not be asked.

I never asked a girl to pay on a date. That is something I picked up from my Grandpa, a real Southern gentleman. However, if she insisted at this point, I wouldn't have put up a big fight.

On the third date, you are reaching the “relationship” level, and the guy can’t be expected to pay for everything forever.

Beyond the Third Date

My opinion: The guy pays more than half of the time, but alternating paying for meals and activities is fine.

Her opinion: Split the costs to keep things fair.

Once you are “dating” someone or in an official relationship, it is normal for a couple to split the costs. In my last dating relationship, I usually paid for dinner or anything expensive (I had a better job), and she paid for cheaper dinners or lunches.

The key is finding a balance where you are both comfortable. If the guy is always paying, the girl could feel cheap, or the guy could feel resentful. If the girl pays more, a guy could feel like less of a man for it. 

Cheap Date Ideas

When I was dating, I knew it was important to get to know each other better, spend time together, have fun, and not blow all of my money. As much as I would have loved to go to the Capital Grille and sushi every night, I knew that was unrealistic.

Here are eight ideas for going out without going broke.

How I Met Your Mother Nights

I have Netflix streaming on my Roku and Xbox. What is more romantic than cuddling on the couch watching Ted on the journey to find Mrs. Right?

What’s better is that Netflix has lots of shows. Whether you are both nerds (Star Trek) or action junkies (MacGyver), you can surely find a fun way to spend time together at home for almost nothing.

Flowers

Here is a tip to any guy in a relationship: girls love “just because” flowers. Seriously. You don’t need to wait for Valentine’s Day to buy overpriced roses.

On a Wednesday night, when you are having a low-key date, head to the grocery store on the way over and pick up a $5 bouquet. This will score you major points and make her super happy.

Dinners

Dinner can be expensive, but it doesn’t have to be. I can cook a great salmon dinner with garlic green beans and wild rice for about $15. You can, too! It is much cheaper than a fancy restaurant and gives you a great chance to spend time together.

For a bonus, pick a meal to cook together. Cooking together is fun and gives you time to talk, joke around, and eat something delicious (as long as you don’t burn it).

Walks

If it’s a beautiful day, ask the person you are dating if they’d like to take a walk and enjoy the sunshine. You can head to a nearby park, hop in the car and head to a nearby state park, or find a new part of town you want to explore.

For example, maybe there’s an art district in your city that you have never spent time in. It could be a fun date idea.

Treasure Hunt

Who would not want to go on a treasure hunt? I have done treasure hunt dates, and they were amazing! Here is how it works:

First, you need to have a smartphone. Android or iOS works. Install the Geocaching app from Groundspeak Inc. It is 100% free. Open it up and find any nearby geocache locations. The app uses your GPS to help you find a hidden treasure.

A geocache is a hidden treasure for recreational treasure hunters. You can’t keep it, but you can take something from the stash if you leave something of equal or greater value for future hunters.

Dance Lessons

Within a ten-minute drive of where I live, I know three places with weekly swing or salsa dance lessons. They all offer a free hour lesson with admission for the night. 

For $20, you can dance the night away and have fun learning the jitterbug.

Include Your Date in Your Life

Chances are, you are dating someone because you have something in common. One girl I dated liked nights out on the town. So did I. We had a great time doing something we already did, so it didn’t cost us any more to go out to the bars on a Saturday night. 

Whatever you love to do, include your guy or gal for a low-cost way to have fun.

Find Free or Cheap Stuff

The local zoo has free days every year. ScoutMob and Groupon offer great options for cheap food or a fun activity.

Also, check out coupon books like Entertainment for more ideas and discounts.

Planning a Romantic and Affordable Weekend Getaway

If dating is going well, one of the next logical steps is to take your dates to the next level and go on a weekend getaway! While traveling with your boyfriend or girlfriend might sound expensive, it doesn’t have to break the bank.

Here’s how you can plan a romantic and affordable getaway.

Pick the Right Location

Location is one of the keys to both a good time and price. Where I live, there is no shortage of weekend destinations. From Palm Springs to Big Sur, there are many travel options. However, you might find something wonderful for a lower price by venturing off the beaten path.

For example, considering places like Ojai or Solvang might help people in Southern California get away without breaking the bank. Every place in the world has a hidden gem nearby.

Check out sites like TripAdvisor and Lonely Planet if you need close-to-home vacation ideas. For discounts, try AAA or AARP if you are a member.

Choose the Right Time

Going to a mountain getaway in the winter for a weekend costs a fortune, but spring and fall hotel rates are affordable and reasonable. You could also go mid-week for some big savings.

Jump on any travel or hotel website and play around with your travel dates to find good deals. You could also look to sites like Groupon for deals.

Find the Right Activities

It might be cheap to stay in Vegas, but it costs a lot once you get there. Any city can be the same. 

Plan ahead and find discounts and activities that are both fun and reasonably priced. Hiking, climbing, wine tasting, walks, and museums are all generally cheap or free activities in my neck of the woods.

When you are out on the road, look to Lonely Planet or AAA (if you are a member) for ideas. You might even be able to squeeze out a AAA discount.

Plan Personal Time Together

This is key to a romantic weekend away. If you are spending a snowy weekend in the mountains, bring snacks and drinks so you don’t have to leave the room much.

You can even bring games you enjoy playing together or couples activities.

Should You Discuss Finances When Dating?

For some of us, talking about money is an easy thing to do. For me, a guy who shares my bank account balances on the internet, it doesn’t bother me to share my financial situation with someone in my life. Of course, I am vague in some areas, but I put a fair picture out there.

For others, money is taboo. I once dated a girl who grew up in a family where money was never discussed openly. The parents took care of everything, and the kids had no idea what was going on. If you grew up in that situation, you probably want to keep your finances close to the chest.

As a money-minded person, it makes sense that you would bring up the topic first. In doing so, you should be willing to share your financial situation. And you should absolutely talk about finances with someone you think you might want to get serious with.

Money is a common reason for relationship failure, so discussing the topic as opportunities arise is essential.

But when is the right time? When you have “the talk” and make it official? A month after? Two months? After your first weekend getaway? Every relationship is different, but it is important that you don’t blindside your partner far into a relationship when they don’t expect it. 

The best strategy is to feel it out based on the progression of your relationship. As you get more comfortable having deeper conversations, discussing more taboo topics like money with whoever you are dating will be easier.

What To Share About Finances

When you start discussing finances with the person you are dating, it doesn’t mean bringing your statements to dinner. However, you should be willing to say, “I have about $XXX in debt and am working to pay it off by XXX,” or “My student loans cost me $XX per month.”

It is easy to paint a clear picture of your situation, goals, and plans for the future without being extremely specific.

When I was dating, I did want to know if I was dating into a ton of debt. Whether it is credit card debt (honestly, this was a deal breaker if it was too out of control) or student loans (which did not scare me off because it was accumulated trying to better their life).

It is fair that your partner should know your situation, especially as you start thinking about the next big steps in your relationship. You should also know about your partner’s financial situation so that major financial bombshells don’t blindside you.

Ultimately, the more serious you are about the person you are dating, the deeper you and your partner should be willing to dive into finances to ensure you are both on the same page before taking more significant steps in the relationship.

Taking the Next Step: Moving In Together

If you’ve reached the point where your relationship is serious enough to move in with each other, you and your significant other will have many decisions to make, from which colors to paint the walls to how to divvy up the chores. 

But, the most important thing couples can do before they move in together is create financial boundaries. This can only be done once you’ve had important financial talks that include understanding each other’s budgets, including spending and savings habits.

Once the partners have discussed their budgets, they should begin to set financial boundaries. Here are some important boundaries to consider before signing a lease together.

Set Financial Goals and Make Plans on How To Achieve Them

Each person should make a list of their own financial goals, such as saving for retirement or getting out of debt, and a list of shared financial goals, such as saving for a romantic vacation or buying a home together.

Next, create a plan for how much each person needs to contribute each month to these goals to make them a reality. For example, couples who want to buy a home should determine how soon they want to buy a house and then figure out how much they need to save each month for a down payment, which can be up to 20 percent of the house's purchase price.

When couples have financial goals, it helps them set their own boundaries on what they should spend money on (the goals) and which expenses are of lesser priority.

Split Monthly Costs

Make a list of all the monthly bills, including electric, cable, water, insurance, and more, then decide who is responsible for making sure each bill gets paid. 

Maybe one person pays all the bills, and the other reimburses him/her for half. Or perhaps the couple splits up the bills so each person takes responsibility for his/her half.

Consider opening a joint account to which each person contributes a predetermined amount and use this account to pay bills. Just remember that both partners own joint accounts, so there is a risk of one person taking money out of the account without telling the other.

Create Limits on Food Costs

Food costs can sometimes be the biggest expense in a couple's budget beyond housing costs. That's why limiting how much each person is willing to spend on food each month, including groceries and dining out, is essential.

It's usually a good idea for couples to set the food budget at about 10 percent more than they anticipate spending. This way, they're likely to stay within budget and use the extra savings for a nice dinner or toward one of their financial goals.

Buy Items for the Home Individually

No one wants to think about this, but couples sometimes break up. That's why experts say it's a good idea for couples to buy furniture and electronics individually that they share in the home. Then, make a list of who bought what so it is easy to split up belongings if you part ways.

The Bottom Line

When you have the right strategy to manage money and dating effectively, you can enjoy getting to know someone new. There's no need for stress during the dating process!

By understanding how to save money on dates, when to talk to your significant other about financial topics, and ways to handle finances if you move in together, you’ll be able to stay on track with achieving your financial goals while helping your new relationship blossom.

Here's everything you need to know about becoming a landlord, from finding a property to profiting to avoiding headaches and more!

How To Find a Rental Property

The first step to becoming a landlord is finding a rental property. Many factors go into finding the perfect property, so this isn't a process you should rush.

As you search for potential properties, consider doing the following.

Study the Demographics

Before you consider making a real estate purchase, you must understand which neighborhoods are healthy and growing vs. which have high crime and drug use. While the high-crime area might seem to produce the best bargains, the long-term outlook of these properties is terrible.

Look online at Zillow or Trulia and study which areas are increasing in value and which properties are the best rental options. After looking at the numbers online, visit these neighborhoods to see who lives there and how well they maintain their yards and homes.

By studying the demographics first, you immediately save time by not reviewing homes outside your desired demographic.

Know the Rental Property Values

If you want to earn an income with this property, you should know what you can expect to charge for rent. Sure, the house might seem like a deal given the area, but if the typical rent amount does not cover the mortgage costs, it certainly is NOT a good deal for you.

If the rent will cover the mortgage expense, utilities, and maintenance each month, you likely have a decent deal on your hands and should pursue this option further. 

Zillow offers a rental estimate that you can look at as a reference point to get a rough idea of what you might be able to charge.

Find a Project Home

As a rule of thumb, if you find a house that is completely renovated and updated, you will not get a great deal on the property. It just doesn't happen. However, if a home has ugly orange walls inside, you might get a $5,000 discount.

When I look for homes, I look for ugly houses that can easily be turned into beautiful dwelling places for families. One of my homes had ugly, worn-out carpet that needed replacing. 

However, instead of looking at this as an annoyance, I took a peek under the carpet and saw beautiful hardwood floors that were original to the house! I paid $20,000 less than what the house was worth, got the floors refinished for $3,000, and had a home worth more than what I originally paid.

You might not be the handiest person, but there are still many things that you are capable of doing. Painting is simple and can add much value to any home. Tearing out carpet can be done by anyone, as can vacuuming and cleaning. 

Tackle projects you can handle, and add tremendous value to that ugly house.

Take Your Time When Searching

Far too often, people get it in their heads that they want to invest their money and feel as though they need to take action NOW! Sure, this life moves by quickly, but that doesn’t mean we should rush into investment options that make no sense. 

I have seen this happen with many of my friends. They have a great idea (such as buying a rental or getting out of a car lease), but because they have no patience, they make bad decisions and end up costing themselves money in the long run.

Wealth does not typically happen overnight, so don't plan on making a large financial move tomorrow. If you are searching for a rental property, plan on searching for six months to a year before finding the right property.

Have a Large Cash Reserve

As with any business, cash is the key to survival. The same is true for rental property investments. Houses require upkeep, and that upkeep will cost you money. 

Sometimes, your rental homes will only require a hundred-dollar fix here and there, but other times, you might have to drop $2,500 on a repair. If you want to get into the real estate game, you must also have an emergency fund set aside for the properties.

As a rule of thumb, plan to set aside 10% of the house value for repairs. This will enable you to act quickly for your renters (it's always a good idea to serve your customers well) and will protect your large-dollar investments for the long term.

Tips to Profit From Your Rental Property

Once you have a rental property, you have to manage it in a way that produces a profit and benefits your net worth. Plus, you likely have a mortgage to pay on it while recouping your down payment costs.

To ensure your venture into being a landlord is profitable, remember these tips.

Growth

Just because I have extra cash each month doesn't mean I spend it. Quite the opposite, actually. I live like I am paying the full amount, but I take the extra and either make additional mortgage payments, save, or invest.

The extra payments save me a lot of interest in the long run, and the savings and investments are all going to my next place. I could even buy another condo in my building, move there (with a primary residence mortgage), and rent out my current unit for profit.

It’s All About Cash Flow

The key to real estate success lies in the cash flow. If you are going to sink a lot of money into owning the property, it needs to pay a stable return that covers the monthly expense plus a comfortable profit. 

Remember, as a landlord, you are responsible for repairs to the property. Take that into account when calculating the rent.

Scale It Up

That is just the beginning. If you are smart with your rental profits and continue to save, you can buy another property. And another. Keep going.

Eventually, you can find economies of scale in the repairs and expenses. You can build a nice portfolio of properties and earn enough to cover the vacant periods and turnover. Then, you slowly start paying off the loans, increasing your profits.

You go from $500 a month to $1,000. That grows to $2,000. There is no limit from there. You can make as much as you can afford to invest. If your real estate investment business grows enough, you can make a full-time living.

If it grows enough from there, you can earn a full-time living while hiring a property manager to take care of everything for you. The sky's the limit.

How To Simplify Being a Landlord

Being a landlord can be a lot of work, so finding ways to streamline the process is essential. When asked for tips about how to simplify things, here are the top suggestions landlords shared with me.

Keep It as Passive as Possible

Phillip Taylor of PT Money, a good friend of mine, had only good news from his property in Texas, which he manages himself:

“My property has been extremely passive after onboarding the tenant. I collect rent by Chase Quick Pay, which is free and takes me about 1 minute a month to “accept” the payment.

The property is relatively new, so we only had one repair, which the tenant made himself and deducted from the rent. The property is also a townhome, so that means no outside upkeep or repairs. It's almost too passive, really. I forget about it until I see the rent payment.”

Hire a (Good) Management Company

A landlord who wanted to remain anonymous for this article shared:

“There are different opinions on this, but I've been thankful I hired a management company. They collect the rent, and if the toilet breaks, I'm not going to get a call in the middle of the night.

It's worth it to me to pay them a small fee (a tax-deductible expense) to deal with any problems, especially since I don't live near the property. This particular company manages hundreds of properties in the area, so they know all the best contractors and tradespeople to hire. By sheer luck. I've had no tenant horror stories.”

Hiring a management company or property manager comes with a caveat. You must choose someone good. I’ve worked with horrible property managers in the past, leading to a stressful situation with poor communication, no tenants, and lost money.

Do your due diligence when hiring someone to manage your rental. Make sure their Yelp reviews are solid, not just from family and friends, and check references to ensure they know what they are doing.

Keep Your Anonymity

Andrea Amir at Smart Money Chicks encourages separating emotions from being a landlord.

“I try to never let the tenant know that I am the owner. When they know you are the owner, they seem to think they can play on your emotions. Instead, I am the “manager” who has a boss who is not that nice and will not allow me to insert crazy thing they ask for here.”

Thoroughly Screen Your Tenants

Martin Dasko is a friend, professional wrestler, and property manager. Unless you want a bodyslam, it is best to keep this landlord happy. 

“My story… Always screen well. Never ever settle. You're better off missing out on rent and holding out than you are with just taking anyone.

I personally screened to the point that I knew everything about the person. You are trusting this individual with a HUGE asset. You wouldn’t just let anyone come over for dinner? Why let a random person move into your home? 

Screening also ensures that you have less problems down the road (hopefully). You always want to know where the person works.”

Brandon Turner from BiggerPockets shared similar sentiments:

“I recently had a nice couple apply for an apartment. They seemed great – until I ran their background check. Two evictions each. Oops – they forgot to mention that.

Last week, I got a phone call from a prospective tenant. They asked what our screening qualifications were. I told them what we required, and she said, ‘What about Manslaughter? I killed my husband a few years ago.’”

Tips to Succeed as a Landlord

Being a landlord isn't all unicorns and rainbows. There are risks and costs with starting up.

I asked some blogger friends about their experiences as a landlord, and they were very mixed. Some had great winning stories, and others had some tenant horror stories. Here are some of the stories they shared.

Don’t Let Repairs Eat Away at Your Profits

Brad Chaffee at Enemy of Debt had a warning based on his experiences.

“Be careful how much you spend on remodeling/upgrades before renting. We were taught a $12,000 lesson the hard way, and that's not counting how much it cost us to upgrade before taking on renters.

We went through three renters in two years, all of which destroyed our home in their own little way. Wood floors, carpet, doors, and drywall were shot and needed to be repaired or replaced. It ended up being such a hassle and cost that we decided to get out of the renting business.

Maybe we'll do it again one day when we're able to be more patient with our application process. There's probably a great positive story for every negative one, but I think the main thing is being financially ready to handle the costs associated with being a landlord.”

Handle Tenant Problems Immediately

Emily Chase Smith is an attorney for landlords with holdings at mobile home parks, and she had advice on problem tenants, which are not uncommon for landlords regardless of their property type.

“My biggest piece of advice is as soon as you have a problem, the rent’s not paid in full, they’re partying loudly, they’re not maintaining the property, serve a legal notice and document, document, document. 

When and if it all gets crazy (and it does), you don’t want to start serving notices and documenting. Not only will you not want the tenant to have a long, rent-free stay, but you don’t want people in your rental who know they aren’t staying long. That’s when the bulk of the damage is done.”

Keep Things Professional

Rebecca Stapler, owner of Stapler Confessions, is another property lawyer with thoughts similar to Emily's.

“I’ve never been a landlord, but I have represented over 60 tenants facing eviction. If I were to be a landlord, I would treat it like a business and separate my emotional involvement with the business as much as possible. 

Also, landlords should follow the proper procedure as soon as it’s appropriate. Those procedures will alert the tenant that the landlord is taking the problem seriously, and it will assist the landlord in the eviction process, if necessary. 

In that vein, as a small business owner, the landlord should establish a relationship with an attorney who specializes in landlord/tenant law so s/he can come out of the eviction process as unscathed as possible.”

Consider Being Pet-Friendly

Doug Nordman is a military veteran and has been a landlord near bases. He has made it nearly 20 years without any major horror stories but has some advice for any smart landlords on pets.

“We meet a lot of very grateful tenants by advertising our property as ‘pet friendly.' We can occasionally get away with not replacing the wall-to-wall carpets between tenants, and I think that the pets cause a lot less damage than their owners.”

Get Insurance 

My friend Kylie Oifu was a landlord down under for quite a few years and has had experiences with both wonderful and horrible tenants. Laws are different in each state, let alone country. If you want to see some scary damage photos, check out her post on one tenant who treated the home like a trashcan.

“Having previously been a landlord in Australia, I learned a lot and did have some horror tenants who trashed my house. I had to evict one set of tenants when they breached the lease by having pets, and thankfully, they left with no issues.

The last tenants in the property were great; they paid on time, let us know when there were any issues, and were very easygoing. Too easygoing, it turns out.

When they moved out, the house was cockroach-infested, mold was growing in most of the rooms, and the house basically had to be gutted. Landlord insurance helps with things like that, but it was a lot of time and effort to repair.”

Don’t Overreact

Lance Cothern at Money Manifesto had this story to share and is a great example of why patience and understanding can sometimes be key.

“I became a landlord this year when we rented out our old townhouse. So far, it has been great, but we had what we thought was a close call with rent not being paid. However, it turns out the post office returned their rent check as undeliverable even though they had everything right on the envelope.

I know because they sent the original envelope back in a new envelope. I'm glad I didn't accuse them of anything, as the rent would have been on time if it wasn't for the post office!”

Should You Become a Landlord?

Based on my experience and input from friends and family who have gone the landlord route, I have learned that every situation is very different, but I have seen a couple of general rules to follow. 

With both of these rules, treat being a landlord as a business. Don’t let emotions or laziness get in the way of doing things right the first time, signing and enforcing solid landlord contracts, and keeping your properties well-maintained.

If You Own One Property

Becoming a landlord is a hit-and-miss proposition if you only own one property. Depending on the location, market, and your marketing skills, getting someone in your unit that will be profitable may be easier said than done. 

If you are confident in your marketing and management skills or that of a trusted manager, it can be a good route.

However, you might be able to get a better ROI on your dollars going another route than renting, so be sure to run the numbers conservatively on your return on investment from renting it out compared to using the cash for something else.

If You Rent Multiple Properties as a Business

You are in better shape to make a lot of money as a landlord if you have multiple properties you can rent out. 

There are significant benefits to the economies of scale of property ownership when you have multiple units and can get discount pricing on maintenance and property management. Plus, having filled properties can subsidize the vacant ones while you are turning them over.

If you can purchase and be a landlord for multiple properties, this could be a good investment for you to pursue!

The Bottom Line

The landlord dream sounds pretty great. However, you must remember that it is not always easy. You have to put in a lot of time and effort to find the right properties. You are risking a lot on the value of the property and the quality of your renters.

If you are up for the challenge and the risk, becoming a landlord could be a great way to grow your wealth!

But what happens when your side hustle starts growing so much that it’s interfering with your full-time job? Is making the jump into self-employment the right move?

Here’s everything you need to know about making the change from side hustle to full-time entrepreneur!

What To Consider Before Becoming Self-Employed

Deciding to quit your job to pursue self-employment is complex. The prospect of working for yourself can be seductive, but you are leaving the world of comfort, familiarity, and a steady paycheck for a world full of unknowns.

Here are some things you should consider before taking the leap with your side hustle.

Taxes

Two things are certain in life: death and taxes. I swear it feels like self-employed people pay more in taxes.

If you plan to run your own business or you have a side hustle that's producing income, it’s your job to take out taxes. To stay on top of your taxes, be prepared to take 30% off the top of each payment. It’s painful, but it’s better to be safe than sorry. 

I have always gotten a tax refund, and the first year I was self-employed was the first year that I owed Uncle Sam. It caught me off guard, even though it was a few hundred bucks. Now, I’m much more diligent with saving for taxes.

Long-Term Sustainability

Self-employment isn’t a vacation or something you should do “just to try.” It’s important to consider the long-term sustainability of your side hustle. It’s easy to fail and hard to go back to full-time employment. 

You need to make your work sustainable and scalable so that you can continue to grow. Ensure that your side hustle can accommodate these needs. Otherwise, you may want to reconsider leaving your full-time job behind.

Being the Boss

One of the most rewarding and challenging aspects of being self-employed is that YOU are the boss. For the first month of self-employment, my schedule was completely out of whack. It was the first time I had no one telling me what to do. Technically, I could do whatever I wanted.

Learning how to stay focused was harder than I expected. Without someone peering over your shoulder, clocking in and out, and checking in every day, it is easy to lose track of where your time is going. You need to stay focused and manage your time and projects. It’s all on you.

I also struggled to embrace the idea that I was the boss. A common mistake many new freelancers make is thinking their clients are their bosses. They feel like they have 10 mini-bosses, and it’s worse than having one boss at their old job.

The people you contract with are your clients, not your bosses. Yes, you still rely on their payment and have deadlines to abide by. But you set the terms. If you are sick of working for a client, find a new one. If you are unhappy about the pay rate, negotiate.

Multiple Responsibilities

Being self-employed means that you wear many hats at all times. Suddenly, you are a one-person show that acts as the HR, marketing, accounting, and operations departments.

You are never just your work title. Essentially, you do all the work of a small agency to make sure things keep running. Self-doubt can easily creep in, so it’s important to be confident and have a strong emotional and financial foundation to keep you steady.

Ask the Hard Questions

Before you take the leap and take your side hustle full-time, ask yourself some difficult questions:

• How much have you saved up in case all your clients drop you?
• What are you willing to give up in order to succeed?
• What is the bare minimum you need to survive financially?
• How does this align with your life goals and values?
• When will you know it’s time to dump a client, and how will you do it?
• Can you see yourself doing this in five years? 10 years? 20 years?
• How do you stand out from your competitors?
• Can you handle putting 30% of your money toward taxes?
• Are you ok with having an irregular paycheck?
• Do you consider yourself confident?
• How will you deal with an unhappy client?
• Are you doing this for the money or because you love your side hustle?
• Do you have a mentor to guide you? 
• Are your friends and family supportive of what you are doing?
• What checks and balances will you have in place to measure success?
• Are you prepared for the worst-case scenario?
• What systems do you have in place to stay on task and organized?
• Do you consider this a hobby or a profession?
• What do you want to learn from this?

Answering these questions can guide you through the process of seeing if self-employment is right for you.

Signs Your Side Hustle Has Become Your Career

If you think you are up for the demands of self-employment, it’s important to evaluate whether or not your side hustle can actually replace your career. 

Before giving your two-week notice, here are some signs that your side gig could be your full-time job.

You Are Actively Turning Away Clients

This is something my wife and I faced before I left my last corporate job. She was at the point in which she was forced to decide which clients we had to turn away. 

There was only so much time in the day, and we could only do so much. We already had a stable client base, but we had to consider turning away new ones. This was the big sign we needed to turn our side business into something more.

Not only does turning away clients keep you from making more money, but word can also spread that you’re unable to manage the workload. If you’re anywhere close to considering going it on your own full-time, that’s the last thing you want.

Your Side Hustle Income Exceeds Your Day Job

This sign is a no-brainer, but it still needs to be said. If you’re regularly making more per month in your side hustle than your day job, then it’s a good sign that you have a budding business on your hands. 

That said, before you take the leap, have an emergency fund in place. Depending on your specific circumstances, this will likely take you some time to build up. However, you don’t want to take the leap into running your own business and have nothing to fall back on.

As someone who has been through it, what people don’t tell you is that your income will fluctuate. You undoubtedly want to be prepared for that.

You’re Adding New Streams of Income

Having multiple streams of income is vitally important if you’re looking to go for it on your own. This will allow you to weather the ups and downs of running your own business. 

If you’re adding these streams to your side hustle while you are still in your day job, this will take even more time. It can also mean more income for you. Eventually, you’ll reach a breaking point where you can only do so much. 

At that point, you’ll want to assess how your side hustle is progressing and if it’s something you can take further. Nevertheless, if you’re actively bringing on additional streams of income, then it’s a possibility you have something you can grow if you have even more time to devote to it.

Navigating Small Business Bank Accounts

If you have a side hustle, especially one that you are going to take full-time, it’s wise to set up a limited liability company (LLC) to protect your personal finances if something goes wrong. Then, to ensure your LLC does its job, setting up business bank accounts is helpful.

But why is this beneficial, and how can you choose the right account?

Why You Want a Small Business Bank Account

A small business bank account can take your side hustle to the next level for a couple of reasons. Not only will these accounts make your company more legitimate in the eyes of your customers, but they will also simplify tracking your business finances.

It’s More Professional

One great reason to open a business bank account for your small business, no matter how small, is for professionalism. With a business bank account, you can accept payments written to your company. Plus, you can write checks from your company.

This is huge in the eyes of a customer. Rather than writing a check to your name, they write it to your business. This gives a sense of confidence and professionalism that using a personal name does not.

It’s Easy to Track

Tracking your business income and expenses is important. Depending on how you structure your business, your company’s income and expenses are listed differently on your taxes than your personal income. Tracking that separately can be helpful when tax season comes around.

All business expenses in the United States can be deducted from your income to lower your tax liability. If you can’t find records for your business expenses, you can’t deduct them.

To make it easier to track, open a business bank account. Then, put all your business revenue and expenses through that account so you can easily find your records when needed.

How To Find a Bank That Meets Your Needs

Not all banks are created equal. Some business accounts come with high fees, while others have bad customer service or poor offerings. Make sure you find a bank that fits your business needs and is responsive when you need help.

With many commercial finance institutions to choose from, finding the best match can be challenging. Here are a few things to look for when starting out:

• No-fee or low-fee business checking accounts
• Merchant support for accepting credit cards
• Free credit and debit card options
• Multiple business account types

Some banks only offer simple accounts for businesses, like checking and savings. Other institutions have more complex offerings like factoring. This is when a company sells its accounts receivables to a third party at a discount to get the cash upfront.

Whatever you do, make sure your bank meets your needs and does not charge you fees to do it. If you spend the time to find the right bank, you will find yourself in a great, long-term financial relationship.

Tax Tips for Self-Employed Workers

Once you stop working for your employer and start working for yourself, taxes can become even more complex. There is some debate as to whether or not you should pay someone to do your taxes, but for me, it made sense to go that route. 

However, even if you get help with your taxes, that does not let you off the hook in terms of tax preparation. With that in mind, here are some tax tips to follow if you’re about to become self-employed.

Keep Things Separate

As mentioned, whether you have a side hustle or take your side gig full-time, having separate bank accounts is helpful. It's also beneficial to separate other financial accounts.

For example, keep your personal and business credit cards separate. If you are self-employed and plan to do a lot of business spending, you’ll likely want a different business card. Be careful, though, as many business credit cards charge an annual fee.

While these fees can be deductible, you want to avoid paying too much in fees. Since you will likely be filing separate business taxes, this will simplify the process.

Automate Where You Can

Automation can be vital to ensuring things go smoothly at tax time. Running your own business can take a ton of effort, and you want to reduce the number of time-consuming tasks on your plate.

I do this through Freshbooks since it allows us to manage our invoicing and expenses, but many other options are available.

If automation is not your thing, you can always set up a simple spreadsheet to keep track of your tax-related issues. Just don’t do what I did during the first year of my business. I avoided doing any of this and paid dearly in terms of time when we needed to prepare our taxes.

Retirement Is Your Friend

Retirement may seem like an outside-the-box tax tip for self-employed individuals, but it very much fits here. If you run your own business, you likely aren’t receiving any 401k match. This means that retirement falls on you as an individual.

The great thing is that the IRS encourages you to save for retirement if you’re self-employed. Several options are available, with SEP IRAs, Solo 401ks, and SIMPLE IRAs being the most common.

In most cases, these allow you to contribute significant amounts towards retirement. If that isn’t beneficial enough, another big carrot is that the contributions can lower your tax liability. This is a double bonus in my book!

Insurance Coverage for Small Business Owners

You likely know about your personal insurance needs, but if you are an entrepreneur with a side hustle, you have a whole different list of needs. Protecting your business, employees, and yourself from accidents and lawsuits is critical, especially if you are making your side hustle your full-time gig.

When it comes to where to get coverage, it’s important to shop around when you are purchasing a new policy. Price differences and service levels can vary dramatically between companies. 

As you start shopping for coverage, here are some options you should consider.

Indemnity

Indemnity insurance protects you from any major “oops” that can happen when you run a company. This type of policy covers negligence, accidental contract breaches, loss of data, and loss of goods.

Liability

If one of your employees goes onto a customer’s property and breaks something, you must pay for it. That is where liability comes into play. Injuries to third parties and damage to third-party property are both covered by a liability policy.

Liability also covers you if your product or service injures someone.

Property Insurance

If your company has a physical office, factory, or warehouse, property insurance covers that location against damage caused by various problems, including weather, fire, earthquakes, and other unexpected events.

These policies generally cover the contents of the location, such as computer equipment and manufacturing equipment.

Business Interruption Insurance

If you are struck by a tornado, your office and equipment are covered by property insurance. However, the revenues you lose when you can’t operate are not covered. 

Insurance policies that cover you in case your business has to temporarily cease operations are available. Your livelihood and your employees’ livelihoods depend on your business continuing to operate. Make sure you are covered by a good policy, just in case.

Balancing Work, Life, and Being an Entrepreneur

I attended a FinCon conference that ended with an incredible talk by professional speaker Grant Baldwin. He shared some advice that I’ve taken to heart as an entrepreneur. Hopefully, these suggestions can help you find balance as you embark on your self-employment journey.

Focus On One Thing and Do It Well

I have a problem that I imagine I share with many of you. I am often inspired by an idea and start a new blog or business on a whim. That has led to projects like my former site, Beer is Sexy / PDX Off The Wagon, something I wanted to do but did not have the time for.

I eventually shut down that site, which opened up lots of mental space and some time to focus on the projects where I bring in most of my online income, like this site and my freelancing business.

Grant was right. I needed to quit wasting time and thought on ancillary projects and focus my efforts on doing the things I really wanted to do that were the most profitable.

Be Present

I am an admitted workaholic, and I know this working style detracts from my family time.

Grant said his kids don’t care about his blog or email list. They just want him there paying attention to them.

This really hit home for me. Time goes quickly, and I do not want to miss out on being a dad or have my kids miss out on the time they want to spend with me because of my work.

I see people miss so much of their parenting experience because of work. It's essential for me to remember that working is a means to an end, not an end. While making money is great, it shouldn't get in the way of spending time with loved ones.

Take Internet Vacation Days

Along with being a workaholic, I am a bit of an internet addict. I hang out on the couch with my wife while we watch Netflix, but I do it with my laptop on my lap. I go with her to walk the dogs but spend time checking my email, Instagram, Facebook, and other little pop-ups on my phone.

My wife is gracious and does not give me too hard of a time, but she probably should give me a harder time. Outside of our vacations, I’m connected more than I’m not.

Grant reminded me of something totally true and a good reminder for internet addicts. The internet is not going anywhere. All those notifications will still be there when we return if we take a day off.

Schedule “Do Nothing” Time

My calendar used to be pretty crazy, and that was my fault. While my income has gone way up, I have started to find better ways to balance my work and personal life. 

I recommend scheduling a time when you have zero plans. Nothing with friends. No work allowed. Just family time. Maybe we’ll explore Ventura. Maybe we’ll hang out at home. Who knows?

I might double up my no internet day with a scheduled do-nothing day.

Upgrade Your Freelance Work

As you start nearing capacity with your schedule, it’s time to start pursuing client upgrades.

This can include onboarding new clients who pay better or have more appealing projects for you to work on. It also means getting rid of ones that don’t pay enough or don’t interest you.

Beyond that, it could involve outsourcing some of your work. This would mean that instead of being a solopreneur, you are growing your company. Expanding should always be something you have in mind as a potential next step.

The Bottom Line

Reaching the point where you can consider making your side hustle a full-time job is exciting. If you have gotten to that point, carefully consider if this switch is what you want and take the steps needed to ensure the transition is smooth.

With some thought and adequate preparation, you can successfully make the jump from employee to full-time entrepreneur!

These apps can help you achieve your goals by encouraging you to stay on top of your finances and continue to run your life responsibly.

Time-Management Apps

Time is money, and making sure you are using your time efficiently can boost your financial health. I use apps for my to-do lists, idea tracking, businesses, and general productivity.

Every app on this list is free, though some have a paid, premium mode. I use the free version of each app mentioned.

Remember the Milk

Remember the Milk syncs to all your devices to ensure you never miss an item on your to-do list. You can add items to your tasks list and get reminded wherever you are whenever it’s time to complete those tasks.

You can even add subtasks and share your to-do list with other people to help get your chores done faster. Plus, you can automate tasks, attach files to them, and take advantage of import or export options.

You can even customize the app with different themes suited to your particular style. If you enjoy looking at the app, that makes you even more likely to complete your tasks when the alerts pop up!

Evernote

Evernote is like a digital notebook on the web. I use the web, mobile, and Windows interfaces to create, reference, and track notes in the cloud.

My favorite use for Evernote is project management. I recently used Evernote to help me track reviews and information for a new hard drive purchase. It's helped me track my home remodeling projects. I even have a notebook full of date ideas.

It can really be used for anything. The mobile version allows you to read, cut, paste, add audio recordings, or add images. For example, you could use it at Home Depot to reference room measurements for a new hardwood floor. 

TripIt

I love to travel. It is one of my favorite things in the world. TripIt automatically picks up travel information from my Gmail inbox, adds it to my calendar, and tracks it for me.

When I am getting ready to go, TripIt has the weather for me. After I get to the airport, I open TripIt, and my reservation information is there. When I land in a new city, I open TripItm, and my hotel information and directions are all ready for me, along with confirmation numbers.

A premium version also tracks your frequent flier and hotel points information and does live updates on changes to your flight information. The premium version even offers travel alerts, schedule monitoring, and some features from AwardWallet.

I never travel without TripIt. I wouldn’t ever consider dropping a service so valuable to me.

If TripIt isn’t an app you enjoy, Kayak Trip Planner offers a similar service. However, it is not quite as robust.

Dropbox

Dropbox is a free, cloud-based storage folder for all your computers and mobile devices. I primarily use Dropbox on my desktop and laptop computers, but the mobile app is an integral part of the value.

The iPhone and Android apps also have an automatic photo upload feature. That gives me an automatic and free backup of all my pictures and allows me to easily get them on my computer to upload to sites like Facebook.

I use Dropbox at least a dozen times every single day.

Google Calendar

Another app on my daily list, Google Calendar, helps me track my schedule. I use Google Calendar on the web as my calendar nerve center that connects Facebook, TripIt, Outlook at work, and more, then aggregates them into one calendar of my life.

The Google Calendar app is not the same thing as the calendar app built into Android. It has many value-added features, including more advanced event scheduling and notifications. Plus, it’s free.

Shippity

I don’t really go to the store anymore. I do all my shopping online and use Shippity to track my purchases.

Shippity makes tracking packages and online purchases a piece of cake. How easy is it? Like TripIt, Shippity grabs my receipts from online shopping sites like Amazon and automatically loads the tracking and shipping information to the web and mobile interface.

When I am itching to know when my package will be delivered, I open Shippity, and everything I want to know is there.

Money-Saving Apps

For most of us, our smartphones are a money drain. We might pay hundreds per month for unlimited plans to get our calls and internet wherever we are. However, we can use our phones to save money. 

Here are my favorite free money-saving apps.

ZipList

I use ZipList for two purposes. First, I use it as a recipe finder and organizer. It works with an interface on both my laptop and my phone. I also use it for my grocery list, which is where the money saving comes in.

I put together a healthy cooking list using the recipe function and load the ingredients list to my phone with one click. Then, I use that shopping list to guide me at the grocery store.

To save money, stick to the list and buy store brands whenever possible. As a bonus, use ZipList to find recipes with many fresh fruits and vegetables. Those are generally money savers, particularly if you buy in-season produce.

GasBuddy

Yesterday, I drove to a nearby Arco station and filled up my tank for $4.47 per gallon. That station had the cheapest gas in my area. Without GasBuddy, I would have had no idea there was cheap gas so close.

Had I gone to my regular gas station on the way home, I would have paid about $.50 more per gallon, or $10 more. Sure, $10.00 isn’t that much, but doing this once a week could save you over $500 per year.

KeyRing

I use KeyRing for two reasons. First, it makes my wallet smaller. Second, it saves me money.

KeyRing allows you to load all your loyalty and membership cards that have a barcode. My local grocery store is King Soopers (Kroger). I put my Sooper Card number in my phone, and the cashier scans my phone for my discounts to apply.

In addition to this feature, which works at almost any store in America, the app also sends you coupons based on where you already shop. If you already shop there, you might as well save the money.

Ibotta

With Ibotta, you can earn cash back when you shop. Before you head to the store, search the app for products you intend to buy, then add them to your list. Buy the items, and upload your receipt or link your payment account to get cash back.

You can withdraw your earnings directly to your bank account, via PayPal, or as gift cards to your favorite stores. However, you will need to reach minimum redemption levels in order to cash out your earnings.

Fortunately, Ibotta offers bonuses to help you reach the minimum redemption thresholds faster. By completing specific offers, you can get the cash back amount and a bonus, enabling you to rack up your rewards quicker.

Fetch

With Fetch, you can turn your receipts into rewards. Every time you shop, take a photo of your receipt and upload it to the app to earn points. You can then redeem your points for gift cards to your favorite retailers, helping you save money the next time you shop.

It’s even possible to redeem your rewards for sweepstakes entries to increase your points or charitable donations.

Just remember to scan your receipts within 14 days to earn points. Otherwise, your purchases won’t count.

Rakuten

With the Rakuten app, you can get cash back when you shop online or in-store. You can even get 5% cash back at thousands of restaurants, which could help you stretch your dining or entertaining budget further!

Some popular stores you can get cash back from include Walmart, Staples, PetSmart, Banana Republic, and more. Olive Garden, Uber Eats, and Flamebroiler are among the restaurants offering cash back.

You can get your cash back via bank transfer or check. Plus, you can get $30 for every friend you refer to the app.

Money-Management Apps

Having a solid understanding of where your money is coming from and where it goes is critical to improving your financial health. From budgeting to paying bills to investing and more, these are some of my favorite apps to help me manage my money.

HomeBudget

Apps like HomeBudget ensure you stay on top of your budget and allow you to access a bevy of information easily. This platform lets you monitor your expenses and income by syncing with your checking, savings, credit, and debit accounts.

You can even manually add cash transactions and work within the same budget alongside other members of your home. This ensures everyone in your home is on the same page when it comes to spending.

The app has a free lite version as well as a more robust subscription that costs $4.99 monthly. It is available for both Android and Apple devices.

Your Bank’s App 

I am a fan of automation and putting things in one place. If you set up a fire-and-forget system, like the many Mint alternatives on the market, you can minimize the time you put into your financial management. But what if you need to trade a stock or transfer money around?

Mobile banking is one of the best innovations of recent years. It lets you view your balance, transfer funds, and pay bills through secure web-based systems. Best of all, internet and mobile banking allow you to keep track of your finances in real-time.

As a Schwab and Chase Bank customer, I’ve downloaded their apps and am happy with them both. You can likely follow suit and do this with any financial institution you use so that you can easily access your accounts from your phone.

QuickBooks

It is worth looking into accounting software to ensure you plan your finances well. The most well-known product is QuickBooks, an extensive system that allows you to track expenses, income, and organize your taxes.

Even if you have an accountant, you can still use it to see your projected earnings. This is very important as it will help you determine how much you can spend every month.

You Need a Budget (YNAB)

YNAB has its budgeting philosophies built around giving every dollar a job. If you earn a dollar, it should be assigned to a budget category, like groceries or rent, or a savings category, like an emergency fund or Roth IRA. 

This app takes a less automated approach than other budgeting apps on the market, but its strategy helps reach financial independence. The app is free for 34 days, then $14.99 per month or $99 per year if you pay in full upfront.

Empower

Empower is my go-to service for getting my financial account balances and investment analysis in one place. The site automatically updates with my most recent transactions for my bank, credit, and investment accounts. It also adds value by analyzing investment fees and categories.

When I signed up and loaded my accounts into Empower, I found that certain mutual funds in my portfolio had fees much higher than comparable funds from other companies. I ended up selling two ETFs and buying into a Vanguard high dividend yield fund. It projected thousands of dollars of savings by the time I retire.

If you want extra help with your investments, new advisor services can help you manage your money with as little work as possible. These services also charge far lower fees than traditional financial advisors. Empower offers this type of service if you want to work with a human advisor. 

If you are okay with computer algorithms managing your investments, Betterment, Blooom, and Wealthfront are excellent options.

Credit Karma

Credit Karma is best known for monitoring your credit score, but it also has an account aggregation tool that works great for matching your credit card accounts to your credit report. 

It falls short of Empower’s investment tools and YNAB’s budgeting tools but is a top choice if you are trying to figure out what is going on with your credit.

Credit Sesame

If Credit Karma isn’t cutting it for you, Credit Sesame might be worth looking into. This app isn’t an aggregator, but it is free and provides huge value. I use Credit Sesame to get my credit score for free. 

The site also offers tips and ideas to improve your credit score. If you want to improve or learn more about your score, check out Credit Sesame.

AwardWallet

When I need to check on my frequent flier miles or hotel point balances, I only click once to go to AwardWallet. Just like Empower, AwardWallet is designed to take a lot of stuff and put it on one screen with the most useful info in one place.

AwardWallet brings in my balances and expiration dates to one screen for every mile and point account I have (including Chase Ultimate Rewards). This way, I can maximize my points and stretch my dollars further each time I book a trip.

Tips to Maximize the Effectiveness of These Must-Have Apps

While each of these apps can help you simplify your life, there are ways to make sure you maximize how well they allow you to improve your time and money management.

Here’s how to ensure you use these apps to their maximum potential.

Have Everything Go To One Email Address

How many email addresses do you have? If you’re like me, it’s more than one, which can be difficult to monitor. 

Many providers want to email you when your statement or bill is ready. This can make it easy to manage, but not if you have them going to different emails.

What we do is have one email address that’s devoted to receiving these emails. That way, there is no confusion, and we can manage our finances without missing a bill or statement.

Streamline Where Possible

The problem with managing your finances is that you have many different accounts and/or bills to monitor. One way to simplify your life is to use one of the various programs that allow you to manage everything out of one location like Empower.

The nice thing about these programs is they can collect everything for you so that you only have one place to go to manage your finances online. Just make sure to evaluate which security measures they have in place so you can have peace of mind that you’re mitigating risk.

Take Action Right Away

It can be difficult to always stay on top of your finances if you're busy. My wife and I have learned that if we don't take care of something right away, it's less likely to happen. So, when we get that little reminder that our bank statement is ready for download, we download it that day.

The same mentality can be taken with your bills so you don't miss a payment. Not only will this keep your accounts in good standing, but it'll also help you avoid costly fees resulting from missing a payment reminder.

Automate to Save Time and Money

You can further automate your finances using free online tools to save even more time and money.

Most banks offer free online bill pay. Using this tool, you can put some bills on autopay while paying others manually through one central dashboard. This is much easier than logging into each site to pay or sending a paper check in the mail like it’s 1986.

Does your employer offer direct deposit? If they do and you are not taking advantage of it, sign up immediately. It is easier to have your money just show up in the bank on payday rather than getting a check and physically depositing it in person or using your bank's app.

Once you get everything set up to run automatically, use the aforementioned must-have apps to check that your payments or deposits went through correctly. 

The Bottom Line

Managing your finances and time might seem overwhelming, but you don’t have to do it alone. If you have a smartphone, downloading the right apps to help you keep track of everything can simplify the process.

Not only can these apps assist you with managing your finances and time management, but they can also improve your life. Consider downloading one (or more) today to see just how beneficial they can be!

Here are some key things to know before you start shopping for coverage.

Why You Need Insurance

If you care about your financial situation, which I bet all Personal Profitability readers do, you’ll likely appreciate that insurance offers a critical safety net for you, your belongings, and your finances.

Think about it this way: if you needed emergency surgery tomorrow, could you afford thousands of dollars in medical bills? Or if your home burned down, would you be able to pay to replace all your belongings? Could you afford repairs if you were in a car accident?

Insurance can offer you a lifeline if you experience a crisis that costs you more than you can afford or more than an emergency fund might cover.

Beyond that, insurance can ensure you don’t have to foot the entire bill for costs like these, even if you can afford them. When you can keep more of your money thanks to the help of insurance coverage, you can reach financial independence sooner.

Common Types of Insurance

While there are many different types of insurance products for both individuals and businesses, there are four types of insurance that are among the most commonly purchased policies across the country.

Health Insurance

Health insurance is easily one of the most important types of coverage people need. In fact, it is so important that in 2010, 219 United States House Representatives voted to bring long overdue reforms to the U.S. healthcare system. 

These sweeping changes have included 30 million people who previously did not have coverage becoming insured, the term “pre-existing condition” becoming extinct, and everyone being covered, no matter what, by a health plan. 

This coverage is essential to ensure you remain healthy by helping you pay for basic checkups, emergency room visits for accidents or illnesses, surgeries, and more.

Sometimes, health insurance will include dental and vision coverage. Other times, it might not. It’s essential to make sure you fully understand what your policy includes to ensure that you can get dental and vision coverage if needed.

Car Insurance

If you have a car, insurance is probably required by law. This coverage will protect your car, other cars, and anyone in those cars in case of an accident or vandalism.

For example, my car was vandalized once, and the cost of repairs was over $3,000. My deductible (the part I have to pay) was $250. Either way, it sucked, but I was protected for all costs over my deductible. 

Accidents happen every day, and car insurance is a great way to protect your finances in the event one happens to you.

Renters Insurance

Many renters do not realize they need an insurance policy, and I highly recommend all renters get a policy. As a renter, you do not have the same worries as an owner, but you still need insurance. A renter’s policy insures all of your possessions that you keep inside your apartment.

If your building burns down, you don’t want to be out of luck with all of your furnishings and possessions. Your policy will cover everything you store in the unit. Your bed, furniture, clothes, electronics, and anything else you own will be covered by your policy with few exceptions.

A renter’s policy does not cover the building or anything attached to the building. Your structure, carpeting, built-in appliances, and walls are the responsibility of the owner to insure. 

Homeowners Insurance

A home insurance policy for a house is the most comprehensive policy most people will ever need. This policy includes everything a renter’s policy covers, plus the structure and building elements.

A policy for a house will include the internal and external structure. If anything serious happens to your home, a single-family home policy should comprehensively cover you.

A home insurance policy does not generally include coverage for specified acts of nature, such as flooding or earthquakes. Purchasing supplemental coverage for those circumstances is critical if you live in an area prone to natural disasters.

How Insurance Rates Are Calculated

Many people do not understand the factors that impact their insurance rates, and there are some important things to know about in the unknown world of insurance premiums.

Health Insurance Rates

The health insurance industry is a beast, and premiums are generally costly. Rates are calculated using one of two methods.

If you work for a company, your employer will negotiate a blanket rate for its employees. This is based on factors such as the average age of employees, fitness levels, and so on. Your employer generally pays a portion of your monthly premium, and you pay the rest.

If you need to get your own health insurance, a formula is used to determine your individual plan rates. The major factors that impact your costs include your age, weight, family health history, your health history and pre-existing conditions, tobacco and alcohol use, past surgeries, and other major health risk factors.

Your deductible, maximum out-of-pocket costs, and the type of plan you choose (PPO, HMO, EPO, or POS) will also impact your rates.

Auto Insurance Rates

The auto insurance industry has extensively researched correlations between people and driving safety. The statistics are pretty solid, and the industry prices insurance based on your risk factors.

The major factors for auto coverage are your age, gender, driving history, marital status, credit score, home ZIP code, and your car’s make, model, and color. 

For example, if you are a 17-year-old boy who has had several accidents, lives in a dangerous neighborhood, and drives a cherry red Mustang convertible, your rates will be higher than a 50-year-old married woman driving a 1980s station wagon with no accidents on her record. 

The downside is that you could be a really safe 17-year-old boy and still get hit with high rates because other 17-year-old boys get into lots of accidents.

In addition, insurers will also adjust your rates based on your deductible and the coverage levels you need.

Renter Insurance Rates

Renter’s policies are rated based on the value of the items you have in your rental. Insurance companies also consider the location of the property you are renting, the construction and building style, the property size, the type of property, and specific policy exceptions.

Discuss this in detail with your insurance agent to make sure your coverage meets your needs.

Homeowner Insurance Rates

Generally, homeowner policies are bundled into mortgage payments, so you make one monthly payment. Property taxes are often included as well.

Many things go into the cost of your homeowner’s insurance policy. These can include things like the value of your home, the cost of the items in your house, your location, and more.

If you live in a neighborhood with high crime rates, your premiums will be higher than in a safe suburb. If you live in a wood frame house, your policy will cost more than a brick or steel-constructed building since these risk factors impact the likelihood of a loss or claim.

Work With an Agent and Company You Trust

The insurance world is complex. While your agent might seem like your friend today, the idea of an insurance company is to make a profit. To make a profit, they try to maximize what you pay in and minimize what they pay out.

Make sure you find a trustworthy, highly rated, well-regarded insurance agent and company. All insurers are not alike, so don’t expect the same treatment and service across the board.

Many people have horror stories about companies not paying for a claim. Others have stories about helpful agents walking them through the entire process. Read about the company you are considering when you are making a selection.

Sometimes, paying a little extra to ensure your insurer will have your back during the stressful process of filing a claim is worth it.

How Insurers Make Money

Back in the days of classes like Financial Institutions Management, I learned how insurance companies make money. I’ll never forget the gusto with which Dr. Gross derived complex profitability equations, but you don’t need calculus to understand how insurers turn a profit.

The two ways insurance companies drive their profits may not be entirely what you’d expect, but they are both worth understanding.

Maximum Premiums with Minimal Payouts

This profit strategy isn’t surprising. Minimizing payouts while taking in as much as possible in premiums is a major aspect of ensuring an insurance company’s success. Every time a customer files a claim, the company is at risk of paying out a substantial amount of money, which is why insurers fight payouts whenever possible.

The insurers know they will have to pay claims on occasion. For example, nearly every driver has been in an accident and filed a claim at some point. But even if a customer costs more than they pay, insurers still come out ahead because they diversify their risk pool.

Companies are willing to insure higher-risk individuals because lower-risk customers offset their risk. For example, if ten customers each pay $1,000 per year in insurance and two have claims that cost $2,000, the company still brings in $6,000 more than it pays out.

While you are a customer and your insurer wants to keep you happy, remember that paying a claim is never in their best interest. They are better off if another insurer has to pay or the claim is never paid at all!

Always stay on your toes and fight for your best outcome when dealing with a claim. If an insurer can deny a $1,000 claim, it has an extra $1,000 in its coffers. If that happens to 1,000 customers, they just kept $1 million in profits!

Investing for Maximal Profits

What happens if an insurance company pays out more in claims than it brings in? Major catastrophes like Hurricane Katrina, the 1994 Northridge Earthquake, and other major disasters can drain an insurer of more cash than it took in over a year or over many years. 

Nevertheless, the companies continue to operate and earn a profit. That is possible thanks to investments, and large insurers have billions of dollars in cash to invest at any given time.

Some insurers make most of their money through investments. To earn a profit, they must maximize the return on investment in the time between receiving a premium and paying a claim. 

The dollars the insurance company holds that it can invest today but expects to pay in the future is called “float.” If you pay the company $100 monthly from January to June and the insurance company pays a $600 claim in July, it has a six-month period to invest that $600 float for a profit.

Scale is very important to insurance company investments. With a large pool of customers, the company can keep a certain amount of cash on hand for projected payouts and invest the rest. 

The Bottom Line

You can’t legally drive a car without insurance. Insurance is required when you get a home mortgage. You can’t live in America without health insurance unless you want to pay a tax penalty. 

With insurance playing such a critical role in our personal finances, it is important to understand the different policies and rates as well as how insurance companies work. If you know the basics, insurance companies are a great partner to work with in your quest for personal profitability.

If you want to set yourself up for financial success this year, here are some things you need to do today!

Create or Update Your Budget

While you might not need a budget to get by unless you are a compulsive spender, having a budget is one of the best pro money moves you can make.

There are many apps you can use to create or update your budget. Some are free, and others cost money. By using these apps or creating your own budget using a spreadsheet, you can make sure you are growing your wealth and making progress toward financial freedom.

Make a Bills Calendar

In Fight Club, Tyler Durden famously said, “The things you own end up owning you.” I have written about how hard you have to work for your possessions once before, but I decided to take it a step further and find out how much time I have to work every month to pay bills.

Nearly 75% of the time I spent at work went toward paying for recurring bills, including rent, student loans, and utilities. That means only about ten hours every week were for the things I like to do, such as eating and entertainment.

You can also build a calendar like this. It can be one of the more eye-opening pro money moves that may motivate you to make changes to your spending to ensure you are using your money in ways that bring you the most joy.

Sign Up for Direct Deposit

Whether you regularly receive a paycheck, Social Security check, pension check, or anything else recurring, signing up for direct deposit whenever possible is one of the top pro money moves you can make.

With direct deposit, you never have to worry about losing a check. You also never have to worry about going to the bank or taking the time to complete a mobile deposit. The money just appears in your account on a regular schedule.

Plus, beyond being one of the must-make pro money moves, it’s more environmentally friendly since the check doesn’t need to be printed. It’s a win-win.

Set Up Automatic Savings Transfers

While you’re automating your deposits, take it a step further and automate your savings. You can do this by splitting your direct deposit between two accounts or setting up automatic transfers to your savings account on payday.

Many banks, particularly online-only banks, allow you to set a recurring transfer to your savings account from your checking account. Whether you want to save $20 per paycheck or $20 per month, you can set that up to happen automatically.

If you already have automatic savings transfers, this is a great time to challenge yourself to increase it. The more you can save, the better!

Put Your Mortgage or Rent Payment on Autopay

Almost all banks have online bill pay for free. Writing a paper check and mailing it to the bank with a coupon or mailing your rent payment is not considered one of the most ideal pro money moves when you can pay it automatically online instead.

Some banks, landlords, and HOAs have an online system that allows you to set up your payment there. When you use your bank’s bill pay, you have 100% control and visibility over when payments are made and sent.

Whatever you do, always make sure you have enough in your account to cover your payments when they go through to avoid fees.

Automate Minimum Credit Card Payments

If possible, you should always pay your credit card in full each month. This is one of the most recommended pro money moves at any point during the year. However, there is an easy way to build a safety net in case you forget to check your statement and make your payment.

Every major credit card company allows you to schedule your credit card payments automatically. You can choose a specific amount, the entire bill, or the minimum payment amount.

If you schedule the minimum payment amount, it will only go through if you have not already made your minimum payment. If you forget to make your payment, the automatic payment will execute, and you will avoid late charges and missed payment fees on your credit card.

It is a great way to cover yourself just in case you forget to make a payment.

Check Your Credit Report

One of the top pro money moves to make at the beginning of the year is checking your credit report. I check my annual credit report through Experian and have found issues in the past.

The first problem I found was my address. I worked through the easy automated menu to fix the problem. The second issue is a bit more complicated. I opened a line of credit at one of my banks, and they opened two instead. I did not authorize two accounts, so two accounts should not be on my credit report. 

To fix that, I had to talk to a real live person. I spent about 20 minutes on the phone, and confirmation that the issue was resolved came in 60 days.

By fixing issues with your credit report, you can increase your odds of getting approved for loans and getting the lowest interest rates.

Take Advantage of Employer Benefits

One of the common things many people overlook is all the benefits they get from their employer. A paycheck and paid vacation are nice, but those are only the tip of the iceberg.

Are you saving for retirement? If not, check out your employer’s 401(k) plan. It helps you in the long run if you want to retire, and it also helps lower your tax liability.

Don’t overlook a lesser-known way to save money via your employer: the Wellness plan. Many employers now offer wellness plans that span from incentives for healthy living habits to gym subsidies to free checkups.

Just ask your HR department if they offer this type of program to employees. If they don’t, there is no harm in asking them to start.

Make Sure You Are Investing

People often get nervous about investing their retirement savings to the point where they might avoid doing it. If you fall into this category, there is a mutual fund for you called either a target date or destination fund. Each fund is tailored specifically to the investment needs of someone with a retirement goal of 20xx.

Target date funds take out the guesswork in investing and asset allocation. As you age, the fund will be tailored to your risk profile. In your 20s, the funds invest almost exclusively in stocks. Later on, it moves toward fixed-income (bond) securities and funds. As you near retirement, your investments are slowly moved into cash and treasuries, the safest investments.

If you are trying to decide what to put your 401(k) or IRA investments into, look at funds like this. It is easier to have someone else pick stocks and mutual funds for you.

Give Yourself an Insurance Checkup

It is wise to shop around when renewing or finding a new insurance policy to ensure you get the best coverage at the lowest rates.

One of the top pro money moves you can make right now is to take an inventory of your insurance policies, including:

• Car insurance
• Renter’s insurance 
• Homeowner’s insurance
• Life insurance
• Pet insurance

Then, get quotes from competitors to see if you can get better coverage at a more affordable rate. Don’t be afraid to switch insurers if a different option offers you a better policy.

Also, make sure that you actually have the coverage you need. If you don’t, update your policies to include more (or less) coverage based on your current situation.

Treat Yourself

While this may not seem like one of the typical pro money moves, when you have a financial goal you want to achieve, treating yourself as you reach certain milestones helps you stay motivated. Whether you have general savings goals or New Year’s resolutions, make sure to establish success points to keep you on track along the way.

For example, if one of your goals is to save $5,000, make each $1,000 increment a success point. Then, find an affordable way to celebrate. You could buy yourself that shirt you’ve been eyeing or treat yourself to some ice cream from your favorite shop.

The Bottom Line

These pro money moves can help you set yourself up for financial success in the new year and beyond.

That said, these tips can be implemented anytime during the year. Regardless of when you decide to improve your financial health, you can use some (or all) of these strategies to help you achieve financial independence.

This is especially true as shoppers continue to see rising prices at the grocery store. Everyone is feeling the strain of higher prices and wondering when (and even if) prices will come down.

Fortunately, it’s possible to ensure your grocery spending doesn’t ruin your entire budget. From planning to saving before you even get to the store and more, here’s how you can save money on groceries.

Plan To Save Money on Groceries

As with most aspects of your finances, you must plan for success. The same goes when you want to save money on groceries.

Here’s what you need to plan for as you prepare to shop!

Make a Budget

Take a look at your overall budget and analyze how much money you actually can afford to spend on food based on your income and other expenses. If you have a clear idea of how much money you have available for one month, you can set firm limits on how much you can spend on groceries weekly.

Having a predetermined grocery budget can inform your choices about what meals to make, the items you need to purchase, and where to buy what you need.

Set Your Priorities

One of the most important contributors to having a lower grocery bill is setting priorities. For example, maybe you are trying to eat an organic diet or implement a healthier diet. This can be challenging on a tight grocery budget, but it’s doable.

To help stick to your priorities, you might need to get creative. For example, maybe you can grow some of your own fruits and vegetables. 

Create a Meal Plan

Meal planning isn’t the most earth-shattering tip to managing your grocery bill, but it does work. Depending on how often you plan on visiting the grocery store, you can come up with as many meals as needed to get you through until your next shopping trip.

It can be easy to see meal planning as restrictive, but you can make it flexible. You don’t have to dictate what meal you’ll have on a given evening, only that you’ll eat these specific meals during the week. That gives you flexibility while also limiting what you need to buy.

If that isn’t enough, meal planning helps avoid temptation, which is incredibly important when trying to keep your grocery bill low.

Make a List

Once you know what meals you’ll be making, it’s time to create a list of the items you’ll need to buy. This will ensure that you stick to the meals you budgeted for and aren’t over your budget by the time you reach the checkout counter.

Cut Costs Before Going To the Store

Once you have a plan, you can start to prepare for your shopping trip before you even head to the store. Doing so can help you reduce your spending BIG time. 

If you want to save money on groceries, make sure you consider doing the following before you head to your nearest supermarket.

Shop Your Pantry

Before you go to the store, take the time to shop your pantry. Most of us have growing hordes of food in our pantries and freezers, slowly making their way toward the expiration date.

Keeping a stockpile of essentials isn’t a bad idea, but clearing out space and using what you already have is a great first step in cutting your costs. Look at the shopping list you made and see if there are any items you can cross off based on what you already have.

You could even take things a step further and see if you have items you can substitute within your planned meals, helping you spend less once you get to the store.

Opt for Fruit and Veggies Instead of Junk Food

If your weekly meal plan includes bags of Cheetos or Pop-Tarts, consider replacing these junk food items with fresh fruit or veggies. In most instances, opting for fresh food guarantees you more sustenance and higher nutritional value for your money. 

According to the Federal Reserve Bank of St. Louis, the average price for a 16-oz bag of potato chips was $6.68 in October 2023, while the price for a pound of bananas was only 63 cents at the same time of the year.

Clip Coupons to Save Money on Groceries

Coupons can help you save money on groceries if you use them right. The trick is to only find coupons for what you will actually use and would likely buy anyway rather than let the coupons determine what you want to buy. 

Outside the local newspaper, you can search online for coupons for items you want to buy. There are a few big coupon repository sites, or you can always search for the item with the word coupon on Google.

Look for Sales

One of the best ways to maximize your meal plan is to shop the sale items. Not only will this let you stock up on items you may like but don’t want to spend too much on, but it also allows you to buy staples you know you’ll be using regularly.

Sit down with the fliers you receive each week and find what’s on sale. This takes maybe 10-15 minutes at most. You can match this with couponing if you want to maximize your savings.

Buy a Freezer 

If you have adequate savings, consider using part of it to buy a deep freezer. This can be a big help in lowering your grocery bill because you can do some targeted stockpiling when certain items go on sale. 

You can buy ground meat, frozen vegetables, and milk when they go on sale and put them in your deep freezer. The first two items are common groceries you can freeze, but you can indeed freeze milk. 

The key here is to put the milk in the freezer once you buy it in order to preserve its shelf life. Then, take it out the night before you want to use it and put it in a sink of cold water. You’ll be good to go the next day.

Get a Membership Card

Many major food chains offer loyalty cards. Most of them are free and easy to sign up for. Generally, you’ll just need to give your name and phone number. 

Cardholders are frequently entitled to great deals and much lower prices. This can help you save money on groceries.

Cut Costs at the Store

Once you are at the grocery store, put your planning and preparation to good use to stay on track. Then, implement these strategies to stretch your budget further.

Shop at Discount Grocery Stores

One money-saving option that some shoppers might not think about is going to the cheapest grocery store there is in their neighborhood. The discount grocery stores near me include Aldi and Save-a-Lot, and they are often 15-25% cheaper than groceries from Walmart.

I can save at least a few bucks on essentials by visiting these more affordable stores. There are plenty of other cheap foods as well. Plus, as a bonus, the cashiers are the fastest I have ever seen! I can typically do all of my grocery shopping in less than 10 minutes when I go to Aldi or Save-a-Lot.

Save Money on Groceries by Shopping Generic

Major grocery stores often offer a “store brand” version of popular products. Generic brands of staples like paper plates, napkins, and shaving gel tend to be on par with brand-name products.

Store-brand medicinal and food items are often on the same level as brand-name options. To double-check, read the back label for ingredients and nutritional information.

Cut Empty Calories

Spending on healthy, fresh items can add up quickly, so don’t waste money on junk food or empty calories. Candy, soft drinks, desserts, frozen meals, and super-processed foods have little nutritional value and can build up your grocery bill quickly.

Watch out for those checkout line goodies as you are in line, and steer clear of the aisles with the appealing, sugary impulse buys that cause you to want to needlessly splurge. They don’t do anything for your financial or physical health.

If you cut spending on junk and only buy what you really need, it’s possible to feed each person in your family for $100 per month, potentially less. 

Avoid Pre-Cut Fruits and Veggies

It might be tempting to purchase pre-cut fruits and veggies since slicing and dicing can be time-consuming once you get home. However, you’ll pay a premium for these items. 

The time savings likely isn’t worth the hit to your grocery budget, so stick with whole fruits and veggies you cut yourself when you get home.

Compare Prices

Comparison shopping is one of the best techniques to ensure you get the most bang for your buck. Check out the unit price, which is listed on the shelf sticker right next to the product price.

You want to pay the lowest price per unit, even if it means buying a larger amount since that will stretch your dollars further.

Buy in Bulk To Save Money on Groceries

Since you can often get a lower per-unit price on bulk products, sometimes buying in bulk is more cost-efficient. Staples like beans, rice, pasta, flour, and frozen vegetables are often much less expensive in large amounts.

Just be sure you can properly store bulk products. Your savvy shopping investment will go to waste if the food spoils before you can eat it.

If you are shopping for a family or you can split the costs of bulk items with roommates or neighbors, stores like Costco and Sam’s Club may pay off. If you are just feeding one or two people, you’ll still probably fare better at the local supermarket or Walmart than you will from paying for a warehouse club membership.

Use a Rewards Credit Card

Before diving into this one, it comes with a caveat. You should only pay for your groceries with a credit card if you can pay off your card in full each month.

There are many rewards credit cards that give you extra rewards on purchases made at grocery stores. These rewards can be redeemed for things like cash back or travel. So leave your cash at home and pay with a credit card that lets you rack up points.

Make Fewer Trips To the Store

By cutting down on your trips to the grocery store by once a month, you might be able to save $50 to $75 per month. Fewer trips to the store means you not only save money on groceries themselves but also gas costs and time spent shopping.

If you push yourself to go to the store less often, you’ll also significantly reduce food waste. Plus, in the event you do run out of fruits or vegetables, you can make a quick stop at the store to get a few of them to carry you through until your next big shopping day.

Leave Your Kids at Home if You Can

If you have children, you know they always want something when you go to the store. While this is expected, it can be distracting and might cause you to make unwise shopping decisions. 

Try to leave the kids at home when you shop. It will save you time and help you stick to your grocery budget more consistently. 

Lower Your Costs Once You Get Home

Just because your shopping trip is over doesn’t mean there aren’t still money-saving opportunities on the table. When you get home, take advantage of these strategies to maximize your savings.

Save Money on Groceries by Using Rebate Apps

With apps like Fetch and Checkout 51, taking a photo of your receipt can earn you points that you can cash out for gift cards to popular retailers. This means you can turn your grocery shopping into gift cards to places like Amazon, Target, Visa, and more.

You have to buy groceries anyway, so getting rewarded for it makes sense. Take a few moments once you get home to upload your receipt and start earning points.

Use Your Leftovers

MedicalNewsToday found that the average U.S. household wastes $1,866 in food each year. That’s almost $36 per week and is a huge bite out of your grocery budget.

If you have leftovers, be sure to eat them for lunch the next day or repurpose them into another meal. When you cut back on your food waste, you don’t end up throwing money in the trash.

Evaluate and Adjust

As you near the end of the week and start getting ready for your next shopping trip, evaluate how well you stuck to your budget and grocery list.

How much food waste did you have? Did you spend on any impulse purchases? Were you able to make all the meals you planned? Or did you end up dining out during the week because making those meals was too overwhelming?

By looking at your successes and shortcomings, you can make adjustments as you plan for the new week. Perhaps you need to re-establish your priorities or create a less complex meal plan. Maybe your list needs to be streamlined a bit. You may need to implement better saving strategies before you get to the store or once you get there.

This step is imperative so that you can stay on budget and find ways to reduce your food costs next week.

The Bottom Line

Rising prices at the grocery store don’t have to mean a blown budget. By planning, preparing, shopping wisely, and being cost-conscious throughout the entire shopping process, you can save money on groceries and improve your long-term wealth.

Now is the perfect time to look at how you can prepare for the dawn of a new calendar year. If you want to successfully set and achieve your New Year’s resolutions, here’s what you need to know!

Start By Taking Inventory

Sometimes, you must look at where you've been to get where you want to go. Not only can this help you figure out what you need to work on, but it can also allow you to see what may have caused you difficulty in the past.

Here are a few things to take inventory of before you start setting your New Year's resolutions.

Reflect on Your Successes and Failures

If you set resolutions for this current year, it’s important to look at your progress toward achieving them. This is because one of the key reasons people may fail to reach their goals is that they aren’t being specific enough about their goals.

Alternately, it's possible that you really wanted or needed to work on something else, not what you were striving for. For example, let's say that one of your resolutions was to save for retirement and build an emergency fund. Let's also say you've been doing great on the former, not the latter.

Take a look at the difference between the two. You’re likely to find the reasons behind your lack of success and can use that information to create your new goals in the coming year.

In addition, you may find that you have a current goal that you can still check off your list before the year ends. Or, you might want to attempt a goal you abandoned this year in the new year. In some cases, it's not too late to achieve a resolution!

Evaluate and Trim Your Expenses

Analyzing your expenses over the last year is critical, and the end of the year is a better time than ever to look at how you can cut your expenses to help you financially prepare for the new year. 

You might think this is as simple as taking at your budget. However, it really means that you should look at how you can streamline your expenses. This way, you can find more ways to have your money work for you as the new year rings in instead of being enslaved to your old spending ways.

What expenses are you choosing to throw money at but getting no value out of? Those are the ones you should look at cutting first. You could start with one and see if you miss it. Assuming you don’t, then you can take the axe to the rest of those unnecessary expenses. This isn’t to say to you should deprive yourself. Just cut things that are providing you no value.

How is Your Investing?

Since you are looking to your future, investing is generally a key component of achieving financial freedom. When I worked in the investment industry, many investors waited until the last minute to look at their investment accounts. Not only did this not help them financially prepare for the following year, but it also meant that they likely missed out on things during the current year. 

Do you have a 401k? If you do, that is the perfect place to start. See how it has been performing, and look at a possible rebalance. Not only will this help you as you financially prepare for next year, but for much longer as well.

Look at Your Use of Time

One key component to success in the new year is your time management strategies. Ultimately, the more efficient you are with your time, the more of it you have to either enjoy life or make money during it. 

Are you trying to pay off debt, or would you like to have more to invest in the stock market? If so, streamlining your time can help you earn more to either slay the debt beast or have more money to invest.

Are you trying to pay off debt, or would you like to have more to invest in the stock market? If so, streamlining your time can help you earn more to either slay the debt beast or have more money to invest.

Start by looking for ways you're wasting time, and be open-minded about changing those problems. You'll be surprised at how that time savings can benefit you as you financially prepare for next year.

How to Set Your New Year's Resolutions

After you’ve taken inventory, you’ll have the information you need to set your New Year's resolutions. These tips can guide you through the process of setting achievable goals that you can work on not just in the coming year but today!

Make a “Right Now” Resolution

Whether you are trying to lose weight, fix your budget, or learn a new skill, do not make a New Year’s resolution that is destined to fail. Instead, make a “right now” resolution.

It is simple to explain. If you are not willing to do something right now, why would you be willing to do it in two weeks? What makes January 1st more special than today?

If you see a problem, then you should attack it no matter the time of year it is. Take paying off debt, for example. If you see the need to do it now, then why wait? In fact, the time you’re wasting is actually costing you money! 

If that's not encouragement enough to get you started, then I don't know what is. The same can be said for saving money or starting a weight loss goal to help you be healthier. That time you're putting it off only hurts you in the long run.

Remember that Small Lifestyle Changes Work

You need to focus on small adjustments rather than dramatic changes. For example, if you go to restaurants four days every week, do not say that you are going to stop going to restaurants entirely to save money. Instead, say that you are going to go twice per week to save some money.

As another example, if you want to lose weight, don't think you can start a dramatic new diet on January 1st. While you might follow it for a little while, you will likely cheat at some point. You will give in, have that chocolate milkshake, and stop going to the gym all at once.

Instead, say you will stop eating candy and ice cream four days a week. If you make those small changes, you will likely succeed in the long run.

After six months, try to make additional changes so the transition is less dramatic.

Stay Focused on a Few New Year's Resolutions

While it may sound good that you have many New Year's resolutions you’re working on, only setting a small handful will generally help you be more successful. Having just a couple to focus on will give you the time to set quantifiable goals to reach, especially if you set yourself smaller goals that will snowball over time and lead to greater success.

When you have too many resolutions, you may stretch yourself too thin. Then, you might burn out and not achieve your goals at all.

Have a Specific Action Plan for Your New Year's Resolutions

The resolutions some people set are too vague. For example, some of the most common and broad resolutions include:

• Losing weight
• Paying off debt
• Starting to save for retirement
• Eating healthier
• Exercising more
• Earning more money

These are all great goals to work towards, but they’re too vague. There are no deadlines or measurable thresholds associated with them, so there’s no motivation to begin working on them. 

A more effective goal is one that is measurable, specific, and achievable. For example, instead of saying, ‘I want to lose weight this year,’ I should say, ‘I will lose 10 pounds by February 15th.’ If I’m using January 1st as a start date, then I’ve set a deadline and a specific, measurable goal.

Beyond that, it's critical to come up with an actionable plan to reach your goals. Without a plan, you're much less likely to succeed.

This plan needs fit your personal situation and not someone else’s. Simply put, it needs to be something you can own and one that motivates you, convicts you, and gets you moving towards reaching it.

Check in on your progress regularly to keep yourself accountable to your set goal. Basically, you want to set SMART goals that will encourage and challenge you to actively work on them.

Ways To Ensure You Achieve Your New Year's Resolutions

Just because you’ve set actionable and measurable resolutions doesn’t mean you are in the clear. In fact, the hard work is just starting, and studies show that only 9% of those who set New Year's resolutions actually reach them. 

So, how can you make sure you achieve your resolutions?

Use Tools to Help You Succeed

Regardless of the goals you set, there are tools that can help you achieve them. For example, if your resolution is to travel more using rewards to stretch your travel budget, you can try AwardWallet to track your miles and hotel points without mixing in your financial accounts.

If one of your goals is to invest more consistently, Betterment makes it easy to set up a small, recurring investment to build your wealth over time. Or, if you are looking to do a better job of simply monitoring your budget, Lunch Money is worth checking out. 

You don’t need to do all of the heavy lifting on your own. Instead, use technology to your advantage.

Find Someone to Hold You Accountable

If lack of focus is a big detractor to reaching success with your New Year's resolutions, then lack of accountability is equally so. Speaking personally, I know the goals I bring others in on have a much greater success of being reached. 

But why is this? It’s plain and simple. I don’t want to be seen as a failure. In addition, I fear being called out for not doing something I said I would. Achieving success is a great motivator, but fear of embarrassment is a strong one as well.

Find someone who will not only encourage you but also challenge you to achieve your resolutions. Tell them what you want to achieve and share the steps you're taking to reach your goals. Then, let that person help you along the way.

You can take this a step further and keep each other accountable for your goals so each of you can see success.

Celebrate Wins Along the Way

As you work towards your New Year's resolutions, there should be little milestones you can celebrate along the way.

For example, if you are trying to save $3,000 for an emergency fund, treat yourself to something small when you hit the $500, $1,000, and $2,000 marks. This could be as simple as seeing that new movie you've been wanting to watch or getting ice cream from the shop down the street.

Or, if you are trying to pay down $10,000 in debt, make yourself a special dinner when you fully pay off one credit card or get your balance due down to a certain threshold.

By celebrating your wins along the way, you will stay motivated to keep working towards your goals. Otherwise, if you just wait until you complete your entire goal, you might lose steam and eventually give up.

The Bottom Line

Setting resolutions for the new year is great, but make sure you set meaningful, measurable, achievable goals to ensure your success. 

More importantly, don’t wait to tackle your resolutions until the ball drops. If you aren’t willing to start your New Year's resolutions today, the motivation likely isn’t there, and the odds of you succeeding are slim.

Here's everything you need to know about emergency funds so that you can be prepared for the unexpected.

What Is an Emergency Fund?

For those of you new to the personal finance world, an emergency fund is a cash savings account that you have “just in case” something bad or unexpected happens. This is not saving for something specific. It is an “oh no, I need $3,000 right now” kind of savings account.

The money in this fund needs to be somewhat easily accessible. If you have it in a checking account, you might be tempted to spend it. A separate savings account is best for an emergency fund.

Why Do You Need an Emergency Fund?

USA Today found that most Americans have almost $8,000 in credit card debt. Not only are we not saving for a rainy day, but we’re digging ourselves further and further into debt!

What’s more, USA Today also found that 1/3 of Americans today have less than $1,000 tucked away that could be used for a future event like retirement! Not only are we building up debt, but we’re saving absolutely nothing at the same time. 

When that rainy day comes along, what do you think will happen to these people? Nothing good, I can tell you that much.

Thinking that it will never happen to you is a common way to put off starting an emergency fund. But I’ll be blunt with you. Things happen.

I have had plenty of emergencies that required a big chunk of cash to deal with. In 2007, I was helping a friend move, and my car broke down. The repair would have cost more than the car was worth, so I needed a $2,000 down payment for a new one. 

A few years ago, I flushed one toilet in my condo only to have the second one start bubbling, resulting in a plumbing problem that cost me $340. I’ve also had medical issues that cost me over $500 out-of-pocket for doctor visits, tests, and medications.

After those experiences, I am prepared for nearly anything with my current emergency fund. Think about your own situation. Can you answer the same question as confidently as me?

What would you do tomorrow if your house burned down in a wildfire? Or if your car completely broke down? What if your spouse were in an accident and had to stop working? Are you prepared? 

If not, it is time to start an emergency fund.

How Much Should You Have in an Emergency Fund?

I suggest all readers keep at least three to six months of expenses in a savings account for emergencies. However, how much you should save depends on your situation.

For example, saving up the suggested three to six months of expenses is not enough for someone in my situation. I am young and mobile, but you never know what will happen next.

What if I find myself out of work and new opportunities are hard to come by? If my car dies, what do I do?

What if…?

This is an open-ended scenario. You never know what is going to come up down the road, so it’s critical to consider how much you need to save if you want to comfortably make it through any hardships that come your way.

Take a look at your lifestyle and what types of emergencies you might run into. If you live in New York, rent an apartment, and don’t have a car, your emergency fund would not need to be as big as someone who lives in a suburban house, has a car, and has kids.

A typical car repair, household emergency, or medical emergency may not cost more than $5,000 if you are insured. If you have an emergency that costs more, you will likely have more than 24 hours to pay for it.

But, if you have a mortgage and a family, a bigger number is better.

Three Steps to Build Your Emergency Fund

This may seem pretty basic, but saving money isn’t all that easy. It requires discipline and consistency with your money. 

Here’s how to build your emergency fund.

1. Write Out a Budget

While this isn’t particularly fun, it is super effective. After you write out a budget, you’ll realize you had no idea what you spent your money on each month.

It happened to me and will likely happen to you as well. But, as you get better at understanding your spending, you can move on to step two and reduce your expenses!

2. Cut Your Costs 

When you know what you’re spending your money on, it becomes natural to ask, “Why?” 

When I started to question my expenses, I made some phone calls and got my bills reduced! I called the cell phone company, the insurance company, and the bank. Each one of these phone calls saved me hundreds of dollars per year and let me save more money each month.

3. Force Your Savings 

As you get more comfortable with your budget and cut out some costs, you’ll probably be able to save $400-$500 a month instead of the measly $200 you were able to scrounge up before. 

To stay consistent with these savings, it is best to force them directly into your savings account with your direct deposit. With each direct deposit, you can actually direct a certain percentage (or dollar amount) of your funds to various accounts. 

Use this tool to put your money directly into your savings to prepare for a rainy day!

Where Should You Put Your Emergency Fund?

Having quick access to funds is important in case you have an unexpected emergency, but keeping that cash in a basic checking account is a terrible idea. It would be a shame to earn virtually no interest. 

It’s also not wise to put your emergency fund into a CD since you can get hit with early withdrawal penalties.

Here are a couple of options for storing your emergency fund once you have enough to open an account.

High-Interest Checking Account

While most checking accounts offer horrible interest rates, you might be able to find an account at a credit union that offers higher interest rates. 

Currently, some credit unions offer checking accounts with interest rates of 5% or higher. While rates can fluctuate over time, it’s worth looking into in order to maximize your savings.

Savings Account

The easiest and most obvious choice to make more interest is through a savings account. My favorite savings account today is Capital One's 360 Savings. It offers competitive rates and great service.

Even if Capital One 360 is not your primary bank for checking, the savings account offering is great. Plus, you can transfer money between banks for free. It takes about two to three business days for most transfers. 

I opened a savings account with Capital One 360 in 2007 (when they were called ING Direct), and I never hesitate to suggest it for others to try. They offer fee-free banking with no minimum balance or activity requirements.

Investment Account

The next place to think about stashing your cash is in an investment account. If you invest in a bond fund or low-risk, diversified, low-fee mutual fund, you can invest with little risk and worry for longer-term gains. 

If you need to liquidate quickly, the settlement period for mutual funds is one day. For stocks and ETFs, the settlement period is three days. 

You can’t initiate a withdrawal until your funds settle. At that point, an electronic transfer to your bank account, if it is not at the same institution as your brokerage, takes two to three business days.

What Should You Do Once You’ve Built Your Emergency Fund?

Common wisdom would say that an emergency fund can never be too big. Finance bloggers and “experts” all explain how important it is to have a fund that is big enough, but we never talk about if your fund might be too big. 

Once you have reached your funding goal, you should funnel additional savings into other opportunities.

Create a Liberty Fund

If you lose your job or another income source, you should have access to funds to cover your life expenses. This is beyond an emergency fund. I call it a “liberty fund.” Your liberty fund should be much bigger than an emergency fund.

The amount of your liberty fund is a personal decision with many implications and inputs. For example, $30,000 might seem like a lot to most people. It seems like a lot to me, but it is my goal. However, I was able to pay off grad school, which cost a lot more than that, in two years, so saving up shouldn't be too difficult.

Invest

Invest your assets in order to grow your wealth! The risks are higher, but with higher risk comes higher returns. 

You can invest in anything ranging from a low-risk government bond fund to a higher-risk equity fund. You can even pick stocks. However, for a typical investor, this might not be the wisest course of action for new investors.

If you use mutual funds, index funds, or ETFs, make sure to keep the fees low. I saved hundreds of dollars a year on fees after doing an analysis with the free tool Empower.

What If Your Emergency Fund Falls Short?

What happens if you don’t have two to three days to get to your money? 

Have enough liquid assets (meaning assets that can be quickly sold and turned into cash) to cover any foreseeable emergency. That can be a combination of cash, stocks, bonds, and fund investments. 

Never hedge paying for a true emergency with credit cards. That said, credit cards are the best way to pay for anything, particularly in an emergency. You don’t have to pay them off for a month, but you should always pay 100% of the balance each month to avoid interest charges.

I never spend a cent anywhere unless I use a credit card unless I have to, but I also never spend a cent that I don’t have in the bank account behind the credit card.

With the right travel rewards credit card, a $5,000 emergency can get you 20% off a plane ticket or more. Why throw that away by writing a check or paying in cash? I have visited both Europe and Israel using miles. There is no secret on how to do it. Here is an example of what I do to get free flights.

Only use a credit card if you can pay it off in full every month. Otherwise, the cost is too high.

If You Think You Can’t Save Because You Don’t Have the Money…

You are selling yourself short. You need to come to terms with your income and spending situation. If you are living paycheck to paycheck, what is the root cause? 

Are you blowing money on cable or a lease on a fancy car and an apartment you can’t afford? Is your boss underpaying you? Are you undereducated and need to do something to fix your situation?

The word “unfortunately” is used often, but I am removing it from my vocabulary. I don’t believe in it. Fortune has nothing to do with your financial situation. Hard work, planning, and smart decisions are the drivers behind your personal finances.

Take charge and make your finances work for you, not the other way around.

In life, things come up. Your car breaks down. You need a new furnace. Things happen. Are you prepared to deal with those issues if they come up today? 

Many people do not have cash put aside to deal with emergencies. It is time you do.

The Bottom Line

Building an emergency fund can give you a cushion if you have an unexpected expense. It will provide you with peace of mind and allow you to breathe easier knowing that you are financially prepared for a rainy day.

However, don’t stop saving once you’ve hit your emergency fund goal. Keep going by creating a liberty fund and investing so that you can continue to grow your wealth!

These tips will help you avoid going overboard on holiday spending and enjoy the season with as little stress as possible.

Why You Should Start Your Holiday Shopping Early

It’s hard to believe it, but Christmas is just around the corner! While some people can go overboard in regards to over-commercializing the season and buying Christmas gifts, in particular, holiday shopping can be done in a wise fashion without breaking the bank.

Holiday Budgeting Helps You Afford Gifts

Not everyone is a fan of budgeting, but living with a budget lets you plan for things that will be happening in the future and save for them in small increments. This is how we afford Christmas gifts for our friends and family. We pull out a set amount each month to go towards Christmas presents.

When the time comes to buy gifts, we use our credit cards to make the purchases so that we can earn the rewards points. Then, we pay the card off with the saved cash. Not only does this allow us to save money throughout the year, but it also lets us easily make purchases throughout the year if we see a deal that will save us money.

You Can Avoid Debt With Holiday Budgeting

The best way to get started with your holiday gifts when you want to avoid big bills in January is to make sure you can really afford what you are buying. In fact, I never spend a dollar on anything I don't have enough cash to cover in the bank already. This this stringent policy has helped me avoid ever paying a cent in credit card interest.

If you have trouble with this each year, set up an automatic savings plan with a dedicated holiday savings account. You can put in a small amount each pay period instead of paying all at once.

For example, saving $20 per paycheck will give you about $500 per year in holiday savings. Whatever your gift budget is, divide that by 25 to calculate how much you need to save from each paycheck.

Last-Minute Christmas Gifts Are Not Always a Good Deal

The advertising industry loves people who go shopping for last-minute Christmas gifts. In fact, many companies thrive during that time.

There is a misconception that the weeks leading up to Christmas are the time to get deals and save money on gifts. However, this could not be further from the truth. Take big-screen televisions, for example. That is a staple of the Black Friday crowd, yet the best time to buy them is in late January through early February as the next models are rolling out. This is when people want new TVs to watch the Super Bowl, which results in lower prices on last year’s models.

The point is that you need to be an informed consumer since this enables you to save money and not spend unnecessarily. If you're pressed for time, you might be better off just getting them a unique gift card rather than overpaying for a specific item!

More Time Means You Can Be Selective

As a parent and someone who likes to be frugal, we want to make sure that we’re purposeful in what we give our children. They already get enough toys and presents from their grandparents that we don’t need to add much more to the pile.

By planning ahead for their Christmas shopping, we can be more selective and get a few things we know that our kids will enjoy. Not only that, but it allows us to take advantage of sales as we see them, which lets us stretch the money we have set aside for them even more.

It's not intended to indulge our inner Scrooge, but we'd rather save some of the money we have set aside for Christmas gifts and use it on experiences for the kids throughout the year. We've funded things like swimming lessons, going to their favorite restaurant, and going to see the circus with the money we saved because we didn't go crazy with our spending.

Holiday Budgeting Rules to Consider

Just like Santa, you should make a list and check it twice. But who should be on your list, and how do you decide on a budget or what to buy your loved ones?

Consider these rules to help you with your gift giving this year.

Limit Your Gift List

It is easy to give gifts to everyone, but I suggest limiting your gift list to people who really deserve something. No co-workers, very few friends, and only close family make it onto my list.

I did have some friends who were perpetual gift givers, and I devised a plan to break myself out of their list. To save money, I suggested that rather than give gifts, we meet for a holiday happy hour. I like happy hour anyway and prefer my friend’s company to gifts. That also gets me out of the guilt of having to give something back.

My list is now down to just my parents, sister, wife, kids, and a little something for my wife’s family. That’s it.

Create Spending Tiers

Aside from just creating a budget for gifts, create a list of everyone you want to buy a gift for. Put your closest friends and family on the “A” list and pick a price level for those people. Put your less close friends as “B.” Maybe list co-workers as “C” or “D.”

Use that tier system to set price limits. Maybe you will spend up to $50 on each “A” gift, $40 on each “B,” and so on. You pick the friends and the levels, so you choose the budget within your means. However, you have to stick to it for it to work. Break it down so everyone added up fits within your gift budget.

By forcing yourself to budget per person, you keep yourself within your total budget.

However, you might do non-traditional gifts to save money, too. Try making something like a baked good for some people. That can save a lot of money.

Use a Shopping List

Once you know who you are going to buy gifts for, you need to decide what to buy. Not only does having an actual Christmas shopping list of items for people help you stay on track, but it can also help you strategize your spending to get what you really want to buy for that person in your life.

The list can be as simple as a mental note of things that catch your eye throughout the year or making an actual list. The point is that a Christmas shopping list can help you plan what you’re going to buy and avoid impulse purchases that can derail your budget.

Thoughtfulness Means More Than Money

At the end of the day, most of us care more about the thought than the value of presents. Take the time to think through the best gift you can give someone. Here in Ventura, a day trip to the beach might be a lot more meaningful and less expensive than a new tech gadget.

So, something that most of us don’t anymore. Take time to do something meaningful for someone you care about. Who knows? It could even save you a few bucks.

Never Go Into Debt for Gifts

Whatever you do, never go into debt buying holiday gifts. Many people find themselves spending years paying for gifts that give only a moment of happiness. Instead, focus on doing the best with what you can afford.

Your friends and family care much more about sharing great moments and experiences than presents on an arbitrary day of the year. Remember what the holidays are really about, and you might find yourself living a richer holiday season regardless of your financial situation.

8 Easy Ways to Stretch Your Holiday Budget

The holiday season can be an expensive one. I've spent thousands of dollars over the years on gifts for family and friends. The worst thing that can happen is that at the end of the holidays, you find yourself broke or in debt from your holiday season spending.

Here are some tips to avoid a holiday spending hangover before it starts.

Search for Sales

My mom gave me an important lesson while growing up. She told me to never pay full price. While it might be stingy to hunt the sales racks for holiday gifts, you can easily find tons of specials and deals this time of year.

I suggest taking a look at Honey, Slick Deals, RetailMeNot, Brad’s Deals, and other coupon sites to find the best deals. If you have a specific gift in mind, make sure to check Amazon, Google Shopping, and give it a zap with Red Laser to make sure you have the best price.

Take Advantage of Free Shipping

I regularly shop online, and I never pay for shipping. If you are smart and watch the deals, most stores will send you what you want at no additional charge.

I have an Amazon Prime membership, which is worth the cost to me. Not only do I get free streaming TV and movies on my Roku and free books for my Kindle, but I also get free two-day shipping on every purchase. If you have a .edu email address, you can get even better deals with Amazon Student.

Avoid Fancy Cards

I know it is fun to open a card that sings to you, but is that really worth $6? The average greeting card costs between $2 and $4. It is easy to find great cards on the low end of that average. Just take a few minutes when you are at the grocery store, drug store, or Walmart, and pick a fun card that doesn’t break the budget.

Sure, an extra $3 does not sound like much. However, if you buy three, four, or five cards, that $3 can easily turn into $20 you didn’t need to spend. Make sure you exclude frivolous spending like this when you are doing your holiday budgeting.

Think About Coupons

Shopping with coupons and getting a great deal is a year-round endeavor. While there are tons of doorbuster deals on days like Black Friday and Cyber Monday, you can find coupons that give you significant holiday savings over buying in December.

Give Free or Inexpensive Gifts

Holiday budgeting doesn't mean you have to give people an Xbox or gold jewelry as a holiday gift. Instead, consider lower-cost gifts that are more thoughtful rather than expensive.

I have seen people give away homemade gifts like infused vodka, homemade pickles, or other fun presents from the kitchen. If you are crafty, knitted hats and scarves make great gifts. Just beware of the ugly sweater!

Comparison Shopping

When you’re busy Christmas shopping, comparison shopping is a must! You can often find items that are considerably cheaper elsewhere just by doing a little legwork. This can really help with your holiday budgeting.

It drives my wife nuts at times, but when we’re out shopping, I’ll pull out my phone and check a price against what Amazon is charging. It’s not always perfect, but oftentimes, you can find it for cheaper there. There are various other phone apps you can use, but the point is you need to be comparison shopping if you want to save money on your Christmas shopping.

Don’t Go Shopping With the Kids

We learned early on as parents to not involve the kids in Christmas shopping. Why? Because they’ll ask for things that could cause you to spend more as a result. Not only that but taking them shopping can also throw you off the task at hand and make you less focused on what your holiday budgeting parameters.

If you have kids, you know they’re always asking for things. It’s part of their nature. Take advantage of that by making a list or remembering what they mentioned wanting and use that as your guide along with your Christmas shopping budget.

If going shopping without them is a challenge, maybe try to swap babysitting duties with another family so you both can be focused on your Christmas shopping.

Think Outside the Box

An often overlooked way to save money on Christmas shopping is not considering used items a viable option. It may sound cheap, but you can often find very good items, especially things like toys, at a very reasonable price at thrift stores or Goodwill. The key is to know what to look for and have a keen eye for what may be of good value.

While this option may not be a good one for everyone on your Christmas shopping list, it can be a great way to save some money on Christmas shopping.

5 Gift Ideas if You Didn't Plan Ahead

If you’re not someone who subscribes to getting your Christmas shopping done early, you’re likely looking for last-minute Christmas ideas that won't destroy the efforts you put into holiday budgeting. The problem with many of those ideas is that most of them are no good!

Fear no more, as this will help the creative juices flow so your Christmas gift is not yawned over.

Gift Cards Are Always a Good Christmas Idea

Assuming you’re shopping for someone who loves them, then a gift card is a great last-minute Christmas idea. Virtually all stores offer them nowadays, and it allows people to get what they want. Just make sure that you include the receipt so that the recipient will still be able to use your gift in case they lose the card.

Also, remember that if it’s Christmas Eve and you are scrambling for a gift, many grocery stores offer dozens of different gift cards to choose from. For even more convenience, head to GiftCardMall to shop for tons of different gift cards, including ones you can send via email.

Give the Gift of Amazon

Who doesn’t love Amazon? I know I do since you can buy virtually anything you want from them.

You have several options for a last-minute Christmas idea with Amazon. It's possible to go the gift card route for either Amazon or cards for other merchants they sell. You could also buy the recipient a year subscription to Amazon’s Prime service, a season of their favorite television show, or the latest book from their favorite author.

Homemade Coupons

I have several friends who have either given or received homemade coupons, and they’re always a big hit. What I like about them is you can see the thought and time put into them. The beauty of homemade coupons is you can tailor them to the recipient.

They can be such things as:

• Free babysitting for a date night
• Movie night to go see a new release movie
• Lunch out every month for three months

These are just a few of the possibilities, and they really depend on who is receiving them as to what you may want to give.

Create Your Own Gift Basket

This last-minute Christmas idea is along the same lines as homemade coupons in that you create something on your own that the recipient would like. The basket can be as extravagant or as frugal as you like.

Seeing as this is a personal finance blog, we’ll go with the more frugal approach. You can go to the dollar store and buy a basket for a few dollars and fill it with something the person would like. It could be the makings for a movie night at home or the theater, ingredients for a nice meal at home, or souvenirs from their favorite sports team. The theme is up to you!

Give the Gift of Experiences

When you are crunched for time, remember that creating memories is far more valuable than more clutter for your home.

Thinking outside the box is a great way to approach this mindset. Head to Groupon or a similar coupon site for things like cooking classes, day trips, weekend getaways, date nights, concerts, scavenger hunts, a special dinner at home, or an urban exploration day. Once you purchase the experience, print out the information about it and gift it to your loved one!

What To Do If Your Holiday Budgeting Failed

If you did not have a good savings cushion for your holiday shopping or you didn't stick to your budget, you have hit the dreaded holiday spending hangover.

Like the morning after you visit the bars, sometimes you have to deal with a hangover. You spent too much and can’t go back and fix it, so you have to press forward and tackle the problem head-bon.

Assess Your Problem

If you have overspent, it is time to assess the damages. In the event you used multiple credit cards, gather your balances (which is easy if you use a site like Empower). If you only used one card, pull up your balance online and see where you stand.

Look at your monthly budget and find places you can cut and put extra into your debt. The faster you are paid off, the less you will spend on interest. Why throw money away with credit card companies when you can be debt-free?

If you have a regular savings contribution, it is a good idea to divert some of that money to your credit cards. Make sure that is only temporary, however, and don’t get in the habit of stopping your savings.

Let the Debt Snowball Begin

When your holiday budgeting falls short and you have come up with an extra funding source, put every available dollar into your debt (while keeping your emergency fund intact just in case) to clear your holiday debt.

Prioritize Holiday Budgeting for Next Year

Dealing with debt is a pain. While we may have family and societal pressure to give expensive gifts, plan out your holidays to stay debt-free. Consider this a chance to prove that you do have the holiday budgeting skills needed to keep your bank accounts in the positive.

Limit your gift exchanges and focus on experiential gifts to save money. Take a friend to coffee or for a happy hour to focus on relationships over material possessions.

The Bottom Line on Holiday Budgeting

With appropriate planning and money-saving strategies, holiday budgeting doesn't have to be complicated. You can stay within budget and create memories that will last a lifetime with your family and friends.

If you do break the bank this holiday season, take the steps necessary to get back on track. Then, be sure to start budgeting for next year ASAP so you never experience a holiday spending hangover again!

This post was originally published on March 10, 2018 and updated on December 8, 2023.

In the United States, people constantly try to live beyond their means. With a debt addiction, what you are buying is irrelevant. The key is that you are buying what you cannot afford. You are a heavy debt user if you regularly spend money you don’t have. If you cannot afford to pay your bills and yet continue to spend money recklessly, you are a debt addict.

Do You Have a Debt Addiction Problem?

While there are many resources that can help you determine if you are a debt addict, there is a simple way to know: do you constantly spend more than you earn and live off of credit without making any concrete steps to change? If yes, you are a debt addict.

Do you become agitated or nervous when you think about living without credit cards? Can you feed your family if your credit cards are taken away tomorrow? Do you regularly miss your payments or struggle to pay the minimums on your outstanding debt? Are you in over your head, but you keep digging deeper? Those are all signs of debt dependence.

What Should You Do Next? 

If you or someone you know answered yes to these questions, you may be wondering about the next steps. Debtors Anonymous is an organization that can help debt addicts and their loved ones overcome the struggles of debt addiction. Here are some other steps to take as well. 

Recognize That You Have a Debt Addiction Problem

The first thing to do is recognize that you have a problem and take concrete steps to get out of debt. You can lean on Debtors Anonymous, a supportive family member or friend, an online community, or even me (I can help answer financial questions if you send me an e-mail). The key is to express that you have a problem and find someone to hold you accountable for your recovery.

Stop Spending

Now that you have acknowledged the problem, stop feeding the beast. Quit shopping for things you can’t afford. You may have to make some painful lifestyle concessions, but that’s okay. You don’t have to go out constantly with friends, eat meals at restaurants, go to the bars and spend money on alcohol, go to the casino, or have the newest style in your wardrobe. Take a step back and only spend on actual needs. Eliminate the wants and excess.

Build a Debt Addiction Recovery Plan

You won’t be out of debt overnight. Chances are, if you have a debt problem, working your way out will take years of dedication and hard work. But remember, many people before you have done it, and some are starting the journey out of debt every day. You can do it, too.

Come up with a list of all of your debts and get going on a debt snowball. Just like this reader worked out of student loan debt, you can work out of any debt. As long as you are dedicated, willing to sacrifice, and work hard, you can beat your debts.

Strategies for Paying Off Debt

Once you’ve recognized your problem with debt, stopped spending, and crafted a recovery plan, you can begin taking practical steps to pay off your debt. Here are some simple ways to start chipping away at your debt: 

• Sign up for credit counseling: If you truly feel that you are unable to manage your multiple monthly credit card payments by yourself, consider signing up with a credit counseling service. Credit counseling organizations are able to consolidate your debt into one monthly payment, which is usually smaller than the monthly payments you are already making, and often can reduce the overall amount of debt you owe.

• Restructure your monthly budget: Frivolous spending is one of the top reasons for excessive debt. If you want to pay off your credit card debt while still being able to afford monthly expenses, you will need to redo your monthly budget completely. Review previous bank statements and look for areas in which you can reduce spending. Instead of spending $50 on coffees and cheeseburgers, put that money towards your credit card debt.

• Stop charging your cards: Many people struggle with not using their credit cards once they choose to pay them off. They have become so used to their credit cards supplementing their regular budgets that they don’t know how to survive without them. When you decide to pay off your debt and don’t believe you are able to stop using them, hand them over to a trustworthy friend or simply cut them up. Do whatever you have to do to prevent yourself from continuing to use them.

• Start small: This may sound counterintuitive as you are paying more interest on the larger amounts owed; however, by paying off your smallest card amounts first, you are better setting yourself up for success. With each card you pay off, you will feel like you are achieving something and more inclined to pay off your other cards.

• Pay with extra funds: Did you receive a large check from your favorite uncle for your birthday? Or make more than expected during your garage sale? Put that extra money immediately towards your credit card debt. Don’t allow yourself the chance to blow your new wad of cash on a new TV or new outfit. Use it to pay off your credit card debt, as this will enhance your life's quality in the long run.

The Truth About Bankruptcy

People with debt addictions might think that bankruptcy is an easy way out of their financial crisis. The fact of the matter is that bankruptcy is a serious issue and can have serious implications that impact you for decades. Plus, it doesn’t treat the root of debt addiction, which is reckless spending.

Debts Forgiven, Sort of

Many people think bankruptcy is a good idea because their debts are forgiven. This is true to some extent, but it’s the only tangible “benefit” of bankruptcy.

When you declare bankruptcy, a judge in bankruptcy court can reduce the debt you owe across the board. It is at the judge’s discretion how much your debt is lowered, if at all, and the repayment terms.

You could have the majority of your debt wiped out or only a small portion. It’s a big risk to declare bankruptcy and only have a fraction of your total debt forgiven.

Either way, it is not a simple solution where you are off the hook. You are still liable for paying back something.

What Bankruptcy Means For Your Finances

The best way to kill a credit score overnight is through bankruptcy. When you declare bankruptcy, your credit report will tell any creditor, landlord, or insurance company for seven years. Even if your finances are perfect from bankruptcy going forward, everyone that matters still knows for nearly a decade.

When your credit score drops and your credit report shows bankruptcy, you will also have difficulty getting new loans and credit cards. If you can get new credit, the interest rate will be much higher than someone without a bankruptcy on their record.

While this isn’t a big deal if you are trying to get a low-limit credit card and pay it off in full every month, if you get a mortgage loan, look out. The higher interest rate will cost you at least tens of thousands of dollars over the term of the loan.

Alternatives to Bankruptcy

The best way to avoid getting into bankruptcy is to avoid getting into a bad situation in the first place. Do not fill up your credit lines with stuff you can’t afford. Do not live above your means. If you are already in trouble, try implementing some of the debt repayment strategies mentioned above before declaring bankruptcy. 

You can also work with the creditors to defer payments, lower interest rates, and come up with a plan to pay down your debt. For instance, in my banking days, we would always try to work with people who called us and told us they were in trouble. We would come up with a payment plan that would not adversely impact their credit score and help them get into a better position. 

The Final Word on Debt Addiction

Debt addiction is a serious problem for many people, and it's one that should be taken seriously. If you or a loved one struggles with spending above their means, don't hesitate to reach out for help. Recognizing the problem, accepting accountability, and cutting your spending habits can go a long way in putting yourself in line for financial success and improving your life.

You must overcome the mental blocks to do something different with your travels. What is holding you back? What are you afraid of? 

For me, travel is a life experience. After traveling for thousands of miles over many years, here are some of my top tips for getting the most out of your vacation.

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Know Your Top To-Do List Ahead of Time

Before taking my first trip to San Francisco, I knew there were certain places I wanted to see and would be unhappy if I missed them. Those included Alcatraz, the spiraling Lombard Street, a view of the Golden Gate Bridge, and dinner at a restaurant called The Stinking Rose. The rest I was willing to play by ear.

Because I prioritized what I wanted to see the most, I hit all the places on my list. 

Automate Your Vacation Planning

If you are anything like me, you like having your travel documents, plans, and information in one place. I used to print out a stack of papers for each hotel, flight, rental car, and other reservation during a trip. Thanks to TripIt that is now a dead practice. 

TripIt is an app that creates itineraries for upcoming trips, consolidating everything into one location for easy and instant access.

From the TripIt website, I ensure I enter everything I could want to know for upcoming travel plans as a Trip. Every time I get an email confirmation for a flight or hotel reservation, TripIt finds it in my inbox and adds the information to my Trip for easy access.

When you click on the Trip, a screen opens up with every flight, confirmation number, hotel, maps, links to directions, weather forecasts, and anything else you might want. You can add restaurant and show reservations too.

Always Have a Plan B

Once on a day trip up north in Napa, my friends and I saw about ten minutes of sunlight and a heck of a lot of rain. That impacted our plans—we couldn’t do outdoor wine tours in the rain. But instead of letting that get me down, I discovered one of my favorite breweries was just a half hour up the road, and we went in for a sampler. Sure, we drank less wine, but we still had a ton of fun, and I got to drink one of my favorite beers, fresh from the source. 

Even with the best-laid plans, unexpected circumstances could pop up. Be open to alternative plans and possibilities. 

Budget For Your Vacation and Stick To It

Budget can be considered a bad word for vacation goers, but it is important to create one and stick with it. How stressed out would I be if I ran out of money? How upset would I be if I spent more than I could afford and was worried about money when I returned home?

Thankfully, taking a great trip on a budget is still possible. Several years ago, I took a two-week trip to London, Paris, and Amsterdam on a budget. I used miles from my British Airways credit card to cover most of the flight. The flight took me everywhere other than a two-hour train ride between Paris and Amsterdam.

I didn’t splurge on fancy hotels. Instead, thanks to some prior research and tips from fellow travelers on X (formerly Twitter), I found hostels with great locations in each city. If you research first, you should find some budget accommodations. You can also check out sites like Airbnb and CouchSurfing for more budget options.

Plan on Payments

If you plan on traveling internationally, you’ll want to think about how to exchange currency. There are a few options you can consider: 

• Get currency before you leave: If you have plenty of time before you go, most large banks can order foreign currency for you. The exchange rates are generally reasonable, but the entire process can be more complicated than other options.
• Bring cash to exchange: You can bring a big wad of your local currency and find a currency exchange when you land. This option is easier because you only have to go to the bank once, and most airports have foreign exchange services on site. Additionally, popular tourist cities have exchange businesses in popular areas. 
• ATMs: If you go to any developed country, you can find ATMs everywhere. ATMs will dispense the local currency and usually have very good exchange rates— the only thing you really have to worry about is the fee.
• Credit cards: These days, vendors take Visa and MasterCard almost everywhere. You can also find international retailers that accept American Express, although it’s not quite as common. Depending on your card, using a credit card abroad might be better than cash. You are protected from fraud and loss, and card companies generally charge a competitive foreign exchange rate. 

Do What the Locals Do

Eating locally is a great way to connect to a new culture. I do not leave the United States to eat at McDonald’s, Burger King, KFC, or Pizza Hut. When I leave, I want to experience a new place like the locals. I go to restaurants, parks, and bars that locals frequent. While there, I try to meet local people and get a feel for what it is like to live there.

My best friend while abroad, particularly in a non-English speaking country, is Lonely Planet. Lonely Planet guidebooks are in-depth guides that give you everything you need to know about a city, country, culture, cuisine, lodging, and other tidbits when traveling somewhere new. My Lonely Planet guidebook was the only reason I survived a solo trip to Prague and Budapest.

Avoid What You Can Do At Home

On the same note, try avoiding things you can do at home while traveling. At home, I can go to a chain restaurant or any LA-centric activity I want daily. While out of town, I do all I can to avoid that. Steer clear of McDonald’s, Starbucks, and familiar things, no matter how comfortable they make you feel. Instead, find a local burger joint or a neighborhood coffee shop, and step out of your box. You will often be pleasantly surprised and might even learn something new.

Stay Safe on Vacation

Be aware of your surroundings and be safe at all times. I have been to dangerous places in Israel and the United States without realizing it until I was already there. I was always lucky, but it is best to take luck out of the equation.

Credit Card Safety

It’s also important to be careful when carrying credit cards and other important documents on vacation. You never know when or where someone might steal your card number, and you can quickly find yourself in a stressful situation. 

Once, my sister brought two cards with her on vacation to Greece, thinking she would be fine. Her debit card was stolen early on in the trip, leaving her with only a Visa card tied to our parents' account. About three weeks into her month-long trip, I took a vacation to Alaska with my mom, who had her joint account card number illegally skimmed on our trip. Visa deactivated the card, leaving my sister with only 100 euros in her pocket and a week left in Greece. 

What’s the lesson here? First, always have a couple of good credit card back-ups when traveling. Also, immediately request an expedited replacement card from your provider if yours gets stolen. 

Have a Fun and Meaningful Vacation

At the end of the day, why are you going? You might want to relax, or you might want to party. You might want to see sights, or you might want to learn. Whatever it is, do it. Go with a positive attitude. You can’t control the weather or traffic, but you don’t have to have a bad time because of the unexpected. Make the best of it, have a blast, and create a trip you will never forget.

This guide will explain how banks make money, the different types of banks, and which one may be right for you. 

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How Banks Make Money

Banks are a business. Like any business, they must make money to last. Most banks make money in two ways—receiving interest on loans and selling assets. 

Borrowing and Lending

Banks borrow money at a lower rate than they lend it to someone else. For example, let’s say a bank borrows $1,000 (from five people’s deposits) for 1% interest per year. Another customer buys a $5,000 car and needs a loan. The bank loans that person the money at 6%. That gives the bank a 5% margin, or $250, in profit.

Banks do that a lot. That is the scale of the old cliché, “It takes money to make money.” If the bank has 1,000,000 customers with $1,000 and loans out 80% of that money (assuming a 20% reserve requirement), it can earn $40 million in profit with a 5% spread. Even if 5% of the loans go bad, it still makes massive profits.

Selling Assets

When banks lend money, whether as loans or other lines of credit, they borrow that cash from other customers’ savings accounts and certificates of deposit. If customers don’t touch these accounts for a while, that is great for the bank. Banks pay the customer a little interest and loan the funds out at a much higher rate.

However, if many customers want their savings back, the bank must give them it. If the money is all loaned out, the bank must borrow from other banks or sell assets.

The primary assets of banks are loans. Loans are considered assets because they are monies the bank expects to receive in the future. It can sell a bundle of loans together to another banking institution or the government for a slight discount. For example, if a bank has $10,000,000 in outstanding loans, another bank might pay $9,500,000 for title to the loans, ensuring the bank is protected from potential losses on future loans.

Types of Banking Institutions

You can hold your money in many different places, but most people choose one or more of these three options when it comes to banking.

• Credit union: A credit union is a financial institution its customers own as a co-op. Each member votes on board members and significant changes to the institution. They are not-for-profit and generally consumer-focused companies with little or no business offerings. Because they are cooperative-owned financial institutions, they typically charge low fees and have competitive interest rates for loan and credit accounts.

• Online banks: Online banks are financial institutions where customers can make online financial transactions through a website or a smartphone app.

• Big banks: Big banks are large financial institutions that can offer a full line of banking products, unlike most smaller, localized banks. Most big banks will have checking, savings, CD, money market, safe deposit, car loan, home loan, business account, credit card, and debit card options. 

What Kind of Bank Is Right For Me?

With all these banking options at your fingertips, you may wonder which kind of bank is right for you. Ask yourself the following questions to determine which bank fits your circumstances best.

Credit Unions

Do you have pretty simple needs? Are you someone happy with a checking account, savings account, and an ATM at your bank branch? Do you stay around home and have a limited need for mobile banking?

If you said yes to those questions, you are a perfect candidate for a credit union. If your banking needs are limited to what a typical checking and savings account offers, you don’t need to waste time or money with a big bank. Credit unions usually have lower fees and better customer service, so this is the route for you.

Online Banks

Do you have a complicated account structure? Do you need to link up your checking, savings, investments, PayPal, and multiple credit cards, plus use your accounts as an automated funnel for your finances? Do you need online and mobile access to your accounts 24/7? Do you hate cash and wish everyone would split the bill with credit cards to make it easier?

If those questions describe you, you may want an online bank. I rarely use cash and hate splitting the bill with people who refuse to use a card. I like transferring money with my phone and depositing checks with my camera. I also have many accounts with different purposes, and my online bank works great for transferring and automating my money.

Big Banks

Do you like cash and easy ATM access? Do you make regular deposits in person? Do you want to keep things simple and under one roof?

If you like the simplicity of dealing with one bank and enjoy having physical banks and ATMs everywhere, you would probably be happy at Chase, Citi, Bank of America, US Bank, Wells Fargo, or one of the other big box banks.

These banks are not known for customer service or low costs, but they are everywhere and have every service you might need.

Is Banking In One Place A Good Idea?

I have tried different combinations of accounts in my life. My credit card, brokerage, checking, and savings have all been at various places before. And sometimes, everything was in one place. I found some significant benefits to both scenarios. 

The Benefits of Banking In One Place

Save Time

The biggest benefit of having everything in one place is the time savings. Assuming you use a site like Mint or Adaptu, you are already tracking everything in one place. Even if you take advantage of one of those free services, there are other time savers to having things in one place.

For starters, you only need one customer service contact for various issues. Are you changing your address? One form. Need online bank statements? One website, often one statement. Need to pay your credit card and other bills? One bill pay site to visit.

You can also transfer money instantly between accounts, which is helpful if you need to move money around quickly. Moving between banks can take up to three days with the ACH system.

Save Money

Keeping everything under one roof can also save you money. Many banks offer special deals to customers with multiple accounts. There’s no need to worry about inactivity fees at one bank while your main account is elsewhere. And, you are less likely to miss a credit card payment if it is at the bank website you use every day.

Banks are also more likely to waive fees for good customers. For example, I once had to send a bank wire from my checking account. A wire fee was $20, but they waived it (without my asking) because I have had a good relationship with the company.

The Benefits of Banking In Multiple Places

More Control

While it is nice to have instant transfers and keep everything in one place, it is not always a good idea to keep everything together, primarily because you won’t have as much control of your accounts.

As a banker, I once had a customer that screwed up badly. She didn’t make payments on her debt for months, answer our calls, answer her mail, or reach out to us. She owed a few thousand dollars, and the bank didn’t want to have to write it all off. It's likely she didn't notice that we had the right to take money from her checking or savings account to pay the delinquent bills that she owed us according to her loan agreement, which the bank eventually did.

Do not have your direct deposit going into a bank account at a bank to which you owe money. If you are not paying off your debt and get a direct deposit, the bank can (and likely will) garnish your paycheck to pay off the outstanding debt, even without asking first. There may be terms in your loan agreement that allow the bank to do that.

Easier to Remedy Issues

If you experience bad customer service from your credit card company, it is easy enough to move your account. If you have a poor experience at your bank and only have one account there, it’s not that big of a deal.

But if everything is at one bank, you are stuck. You don't have any recourse if you have bad service or an irreconcilable problem. You can always try a manager or try for a ‘good customer’ refund or discount, but you can’t really control anything.

The Final Word on Banking

Banks seek to build customer relationships and cover all of the customer’s banking needs, including checking and savings accounts, credit cards, and loans.

If you’re looking for a bank, carefully consider your financial situation, habits, and goals to determine which one may be right for you. 

It’s important to take a hard look at your finances to decide where to make some cutbacks and keep more money in your pockets. None of these ways are going to turn your life upside down. Most are pretty simple changes, but they can significantly impact your finances.

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Create a Budget

Finance experts everywhere talk about budgeting as a major method to improving your financial situation, especially if you’re a compulsive spender. 

A budget is a spending goal for a set period. A simple budget might be “spend less than $1,000 this month.” A more complex budget has categories for things like gas, food, entertainment, rent, insurance, clothing, and more specific subcategories.

Companies use budgets to make sure they reach profitability. You should be profitable too. As the treasurer of my life, I make sure I spend less than I earn and meet my savings and spending goals. I use a budget for both of those.

For more information on creating the best budget for your finances, check out my Complete Beginner’s Guide to Budgeting here. 

Cut the Cord

One money-saving technique that has become popular in the last several years is to cut the cable bill. Ditching the cable company has never been easier, thanks to devices like Roku, Apple TV, and streaming services. Instead of paying $150 monthly for cable, you can spend less than $15 monthly for Netflix or Hulu. 

You can still get your favorite shows at a fraction of the cost. With all of the streaming options out there, you won’t miss your old cable service, but you will love the hundreds of extra dollars in your pocket at the end of the year.

Save Money on Everyday Expenses

An easy way to save money is to practice comparative shopping on everyday expenses. Most people do a lot of research and comparisons when making large purchases, like a car or a TV, but it shouldn’t end there. You can easily save when you compare utilities, prescriptions, groceries, and other household items. 

Save money on utilities.

If you have never thought about who supplies your energy, it is time to determine whether your current supplier gives you as good a deal as the nearest competitor. Prices and discounts for energy supplies fluctuate throughout the year as various companies grapple with each other for a market share. If you’re keen-eyed and aware of the best deals available, you can grab a bargain rate for your energy that will save you heaps of cash over time.

Calculate how much you could save on your energy costs by taking your current energy costs (in dollars per kilowatt hour) and subtracting the price of a cheaper tariff. Take the resulting number and multiply it by the amount you spend each month on energy, and you’ll have the savings you could make just by switching suppliers.

Many of the best deals available are offered online, so if you’re looking to save money on your energy bills but you’re not checking comparison websites regularly, you could be missing out.

Save money on prescriptions.

Many people perceive that generics don’t work as well as the name brand. That is simply not the case. Also, it can be a costly assumption to have since generic drugs tend to cost significantly less than their name-brand counterparts. 

Why are they cheaper? The name-brand company that researches and develops a new medication gets a trademark (name) and patent (drug makeup) for a certain length of time. Once that time is up, other companies can market the same drug under the same strict safety standards of the name brand, just under a different name. That saves them tons of money on research and development to sell it for less.

You can also utilize prescription discount services like GoodRx to dramatically cut the cost of most medications.

Save money on groceries

While the ingredients in food products will not be exactly the same, most generic foods are similar enough to name-brand products to be worth the cost savings.

Likewise, you can save by purchasing the generic version of home goods, such as trash bags, dish detergent, cleaning products and chemicals, and so on. The products are much cheaper and are just as good as their expensive counterpart.

While you may only save a few dollars each trip to the store, those savings add up quickly over time. 

Don’t Fall for Sales

Some people in the world get really excited when things are on sale. “What a deal! Think of how much money I can save,” they might say. But do you?

The idea of a sale is simple. Stores try to unload products on you by marking them at a lower price, giving the impression that you are saving money when you purchase them. 

Do not be deceived by sale marketing techniques. If you intend to buy the product anyway, then sales can be a great way to save a few bucks. But if not, you just wasted money on something that you probably didn’t want or need in the first place.

Take a Hard Look at Your Insurance

You can save money in several ways with just about every insurance plan you have. One easy way is to bundle all of your plans with one company. Almost every single insurance company on the market offers bundle savings—the more plans you have with that company, the more you’ll save.

If you have your life, auto, and homeowners insurance with different companies, call your agent and ask about holding all of them with the same company. It could save you hundreds of dollars.

Choose Practical Over Luxury

Once, David Oreck came to my school and spoke to a class about his company. In his speech, he made a significant point. On one wrist, he had a $25 Timex watch from Target. On the other wrist, he had a $25,000 Rolex.

He said the Timex worked flawlessly for years, never needed a new battery, and kept perfect time. It was cheap, efficient, and did the job. His Rolex needed maintenance, new batteries, and was more for looks than practical purposes.

What is the point of this? You do not need a BMW SUV when a Toyota Corolla or Honda Civic will do the job. You do not need a $1,000 plasma HDTV when a 20″ TV would be fine.

There is a difference between buying something you want and buying something practical that you need. While having luxury and status is fun, it’s more realistic and beneficial in the long run to have what you need and no debt.

Think of Yourself as a Corporation

A corporation is an entity that has cash inflows and outflows. It can have assets and liabilities and engage in business deals. That is kind of like you.

If a company goes bankrupt, it will be in a difficult situation. While it can rebuild, it will take a while. That is also kind of like you.

You should think of yourself as a company. You even have stockholders. They are you, your significant other, your kids, your pets, and anyone who relies on you financially. If your net income goes down, your shareholders will be negatively impacted. If your income goes up, your shareholders will be positively impacted.

Like a company, you should assume that most money you have goes back into the “you” company. Operating expenses—think housing, food, clothes, and transportation—must be kept to a minimum to ensure higher net income. You should also maximize revenue to ensure net income goes up.

When buying things for fun, think of it as a dividend. You could have put that money back into the company (invest) to increase future returns. It is a decision that CEOs and CFOs make every day.

I am the Eric Company. To increase my gross income, I have a major income source (freelance work) and several subsidiaries (blogs and other endeavors). I have several operating expenses (living, car, etc.) that offset my gross income to find my net income. I also invest (education, stock market) to build future returns, and even take an occasional dividend (vacation, streaming subscriptions, eating out) to make my shareholders happy.

If you think of yourself as a corporation, how can you waste money or opportunity? You can’t. Work to build your net income today and in the future. 

The Final Word

Creating a budget, cutting cable, comparison shopping, avoiding sales, bundling insurance, choosing practical items, and changing your mindset are simple ways to start saving money today. With some creativity and careful planning, I’d bet you could come up with even more. 

Try following a few of these easy tips, and look forward to that raise in net income you’ve been searching for.

As with any personal loan, it’s better, of course, to never have to borrow money. A consolidation loan is a personal loan you’d take out if you’ve already borrowed money and hope to make the payment process more efficient and potentially save on interest. 

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What is a Consolidation Loan?

A consolidation loan is essentially a new loan that pays off multiple old loans. Rather than having, for example, two student loans with different lenders for $5,000 each, you could have one $10,000 loan. That means one payment (and one lender) instead of two. You can do a consolidation loan with either of the two original lenders. Alternatively, you can look for a new third lender if you think you can get better terms.

There is always a “however,” though. If you have two Federal student loans at 4.9% and your consolidation offer is for 5%, then you should keep the loans where they are. Furthermore, if the interest rates are the same, you should probably stay where you are. Consolidation loans have the same set of origination fees as any new loan. Unless interest rates will be lower for a long enough time to save you money on the fees, it is probably best to endure the headache of multiple lenders. 

Alternatively, if you have the cash, you could pay one (or both) of the loans off early, making no payments and paying no interest. While this is the ideal option, it won’t be possible for everyone. 

Likewise, the same principle is true for consolidating credit cards. Balance transfer offers often come with fees. There may be a temporary no-interest period, but the interest rate eventually increases. Thus, you should only consolidate if you transfer the balance to a card with a lower interest rate.

Pros of Loan Consolidation

• Fewer payments
• Fewer lenders
• Less hassle

Cons of Loan Consolidation

• Fees
• Possible higher interest rates
• Your new lender might not be as good

Exercise Caution When Consolidating Loans

You should be careful, educated, and calculated if you are moving around debt balances. Treat your loans like you treat your cash. For instance, you wouldn’t decide to move your bank accounts to a company that charges extra fees and pays you less interest. Similarly, you wouldn’t entrust your money to a sketchy guy on the street.

Treat loans the same way, especially because they have a long-lasting impact on you and your credit. Be smart and only consolidate if it’s the right thing to do. Remember that a hard inquiry a lender runs on your credit history can ding your credit score, so try to shop around for loans in a smaller window of time to keep the damage confined. 

Student Loan Consolidation

If you’ve taken out loans to attend school, you most likely have Federal Stafford loans from at least one bank. Taking loans from two or more banks means you must make two or more monthly payments for those loans.

Let’s say you have two loans, and in about seven months, they’ll come due. When that happens, you might consider finding a consolidation loan. Here are the key things to remember if you’re a student considering a consolidation loan.

First, do not assume that a consolidation loan will save you money. Federal Stafford loans, the most popular type of student loan, have rates set by the government. If you have two loans with minimum payments of $100 each and you consolidate, they will combine into one payment of $200.

Second, the process might cost you more money if you get a different kind of loan when you consolidate. Make sure that if you have student loans to consolidate, you continue with a Federally backed loan with the same fixed interest rate.

If you’re nervous about the impact of a consolidation loan on your credit score, any negative result should not be significant depending on when you got the first loan. When you consolidate, you close two loans with history and replace them with one brand-new loan, which lowers your average account age and can impact your credit.

Alternative Methods for Saving on Interest

Maybe you’d like to save money on interest payments but aren’t sure that loan consolidation is right for you. Consider these three alternative strategies for managing debt. 

Debt snowball

Snowballing, for loans, means you pay the minimum payment on all of your loans except for the one with the smallest balance. You pay as much as possible into that loan. Once you pay it off, put all that money into the next smallest debt rather than just lowering how much you put into loan payments.

For example, let's say you have three loans. One has a balance of $5000 at 4.9% (minimum payment is $150), the second has a balance of $1000 at 5.9% (minimum payment $50), and the third has a balance of $3000 at 7% (minimum payment $100). Which would you pay first using the snowball method? 

If you said the second loan, you are right since the strategy here is to pay for the loan with the lowest balance first. It doesn’t matter what the minimum payment or interest rate is. Instead, all that matters is how quickly you can eliminate that first debt. 

Debt avalanche

Another potential approach to paying off debt is called a debt avalanche. Using this method, you’d focus on paying off debt with the highest interest rate first, then moving on to debt with the next highest interest rate once the former is paid off. 

Many financial experts prefer the debt avalanche method to the debt snowball method because you’ll save money overall by reducing how much extra debt you take on due to interest.

A debt snowball plan based on the example above would look like this: you make the $50 and $150 minimum payments while putting $200 into the highest-interest loan. Once you pay it off, you start putting that $200, in addition to the $50 minimum payment you were already making, into the 5.9% loan. Then once the second loan is paid, you put the whole $400 into the 4.9% loan. That is the fastest way to pay down all of your debt.

Debt roll-up 

If you own a home and are well on the way to paying it off, then you might benefit from a debt roll-up loan (I just made that term up). I have helped people structure loans like this in the past.

For example, a woman came in with $20,000 in credit card debt, $7,000 remaining on her auto loan, and $40,000 remaining on her home mortgage. That is $67,000 in total debt. Consequently, it would have taken her about ten years and tens of thousands of dollars in interest to pay it all off.

Her home was worth about $250,000, well over her total debt load. She was able to pay off all other debt and have just one mortgage loan payment instead. This refinance and debt roll-up saved her hundreds of dollars a month in payments and thousands of dollars in long-term interest.

The math is simple, so you can look at your debt structure and determine if this is a good idea for you. But think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Loan Consolidation: The Final Word

Building a strong debt management plan is important if you are in a difficult financial situation. If you feel overwhelmed and unable to handle your current situation, you can get debt consolidation help. Moreover, be sure to work with a trustworthy, reputable company that has your best interest in mind.

As a college student, I've seen firsthand how financial literacy can make a big difference in people's lives. That's why I'm excited to share my insights on navigating personal finance before, during, and after college. 

College is a time of great opportunity, but it's also a time of financial challenges. From paying for tuition and textbooks to managing living expenses and student loan debt, there's a lot to think about when it comes to personal finance.

In this blog post, we'll start by discussing the importance of thinking about personal finance before college. Many students don't start thinking about money until they're already in college or even after they graduate, but taking some time to plan ahead can make a big difference. We'll offer some tips for saving money before college, such as getting a part-time job, applying for scholarships, and starting a budget.

Next, we'll dive into the financial challenges that college students face, and offer tips for managing money during college. This will include advice on using student discounts, avoiding credit card debt, and creating a realistic budget that takes into account all of the different expenses that come with college life.

Finally, we'll look at the transition from college to the “real world” and the financial challenges that come with it. This includes finding a job, paying off student loans, and building credit. We'll offer some tips for managing money after college, such as creating a plan for paying off student loans, building an emergency fund, and setting financial goals.

Whether you're a current college student or you're planning for the future, this blog post will offer valuable insights and practical advice on navigating personal finance. So, let's get started!

For a comprehensive guide to navigating personal finance as a young adult, be sure to check out my eBook, Building Your Financial Future: A Practical Guide For Young Adults!

Before College

When it comes to personal finance, many high school students are left in the dark. It's not uncommon for students to graduate without any real understanding of how to manage money, create a budget, or navigate the financial challenges that come with adulthood. This is why it's so important for students to start thinking about personal finance before they even enter college.

Unfortunately, personal finance is not a subject that's typically taught in high school. While some schools may offer a basic personal finance course, the reality is that many students are left to figure things out on their own. This lack of education can have serious consequences, as students may make costly mistakes or fall into debt simply because they don't know how to manage their finances properly.

Starting to think about personal finance before college can help students avoid these pitfalls. By taking the time to learn about topics like budgeting, saving, and investing, students can set themselves up for financial success in the long run. This may involve getting a part-time job, applying for scholarships, or creating a savings plan. 

Whatever the approach, the key is to start thinking about personal finance early on, so that students can make informed decisions and avoid common financial mistakes.

Whether it's through self-education, working with someone with more financial experience, or taking a personal finance course, there are many ways for students to start learning about personal finance and take control of their financial futures.

Tips for high school students

Navigating personal finance can be a challenging and overwhelming experience, especially for high school students preparing to enter college. It's important to start thinking about personal finance early on and develop good habits to set yourself up for financial success. 

In this section, we'll explore 10 personal finance tips for high school students to consider before entering college. These tips can help you save money, avoid debt, and make informed decisions about your financial future.

1. Get a part-time job: A part-time job can help you earn some extra cash before college and provide valuable work experience. Although you may be making minimum wage, every dollar earned can be a valuable contribution to your future.
2. Apply for scholarships: Scholarships can help you save money on tuition and other expenses. Start researching and applying for scholarships early because many of the scholarships out there are quite competitive.
3. Create a budget: A budget can help you track your spending and identify areas where you can cut back on expenses. Check out this article here for a complete beginner’s guide to budgeting!
4. Save money: Aim to save as much money as possible before entering college. This can help you cover unexpected expenses and reduce your reliance on student loans.
5. Avoid credit card debt: If you do get a credit card, use it responsibly and avoid carrying a balance. High-interest credit card debt can be a major financial burden.
6. Learn about student loans: If you do need to take out student loans, make sure you understand the terms and conditions. Only borrow what you need and explore options like federal loans before turning to private loans.
7. Use student discounts: Many businesses offer discounts to students, so take advantage of these deals whenever possible. One website to check out is UNiDAYS, which has hundreds of student discount offers available.
8. Consider community college: Starting at a community college can be a more affordable way to get a college education. Just make sure the credits will transfer to the four-year college you plan to attend.
9. Start building credit: Building a positive credit history early can help you qualify for lower interest rates on loans in the future. Consider getting a secured credit card or becoming an authorized user on a parent's credit card to start building credit. Check out this comprehensive guide to credit to get started!
10. Invest in yourself: Whether it's through additional education or building valuable skills, investing in yourself can pay off in the long run. Consider taking online courses or volunteering to gain experience in your desired field.

Example

Chris had always been a dreamer. As a high school student, he spent countless hours imagining what college life would be like, from studying in the library to hanging out with friends on the quad. But as he approached graduation, he realized that his dreams would require a significant amount of money.

Determined to make his college dreams a reality, Chris set out to prepare his finances. He started by getting a part-time job at a local coffee shop, working nights and weekends to save as much money as possible. He also applied for every scholarship he could find, spending hours filling out applications and writing essays.

As he started receiving acceptance letters from colleges around the country, Chris knew that his hard work was paying off. But he also knew that college would be expensive, and he needed to be smart about how he spent his money.

So, Chris created a budget. He listed out all of his expected expenses, from tuition and textbooks to rent and food. Then, he calculated how much money he would need each month to cover these expenses and started looking for ways to save.

Despite the challenges, Chris was determined to make his college dreams a reality. And with hard work, perseverance, and a smart financial plan, he knew that he could do it.

During College

Ah, the joys of college life! Parties, friends, and freedom – what could be better? Well, there is one thing that tends to put a bit of a damper on the whole experience: money. College students face a myriad of financial challenges that can make the already stressful experience of higher education even more overwhelming. Let's take a closer look at some of the most common financial challenges that college students face, shall we?

First and foremost, there's the matter of tuition. Every student knows that college isn't cheap, and tuition costs only seem to be going up. Between tuition hikes and rising fees, it's no surprise that students find themselves struggling to keep up with the bills. 

And let's not forget about textbooks – those hefty tomes that are absolutely essential for passing classes. Unfortunately, they also often come with a hefty price tag that can set students back hundreds of dollars each semester. It's a cruel irony that the very thing that students need to succeed academically is also one of the biggest financial burdens they face.

Of course, there's more to college life than just tuition and textbooks. Students also have to deal with the daily costs of living, which can add up quickly. Rent, utilities, food, transportation – it all adds up. And if students want to have any sort of social life outside of their studies, they'll need to budget for that as well.

In short, college students face a lot of financial challenges, both big and small. But here's the good news: with a little bit of planning and some smart financial decisions, it's possible to navigate these challenges and come out ahead. In the next section, we'll look at some practical tips for managing money during college that can help students keep their finances under control.

Tips for college students

Personal finance can be a daunting topic for anyone, but it's especially challenging for college students who are navigating the transition to adulthood while juggling a range of financial responsibilities. From paying for tuition and textbooks to covering rent and living expenses, college students face a host of financial challenges. 

However, with the right strategies and mindset, it's possible to manage your finances effectively during college and beyond. In this section, we'll explore 10 personal finance tips for managing money during college, so you can stay on track and achieve your financial goals.

1. Take advantage of student discounts: As mentioned in the prior section, many businesses offer discounts to students, so be sure to ask if there's a discount available before making a purchase. Always check at stores around your school because they are more likely to offer a student discount due to their proximity to the campus. This can add up to significant savings over time!
2. Avoid credit card debt: Credit cards can be tempting, but they can also lead to a lot of debt if you're not careful. Try to use credit cards sparingly, and pay off the balance in full each month to avoid accruing interest.
3. Create a realistic budget: It's important to create a budget that takes into account all of your expenses, including tuition, textbooks, rent, food, and other living expenses. Be sure to track your spending and adjust your budget as needed. College is certainly a time when your budget can be forgotten about (on purpose or by accident), whether it’s eating out more often than you should or splurging for a ticket to your favorite artist’s concert.
4. Cook your own meals: Eating out can be expensive, so try cooking your own meals instead. This can be a fun and cost-effective way to eat healthy food and save money at the same time.
5. Use public transportation: Instead of relying on a car, try using public transportation to get around. Many cities offer discounted rates to students, and this can be a great way to save money on gas, parking, and other transportation costs.
6. Get a part-time job: A part-time job can be a great way to earn some extra cash and gain valuable work experience. Look for jobs on campus or in your local community. Following the pandemic there are also an abundance of remote internships and positions available to college students. One website to check out that is targeted for college students is Handshake.
7. Rent or buy used textbooks: Textbooks can be a major expense, but you can save a lot of money by renting or buying used textbooks. Check with your school's bookstore or look online for deals.
8. Consider living off-campus: On-campus housing can be expensive, so consider living off-campus to save money on rent. You can often find cheaper apartments or houses that are close to campus.
9. Use free resources: Many schools offer free resources to students, such as libraries, tutoring services, and fitness centers. Take advantage of these resources to save money on entertainment and other expenses.
10. Plan for the future: It's never too early to start thinking about your future financial goals. Consider opening a savings account, investing in stocks or mutual funds, or starting a retirement account. The earlier you start, the more time your money will have to grow. For a complete guide to the stock market, check out this article here.

Example

As Chris settled into college life, he realized that managing his finances would be even more important than he had anticipated. With the cost of tuition, textbooks, and living expenses continuing to rise, he knew that he had to stay on top of his budget to avoid drowning in debt.

But he wasn't alone. Chris found that many of his fellow students were also struggling with financial challenges, from finding ways to save on textbooks to managing credit card debt. So, he decided to take action.

He joined a financial literacy group on campus, where he learned more about budgeting, investing, and managing debt. He also started looking for ways to earn extra income, such as taking on a part-time job on campus.

But perhaps most importantly, Chris remained committed to his budget. He continued to track his expenses, avoiding impulse purchases and sticking to his plan. And when he faced unexpected expenses, such as a car repair or a medical bill, he used his emergency fund to cover the costs instead of relying on credit cards or loans.

Through it all, Chris remained optimistic. He knew that college was an investment in his future and that the sacrifices he made now would pay off in the long run. And with each passing day, he became more confident in his ability to navigate the challenges of personal finance, both in college and beyond.

After College

Ah, the transition from college to the “real world” – it's a time of great change and excitement, but also a time of financial challenges that can seem daunting. As you prepare to embark on this new chapter in your life, it's important to understand the financial obstacles that you may encounter, so you can set yourself up for success.

One of the biggest challenges that many college graduates face is finding a job. After spending years studying and working hard to earn a degree, it can be frustrating to enter the job market and find that there are few opportunities available. This can be especially difficult if you have student loans to pay off, as you'll need a steady income to make those monthly payments.

Speaking of student loans, they are a common financial burden for many recent graduates. The average student loan debt for the class of 2021 was over $35,000, and it can take years (or even decades) to pay off that debt. This can make it difficult to achieve other financial goals, such as saving for a down payment on a house or investing in your retirement.

Building credit is another important financial challenge for many recent graduates. Without a solid credit history, it can be difficult to qualify for a car loan, a mortgage, or even a credit card. But building credit takes time, and it can be easy to make mistakes that can damage your credit score.

So, what can you do to overcome these financial challenges? First, it's important to start by creating a budget and sticking to it. This will help you understand where your money is going and make sure that you're not overspending. Additionally, consider setting financial goals for yourself, such as paying off your student loans or saving up for a down payment on a house.

When it comes to finding a job, be persistent and open to different opportunities. You may need to start with an entry-level job or a temporary position, but that doesn't mean you won't eventually find the job of your dreams. And don't be afraid to ask for help – your college's career center or alumni network may be able to connect you with job opportunities or offer career advice.

Finally, be sure to stay on top of your student loan payments and build your credit responsibly. This means making your payments on time, not taking on too much debt, and monitoring your credit score regularly. With a little bit of effort and some smart financial planning, you can navigate the transition from college to the “real world” and set yourself up for a bright financial future.

Tips for college graduates

In this section, we will be discussing 10 personal finance tips for managing money after college. These tips are designed to help recent graduates build a strong financial foundation and navigate the challenges of the “real world.” 

From paying off student loans to building an emergency fund and investing in your future, these tips offer practical advice for managing your money and achieving your financial goals. So, let's dive in and explore these tips in more detail!

1. Get organized: Start by creating a financial plan that outlines your income, expenses, and financial goals. This will help you stay on track and avoid overspending.
2. Create a budget: Set up a budget that reflects your income, expenses, and financial goals. Make sure to include all of your expenses, from rent and utilities to groceries and entertainment. This will likely be different than the budget that you set in high school or college due to the change in your income and expenses.
3. Pay off your student loans: Make paying off your student loans a top priority. Consider consolidating your loans or refinancing them to lower your interest rates and monthly payments.
4. Build an emergency fund: Start building an emergency fund that covers at least three to six months of living expenses. This will help you weather unexpected expenses without going into debt.
5. Avoid lifestyle inflation: Don't let your lifestyle inflate too quickly after college. Stick to your budget and avoid unnecessary expenses.
6. Invest in your future: Start investing in your future by contributing to your retirement accounts, such as a 401(k) or IRA.
7. Negotiate your salary: Don't be afraid to negotiate your salary when starting a new job. Research the industry standards and use that information to negotiate a fair salary.
8. Use credit cards responsibly: Avoid racking up credit card debt by using credit cards responsibly. Pay off your balance in full each month and avoid carrying a balance.
9. Take advantage of employer benefits: Make sure to take advantage of any employer benefits, such as health insurance, retirement plans, and tuition reimbursement.
10. Learn to say “no”: Finally, don't be afraid to say “no” to friends and family who may ask you for money. Remember that your financial security is your top priority.

Example

As Chris walked across the stage to receive his diploma, he felt a sense of pride and accomplishment that he had never experienced before. He had worked hard to earn his degree, both academically and financially, and he was ready to take on the world.

But as he looked to the future, he knew that the financial challenges he faced in college were far from over. He still had student loans to repay, and he needed to find a job that would support him as he started his career.

Fortunately, Chris was prepared. He had spent years building a strong financial foundation, from saving money before college to managing his expenses during college. And he knew that the lessons he had learned would serve him well in the years ahead.

He started by creating a plan for paying off his student loans. He calculated how much he owed, what his interest rates were, and how much he could afford to pay each month. Then, he set up automatic payments to ensure that he never missed a deadline.

At the same time, he started looking for a job that would help him build his career and his income. He used the skills he had learned in college to create a strong resume and cover letter, and he networked with alumni and other professionals in his field.

And as he started earning more money, he remained committed to his budget. He continued to track his expenses and save for the future, whether that meant building an emergency fund or investing in his retirement.

Through it all, Chris remained optimistic. He knew that the journey ahead would be challenging, but he also knew that he had the skills, knowledge, and determination to succeed. And with each passing day, he felt more confident in his ability to navigate the complex world of personal finance, both now and for the rest of his life.

Thank you for sticking with me through this post on navigating personal finance before, during, and after college. I know it's not always the most exciting topic, but trust me when I say that taking control of your finances early on can make a huge difference in your future.

After college, things can get a little trickier. The job market is competitive, and student loan payments can be overwhelming. But don't worry, I've got your back! By creating a plan for paying off student loans, building an emergency fund, and setting financial goals, you can set yourself up for long-term financial stability.

So there you have it! Personal finance might not be the most glamorous topic, but it's one that can truly change your life. By taking control of your finances and making smart decisions, you can create a brighter future for yourself. Thanks for reading, and happy financial planning!

Thank you for taking the time to read my article! My name is Jackson and I am the founder of Money Conversations, a blog dedicated to helping young adults learn about personal finance. As someone who has experienced the challenges of managing money as a young adult, I am passionate about sharing my knowledge and insights to help others make informed financial decisions. I hope you found this article helpful and informative, and I look forward to sharing more insights with you in the future.

Are you wondering how to choose your first investment? At the start of your own investing journey, consider this advice from Warren Buffet, one of the savviest investors in history. “Be fearful when people are greedy, and be greedy when people are fearful.” 

The thinking behind this wise quote is that when many investors buy a stock, it pushes its price up and may make it more expensive than it’s worth. On the other hand, if investors aren’t investing and prices drop, it may present an opportunity for a savvy value investment. As a new investor, you may be overwhelmed by the many different investment products and strategies out there. In this article, we'll examine some of the basics of choosing your first investment. Investing is an essential part of growing your wealth, so don’t give up yet if you’re feeling lost! 

Contents

First Investment: The Investment Accounts Everyone Needs

Retirement Account: Your First Investment Should Be Here

There are generally two types of investment accounts everyone should have. The first is a retirement account. This can be in one of several forms. The standard for employees of large companies is a 401(k). Nonprofit and government employees may have a 403(b) or 457 plan, but they work mostly the same as a 401(k). These accounts are a pre-tax investment, meaning you do not pay taxes on the money that goes into them. 

Most companies match your investment up to a certain percentage. For example, your company may agree to match up to 3% of your pay going into your retirement account. If you invest the full 3% every payday, that comes out to 6% of your pay going into savings. 

With these accounts, you usually have a handful of investment fund options. For my first 401(k), I chose a target date fund. This fund is managed by a professional fund manager for people planning to retire around the same time. As you get closer to retirement, you want less volatility and risk.

Retirement accounts can also be an IRA or Individual Retirement Account. The traditional IRA is also a pre-tax investment. A Roth IRA is an after-tax investment. In 401k, 403b, and traditional IRA investments, you pay taxes on withdrawals and get to save on taxes the year of your contribution. In a Roth IRA, withdrawals are tax-free, but you must pay taxes the year you earn the income. Picking which of these tax options is better depends on your age and what you expect your income to be post-retirement.

Prefer to listen? Check out my podcast on the stock market for beginners.

Personal Investment Account: After Your First Investment

The other investment account you should have is one you manage yourself. You may have a 401(k), a Roth 401(k) – which is a Roth IRA managed through your 401(k) company – and a personal investment account, all operating alongside each other. This is quite common.

When making investments for your future, set a goal. Know where you’re starting. Are you starting with that 3%? Is your company turning that into 6% with the company match? Sometimes it’s helpful to set a percentage goal of your pay you want to funnel into retirement. To maintain the same standard of living in retirement as your working years, it's best to save at least 15% of your income across your savings and investment accounts.

Stocks, Bonds, and Funds, Oh My! Picking an Asset Mix

The tricky part of managing your personal investment account is picking your asset mix. Every person will have a different mix based on their needs. The biggest factor in your mix is age.

If you’re in your twenties, you can realistically afford to lose most of your portfolio and be fine for retirement. If you have over thirty years to retirement, you can rebuild if something goes wrong in your investments. If you are sixty and getting ready to retire, losing even 20% of your investments is not as feasible. How do you plan for this? You pick an asset mix. 

Traditional mixes include cash, stocks, and fixed-income investments. Cash is money in the bank. This includes CDs, money market funds, and traditional checking and savings accounts. Stocks are any equity investment. This includes regular company stock or a mutual fund composed of stocks. Fixed-income securities are bonds (company, government, or any other investment that pays a fixed rate). Cash is the least risky investment. Fixed-income securities are also fairly low risk. Stocks are volatile and can change value daily.

Young investors can afford to be more heavily weighted in stocks. However, they can also benefit from having cash on hand to pay for things like school. Having fixed-income securities is less important to young people as they can take the risk of owning stocks.

Taking risks is not always bad. Higher-risk investments usually lead to greater returns, especially because the stock market has always historically increased over time. The volatility of your investments is something to watch. Do not think that just because you are young you should not be diversified. Spread the money around sectors and companies.

Take risks appropriate for your age. If you want a free tool to calculate your investment risk, check out Empower.

Stocks 

The most well-known investment option is stock.  A share of stock represents a fractional ownership in a company. The return on a stock is generated through a dividend or a change in share price. If you buy a share of stock for $1, receive a .05 per share dividend, and later sell for $1.05, you have made .10 per share or 10%. Usually, people do not buy only one share of stock in a company, but you can if you want to or if the price is really high.

Bonds 

Bonds are often mysterious and scary to the average person. A bond is an instrument created by a company as a way to raise funds through debt. In other words, if you buy a bond, you loan a company money.  Most bonds are for $1,000 and give you a fixed coupon, or interest payment, throughout the bond's life, most commonly 20 years. Ultimately, you get your $1,000 back and can keep the interest you earned. 

State and local governments have bonds called municipal, or muni, bonds. Those are generally tax-free and pay a lower interest rate. The risk with bonds is that a company will go bankrupt, like General Motors or Chrysler did in the late aughts, and will stop paying the coupon and, rarely, keep your $1,000. The company always sets the bond terms before it is sold. 

Mutual Funds

A mutual fund is created when a lump of investors put in funds to buy an assortment of stocks. If you buy into a fund, you own a portion of the total assets, depending on how much you buy in for. The price per share of a mutual fund is calculated by dividing total assets (stocks, bonds, cash, and other instruments) by the number of outstanding shares. 

Funds are only as good as the people who manage them. They are an easy way to build a diverse portfolio but are not guaranteed to gain. There are also fees (annual marketing and administration fees) associated with mutual funds. 

ETFs and Index Funds

Exchange Traded Funds, called ETFs, and Index funds, are another fund option. ETFs and index funds work like mutual funds but are mirrored to major indices such as the NASDAQ composite index or the S&P 500. Because the funds track an existing index, fees are usually very low. These are often a good way to get started investing in funds.

Many other fund options exist but are usually just types of mutual funds. These include bond funds, stock funds, foreign stock funds, emerging markets funds, government treasury funds, and funds that buy other funds. 

You can also short sell a stock, where you bet on it going down in price. You can buy options on a stock, where you have the ability to buy it later at a predetermined price. You can trade commodities, such as cattle, corn, or coffee. Some bonds are called mortgage-backed securities. Those let you buy into a share of ownership in the future payments of people’s mortgages. You can invest in almost anything.

Hedge Funds

Hedge funds are like mutual funds, but are not regulated by the government to the same standards. As such, they are only appropriate for wealthy investors with a lot to lose. Though there is a possibility of a big gain, there is also a large opportunity for loss.  Most hedge funds require very large investments to join in.

The most important thing to remember is to invest responsibly. If you don’t understand it, don’t buy into it. If you do not know what risks are involved, pick something else. 

Certificate of Deposit (CD)

The certificate of deposit, called a CD, is one of the most looked over investment vehicles in the world. Because of their low risk and lack of variability, they are rarely mentioned by financial analysts. They are simply not exciting.

CDs are time deposits, meaning you deposit your money with a financial institution for a fixed term, during which you earn interest. With some economists predicting we’re heading for a recession later this year, maybe it’s time for sensible people like you to look at CDs. CDs will give you a higher rate than a bank savings account. Banks benefit by having your money locked in with them, and you benefit by having a higher rate.

Like savings accounts, CDs are FDIC insured up to $250,000. Local banks usually have pretty good rates too, but shop around before you invest. For zero risk up to $250,000, this is generally a pretty good deal. If you have school or a big purchase looming in the future, a CD is a good option to keep your cash in while waiting for the big day.

I sometimes have 3-month, 6-month, and 1-year CDs as temporary storage for my latent cash to earn extra income. If you are worried about your IRA or 401k, most allow for CDs as an investment option in addition to stocks, bonds, and regular bank accounts.

Warren Buffet’s Strategy 

Let’s take a closer look at the investing strategy we mentioned at the beginning of this article. 

The big principle is to find a company that can be invested in for a lower cost than the company is worth. Value investing generally uses book value for determining company value. This is a conservative valuation method, as it does not consider future earnings.

How can you identify these opportunities today? Look at a company’s financial statements and find net book value and assets and liabilities. If the market capitalization (total value of all shares of stock) is lower than assets less liabilities, you found a bargain according to the value investing method.

While Buffett is the most famous value investor, he did not come up with the idea, he just adapted it to his own investing style. Benjamin Grahm is often credited with creating value investing. He worked with co-professor David Dodd to create this “cautious approach to investing.” 

Since the 1970s, Warren Buffett and his partner Charlie Munger have been considered the top value investors in the world. The proof is in stock. Just look at Berkshire Hathaway over the last four decades, value investing works.

Another investing strategy is dollar-cost averaging (DCA), in which you mitigate the risk of timing the market by investing fixed amounts of money at regular intervals in a target security. This accomplishes more than one investing goal as it makes you invest regularly and protects your money from being hurt by adverse market timing. 

Investment Risk for Your First Investment

Investment risk is generally measured with beta. If a stock has a beta of one, the risk is equal to that of the overall market. A higher beta means higher risk. If you look up any stock on Google Finance, the beta is given at the top of the page. Amazon, for example, has a beta of 1.26. That means it is a higher-risk stock. 

But how does that impact you?  If a stock has low risk, it will probably not go up or down very much. If a stock has a high risk, it could take a big swing either way. You should know how risk-averse you are before investing. 

I am a little risk-averse but still young enough to afford a swing in my portfolio. My early stocks had a beta of .20, 1.43, .98, and .64.  If weighted evenly, I have a portfolio risk of .81.  That means my portfolio will be slightly less volatile than the overall stock market. 

Remember, risk should be proportionate to return. If you invest in treasury bills, you have virtually no risk and will get a little return. 

Large corporate securities for established companies, called blue chips, are the second least risky investments, not including foreign treasury securities. Blue chip stocks, such as those included in the Dow Jones average, generally have low risk. One major measure of corporate risk is the bond rating system. Companies rated AAA, AA, A, or BBB bonds, are investment grade. BB and below are considered junk bonds. 

Your First Investment: The Final Word

Hopefully, this article has given you some useful information with which to start thinking about investing. You’ll want to set up a retirement investment account (with company matching, if available through your employer) and a personal investment account. Assess your own risk tolerance and do more research into the investment products I’ve briefly gone over above. 

Investing is essential to your financial future, so get started sooner rather than later. If you're already investing and need to understand your portfolio better, be sure to check out Empower.

If you’re looking for help in business incorporation, taxes, or payroll, Collective is the first back-office system made for self-employed business owners. By becoming a Collective member, you gain access to a team of experts who can help you with everything from general administration to the specifics of business formation and electing an S corp tax status. 

What’s Useful About Collective? 

Collective offers a unique set of services to its members. The first – and arguably most important in the long run – is helping self-employed business owners register as an LLC with S Corp taxation. 

If you form an LLC, you can elect to be treated as an S Corp by the IRS for tax purposes. The benefits of this are manifold. S Corps are pass-through entities, meaning they pass corporate income, losses, credits, and deductions onto their shareholders when paying federal taxes. S Corps can therefore avoid additional taxes.  

Collective agents guide members through registering their company as an S Corp, getting an employer identification number, business license, and separate business bank account. A Collective membership also gives you access to an accounting and tax team. They’ll set up your payroll and file your business (and personal, if you choose) tax returns at no additional cost. 

If you’re a solopreneur, you may have had to go through the tedious process of reconciling bank statements with business transactions. Collective agents will take care of this too. If you have questions related to taxes or financials along the way, every member is assigned a Member Relationship Manager to act as their primary point of contact with Collective. 

Collective calls itself the “first back-office system designed for self-employed business owners,” and it’s true that almost no other memberships will offer you this amount of help with setting up and maintaining your business. 

Business formation help 

Registering a business in your state requires several steps that Collective can assist you with. One of the most important is drafting an operating agreement for your LLC. 

An operating agreement is a document signed by the members of your LLC that acts as a contract laying out the purpose, provisions, and regulations of your business. Having an operating agreement not only informs the day-to-day operations of your business but protects your status as an LLC in the eyes of the government. 

Collective advisors can help you draft a professional operating agreement and jump through various logistical hoops. Obtaining an EIN, picking a registered agent, and filing an S Corp election with the IRS requires a lot of paperwork Collective can help you manage. 

Taxes 

Collective can provide you with quarterly tax estimates and annual salary recommendations. If you’re worried about filing tax returns – either for your business or for yourself – Collective’s accounting and tax team can also do those for you if you elect. 

Bookkeeping and accounting

This is the service many business owners will enjoy the most about Collective. After all, most entrepreneurs don’t start their businesses hoping to be their own accountants. 

A Collective membership automatically gives you access to a dedicated team of tax specialists and accountants. This back-office team will automatically categorize your monthly expenses, reconcile credit card and business bank accounts, and close your books at the end of the year to prepare for taxes. 

For accounting-specific needs, Collective offers members training in bookkeeping and payroll and will set up your books and payroll for you. Collective works with CPAs to give 3rd party verification of your financials for lending purposes. 

Payroll 

Collective offers many services related to your company’s payroll. They’ll automatically file new hire reports to the state you do your business in and can quickly issue and file W2s. You won’t need to worry about filing your quarterly payroll returns, as Collective has this covered, too. 

Your Collective subscription will give you access to a Gusto membership. Gusto is a cloud-based payroll and HR-management software that Collective advisors can help train you in. Another nice perk of Collective’s offerings is that your payroll is automated, and you have unlimited payroll runs. 

Pricing for Collective 

Collective offers two pricing plans. A monthly plan costs $299 per month, and a yearly plan costs $254 per month. That roughly translates to 15% in savings when you pay annually. Though this is a high monthly cost to add to your budget, you may find it worthwhile as a small business owner, especially if you plan on hiring a third-party accountant or bookkeeper to help you with your finances. 

Also, Collective is tax-deductible, meaning you can claim it as a business expense when filing taxes and subtract it from your gross income. Collective says it will pay for itself within months. However, this obviously depends on what kind of expenses you had planned to make prior to your membership and whether or not you were already registered as an S Corp before joining. 

FAQs 

Is Collective worth it? 

This will depend on your business needs and your familiarity with the ins and outs of running a Business-for-One. If you’re relatively new to the solopreneur life and don’t know the steps of registering a business and electing S Corp status, Collective could be very helpful. If you don’t want to manage your own accounting and want to focus more on your passion than your paperwork, Collective may also be a good choice for you. 

How do I get a membership? 

Collective is an invitation-only service, meaning it’s not available to the public. Referrals are how most members join, but you can also contact the Collective team directly through a form on their website. Collective describes their typical members as “full-time solopreneurs, like marketing consultants, coaches, designers, software developers and creatives who make over $80,000/year.” If this sounds like you, it may be worth reaching out! 

Does my Collective membership cover taxes? 

Your Collective membership will not cover any third-party fees. This includes fees and taxes charged by your city, state, or federal government and business licensing fees. 

Is there a set-up fee? 

You’ll be charged a one-time $399 Business Success Upgrade fee if you’re seeking assistance with an existing LLC or an LLC already electing an S Corp tax status. The reason for this fee is so Collective can take extra time to review your records and standardize your books where necessary. 

Conclusion 

Collective is a handy tool for small business owners seeking help with bookkeeping, accounting, payroll, and business formation. Calling themselves the first back-door system for self-employed business owners, Collective’s mission is to help you focus on your passion instead of your paperwork. If you’re curious about being a member, consider contacting Collective today. 

Forex trading, also known as foreign currency trading, can be a lucrative hobby for those interested in putting in the time and effort. 

Today, you do not need deep pockets to get started. There are online forex brokers and platforms that cater to small-scale traders, and you can open a real-money trading account with them even if your bankroll is small. You have quite a lot of brokers to choose from if you can make a $200 first deposit, and some brokers accept even less than this – such as $100 or even a mere $10. 

Doing it small-scale to begin with and gradually building up a bankroll makes it easy to follow the #1 rule: do not risk money you can not afford to lose. Putting money on the line through forex trading always entails risk, and there are no “safe bets”. 

Therefore, proper risk management is essential for long-term profitability. If you have a small bankroll, choose a forex broker that permits small trades. For example, if you only have $100 in your account, you should go with a broker that allows you to make tiny trades – otherwise, you have to risk far too much of your total capital on each trade, which makes proper risk management impossible. 

What is forex trading?

Forex trading is the same as foreign currency trading. The global forex market is huge and decentralized, and the bulk of the trading is carried out by enormous entities such as central banks, investment banks, and hedge funds. All in all, currency worth around 6.6 trillion USD will be traded on the global forex market during an average trading day.

Currency pairs

The trading on the forex market is based on currency pairs. The most traded currency pair is  EUR/USD, which accounts for roughly one-quarter of the total trading. This currency pair is traded so heavily because it represents two of the world's largest economies: the European single market and the United States of America. These two currencies are also widely used outside Europe and the United States.  

Examples of other well-known and heavily traded currency pairs include:

• The United States dollar and the Japanese yen: USD/JPY.
• The British pound sterling and the United States dollar: GBP/USD.
• The United States dollar and the Swiss franc: USD/CHF.
• The Australian dollar and the United States dollar: AUD/USD. 
• The United States dollar and the Canadian dollar: USD/CAD. 
• The New Zealand dollar and the United States dollar: NZD/USD.

Base currency and quote currency

In a currency pair, the first currency is the base currency, and the second is the quote currency. 

Example: In the currency pair EUR/USD, Euro is the base currency, and the US dollar is the quote currency. In the currency pair USD/JPY, the US dollar is the base currency, with the Japanese yen as the quote currency. 

0.9844 USD/EUR means that you have to pay 0.9844 Euro to get 1 USD. 

Forex derivatives

A wide range of financial instruments are based on forex. Here are a few examples:

• Basis swap
• Currency future
• Currency swap
• Foreign exchange binary option
• Foreign exchange forward
• Foreign exchange option
• Foreign exchange swap
• Forward exchange rate
• Non-deliverable forward
• Power reverse dual-currency note (PRDC)

Comparing forex brokers

Below, we will look at a few points that are good to keep in mind when comparing forex brokers. It is good to keep in mind that you do not need to find a broker that fits all your needs. If you employ two different trading strategies or trade with two other currency pairs, do not hesitate to sign up with two different forex brokers instead of compromising. The forex broker that is ideal for your first strategy might be unsuitable for your other strategy, and so on.

Asset, strategy, and associated trading costs

• Does this broker offer the currency pair I want to focus on? 
• Does this broker offer the type of instrument I wish to use for my forex trading (e.g. Contracts for Difference)?
• Is this broker suitable for my strategy (e.g. scalping)?
• What would it cost to employ my trading strategy with this broker for this currency pair?

It is important to look at all the costs. For example, a broker luring you in with promises of zero spreads might charge a higher-than-average commission and vice versa. Also, be vigilant about small fees that may add up in the long run, such as deposit and withdrawal fees, platform fees, etcetera. 

The trading platform

Use a free demo account with play-money to test out the trading platform risk-free. It is important that you like the platform and that it is easy to use.

A platform that is difficult to navigate or where it is easy to accidentally put in the wrong order will be especially detrimental for fast-paced day traders who employ a trading strategy where every second counts. Fortunately, many brokers will allow you to open a free demo account. It will be filled with play money so that you can make play-money trades on the platform. It is a great way to learn and experiment without risking any real money.

Mobile trading

If your plan is to do most of your trading on your phone or tablet, make sure you test-run the trading platform on that device. Some trading platforms have a nice interface for desktop traders but sub-par trading apps for mobile devices.

Technical analysis

Do you carry out technical analysis? Is it important that the platform provides historical trading data and a lot of tools for technical analysis?

Minimum deposit

If you do not wish to make a big first deposit, make sure you select a forex broker who does not require this. Some forex brokers cater to micro-traders and accept very small first deposits, e.g. $10.

Transaction methods

Does this broker accept a method for deposits and withdrawals that you are comfortable with? Are there any deposit and/or withdrawal fees for this method? 

Do you get to make at least one withdrawal per month without paying the fee? What are the minimums for deposits and withdrawals?

Minimum trades

Most hobby traders are on a small budget when they start out, and it is important that you select a  broker that will allow you to make trades small enough for proper risk management. Even if you have $1,000 in your account, it is not wise to stay with a broker where each trade must be $1,000 or nearly that. Do not put all your eggs in one basket. Select a broker where you can properly manage risk and only put a fraction of your total bankroll into each trade. 

Customer support

• Not all brokers offer phone support nowadays, so if this is important to you, make sure you select a broker who does. Also, check if you will be required to make a potentially expensive phone call to another country to reach the support by phone. 
• If you want to be able to get help in real-time, make sure the broker offers phone support or live chat – not just email support.
• Check if support is available in a language you are okay with using.
• Check if the support is staffed when you are most likely to trade. It is nice to be able to sort out issues directly, even if they occur outside normal office hours.

Regulation

• Is the broker licensed by a reputable license authority? Examples of license authorities that have a good reputation among the traders are CySec, BaFin, UK FCA, FINMA, and ASIC. 
• Is the broker licensed by a licensing authority in your part of the world? If you live in Country  A and pick a broker company that is based in Country B and licensed from Country C, you are putting yourself in a complex legal situation. 

Please note: Many large broker corporations have set up subsidiaries within the European Union and are licensed from one or more member countries. The subsidiary must adhere to the EU regulation, including MiFID II, so the legal framework is pretty straightforward even when a subsidiary does not have a license from the member country you live in.

Reputation

Does this broker have a good reputation among the traders online? 

All restaurants – even the truly great ones – have at least a few angry customers posting scathing reviews online, and the same is true for forex brokers. You would be hard-pressed to find a broker with 100% happy clients giving nothing but 5-star reviews. (That might actually be a bit of a red flag in itself.) With that said, try to get a feel for the general reputation of a broker. Does this broker seem to, in general, have a good reputation? When clients complain, what are they complaining about, and do the complaints seem to be well-founded? Are the same issues popping up over and over again?

Figure Out What Makes Your Business Unique

The first step to making your online business profitable is to figure out what makes it unique. What do you offer that no one else does? What can you do better than anyone else? Start by brainstorming a list of your unique selling points. List every aspect of your business that makes it special. Then, start promoting these features to your target audience. Let them know what sets you apart from the competition. You can capitalize on your uniqueness and sell more products or services with this information.

Set Up a System for Tracking Expenses and Revenue

If you want to make your online business profitable, you need to have a system to track expenses and revenue, such as those found at AWS Marketplace services. This will help you see where money is spent and how much profit you make. Without this information, it will be tough to make changes to increase your earnings. Your business has to make more money than it spends to be profitable.

Use Social Media To Reach New Customers

Social media is a great way to reach new customers and connect with existing ones. If you are not using social media to promote your business, you miss a huge opportunity. By creating a solid social media presence, you can attract more customers and make more sales. Every successful business has an active social media presence these days.

Invest In Quality Tools And Resources

If you want to succeed, you need to invest in quality tools and resources, such as AWS Marketplace services. Many great products are available that can help you save time and money. By investing in the right tools, you will be able to increase your profits and run your business more efficiently. There are many valuable tools, so do some research and find the right ones for your business. An efficient business is a profitable business.

Delegate Tasks

As your business grows, it will become increasingly difficult for you to handle everything yourself. It is important to delegate tasks to other people to make things easier on yourself to make things easier. This will free up your time to focus on more important things. As a business owner, you need to focus on the big picture and be able to handle the more significant tasks. Delegating tasks will allow you to do this.

Take Some Time For Yourself

Finally, it is essential to take some time for yourself. If you are constantly working, you will eventually burn out. This will make it difficult for you to be productive, and you could even make mistakes. You can recharge and come back stronger than ever before by taking some time for yourself. Taking a time out is not a sign of weakness; it is a sign of strength. It shows that you can take care of yourself and your business.

Final Thoughts

Whether online or offline, any business takes a lot of time and effort to be successful. However, there are some things that you can do to make your online business more profitable. Running a business is stressful, so make sure to take some time for yourself to relax and recharge. If you follow these tips, you will be well on your way to success.

There were several significant milestones where I felt like a real grown-up, and one of them was getting my first mortgage. But I felt like a financially savvy grown-up after refinancing that mortgage, and another one more recently. Those were both big financial wins that set me up to save tens of thousands of dollars over time.

I recently teamed up with Refily, a free-to-use platform that does the hard work for you of shopping around for a lender, allowing you to compare rates to help you pick the right provider for your needs. Here’s a look at how refinancing saved me money and how Refily can put you on track to finding a lender who could help you see if you could save by refinancing.

Secret Insights Into the Mortgage and Refi Process

My first home was a condo in Denver, which I refinanced and eventually sold for a significant profit. My second home was a single-family home in Portland, Oregon, where I only had the home for a little more than a year but still managed to come out way ahead when selling.

I’m writing this article in a home office in the third home I’ve owned with a mortgage. When mortgage rates dropped at the start of the COVID-19 pandemic, I jumped to refinance at a lower rate. In total, including this house, I’ve had five mortgage loans.

But before I ever had my first mortgage, I sat on the other side of the desk at the bank. My responsibilities as a bank manager included reviewing and approving mortgage and refinance loans that came into my branch. Having been on both sides of the mortgage process, I know what to look for when refinancing and how to refinance for the maximum financial benefit.

My Latest Home Refinance Saved Me Thousands

I’ve never met anyone who refinanced their mortgage for the fun of it. Refinancing takes a bit of legwork, so you’ll only want to go through the process if it will lead to major financial savings. It’s always worth running the numbers if you’re considering a refinance.

I bought my current home with a 30-year fixed mortgage originated in May 2017. The loan came with a 4.25% interest rate, which was competitive for the time, particularly for someone who was newly self-employed as I was at the time.’

I refinanced just a few years later in March 2020, which you may recognize as the start of the COVID-19 pandemic. When the Federal Reserve lowered rates in response to the pending economic challenges, I jumped and refinanced with a new 25-year fixed loan with a 3.25% rate.

The refinance lowered my payoff period by a few years and lowered my payment by about $100 per month. But most importantly, I should save about $12,000 in just the first five years, thanks to a lower interest rate. If I keep the loan through the payoff date, I’ll save more than $50,000. That’s serious money! The amount you may be able to save depends on your original loan and new finance loan terms.

When You’re Most Likely to Save Money with a Refi

Most people would jump at a chance to save tens of thousands of dollars. If you have a mortgage and any of these apply, you may be able to save by refinancing:

• Improved credit: If your credit has significantly improved since buying your home, it would be worth checking with a lender to see if you could qualify for a loan with better terms. Those with the best credit scores tend to qualify for the lowest interest rates.
• Rates have fallen: When interest rates fall, as they did at the start of COVID-19, mortgage interest rates go down for the entire market. Those lower rates spurred me to refinance. If rates are down since you took out your mortgage, you may be able to save even if your credit score hasn’t changed.
• Shorter payoff period: When you trim from a 30-year loan to a 15-year loan, your interest rate may go down, as shorter loans are considered a lower risk by the lender. Your monthly payment may go up, but your total interest cost should decrease when shortening your term with a lower rate.

It’s usually not a great long-term idea to refinance for a lower monthly payment. While it can take off financial stress in the short term, you’ll typically end up paying more interest over time. In addition to mortgage calculators, the best way to compare the cost of a mortgage is the annual percentage rate (APR), which gives an all-in, apples-to-apples cost comparison between two loans.

Situations Where You May Not Want to Refinance

Just because you can refinance doesn’t mean you should refinance. If you’re on the fence, focus on the numbers behind the loan. These situations should lead you to think twice before pulling the trigger:

• Higher interest rate: The interest rate determines the cost per dollar borrowed. You should avoid a higher interest rate for a mortgage in nearly all circumstances. The only time to consider a higher rate seriously would be if refinancing to a lower monthly payment can help you avoid foreclosure and losing your home.
• Longer mortgage term: Extending your mortgage term means more monthly payments. In most cases, that also means a higher interest rate and higher total costs.
• High cost for points: You may be able to get a lower mortgage rate by paying “points” to your lender upfront. You should definitely do the math to verify that paying for points makes sense for you. Paying too much for points cuts into your savings from a lower interest rate.
• You plan to move soon: If you’re going to stay in the home for less than five to seven years, you may not live in the home long enough to cover closing costs. Again, look at the dollars and cents behind your current and prospective loans to guide your decision.

Shopping Around For the Best Deal

When you type “best interest rates” into Google, you’ll get 1.2 billion results. Odds are you don’t have time to shop around at dozens of different banks and other lenders to find your best rate. But if you don’t shop around, you could wind up overpaying significantly.

That’s where Refily comes in. Refily is a home refinance lender comparison tool. It takes less than five minutes to enter your information (Social Security number not required), and Refily will show you a recommended lender and comparisons with other lenders.

The comparison includes interest rates, estimated monthly payments, lender fees, recommended credit scores, and other key details to help you choose the best provider for your needs and budget.

It All Comes Down to the Dollars and Cents

Mortgages and refinancing are some of the most significant financial decisions you’ll ever make. A slight difference in interest rates could help you retire early, pay for a dream vacation, or treat yourself to of benefits of having more money to spend the way you want instead of handing it over to a lender.

If you’ve done the math and the dollars and cents say it’s time to refinance, don’t hesitate to get connected with a lender now.

This post is sponsored by Refily. If you’re looking to refinance your mortgage or want to compare rates, Refily uses custom matching technology to help you compare lenders and make the right refinance decision. Refily provides transparent, tailored lender choices designed to fit each borrowers’ needs—all without giving an SSN. (NMLS# 167283)

This post was originally published on October 22, 2021, and updated on February 17, 2022.

Here’s a look at exactly how pay per mile insurance works, when it makes sense, and how it saves me money every single month compared to my old insurance policy.

How pay per mile is different from traditional auto insurance

With old-school car insurance, you pay a fixed amount every month to insure your car. While it’s important to have comprehensive coverage that meets your needs, with traditional insurance policies, you have to pay the same amount whether your car is sitting around at home or driving back and forth to work and running regular errands around town.

Pay per mile insurers realized that you probably will not get into a car accident when your car is sitting still, so you shouldn’t have to pay as much if your car is parked.

With pay per mile, you unbundle the cost of insuring your car while sitting around and insuring it while driving it around. This means people who drive less will save a lot. People who put a lot of miles on their cars might do better with traditional insurance. Your driving habits are the main factor in which type of insurance makes the most sense for your unique needs.

When pay per mile car insurance makes sense

With traditional insurance, you always know exactly what you’re going to pay for coverage each month, but you won’t save anything if you drive a lot less, as many of us are since the start of the COVID-19 pandemic. Even many people who drive to the office five days per week could save with pay per mile, but those who now work from home full-time or part-time may be more likely to find significant savings.

With pay per mile, you pay a much lower fixed rate every month and pay a few cents for every mile you drive. If you drive more, you pay more. If you drive less, you pay less. Anyone who drives less than 10,000 per year may be able to save money with pay-per-mile. During COVID and beyond, there’s a very good chance that includes you.

This kind of insurance isn’t right for everyone, but for many people, particularly those who work from home or have very short commutes, pay per mile could save you a small fortune compared to traditional insurance. College students, seniors, public transit riders, and anyone who drives less than 30 miles a day on average will save.

For me, switching to pay per mile insurance with Metromile led to huge savings. Honestly, my only regret is that I didn’t switch sooner!

How I saved half with pay per mile insurance

As a personal finance writer, I’m a big fan of saving money – but who isn’t? One of my favorite parts of getting married was saving money every month on my car insurance. But even having tied the knot and proven that I was a low-risk driver, my wife and I still had to pay what felt like an arm and a leg to stay insured.

It was actually a bad customer service experience that led us to shop around and discover Metromile. While bundling and “saving” with our previous insurer, we paid $155 per month for our two cars and two drivers with perfect records for about a decade.

We both drove old, paid-off cars, and neither had (or have) a regular commute. That means we didn’t rack up a lot of per-mile charges regularly. However, if we do decide to take a road trip, there’s a limit to how many miles we pay for per day. If you go over 250 miles in a day (or 150 if you live in New Jersey), any additional miles are free.

For October 2016, our first full-month bill with Metromile, we paid just $87. That’s a fairly average bill for us. However, we have some months where we’ve paid less than $60. Assuming an average bill of $85 per month, which we generally paid our first year at Metromile, that’s a 45% savings, or nearly half!

Our costs have crept up very slowly over time, and we got a new car, so now we pay around $100 per month to insure both cars. But our most expensive month ever with Metromile when we’ve taken long road trips have always been less than what we paid to our old insurer.

Over the four years we’ve been with Metromile, I estimate that we’ve saved about $3,000 so far, and that would be assuming our old car insurance company wouldn’t have raised their rates, and they almost certainly would have. Thanks to dumping our traditional car insurance, we can add more to our savings every month.

Are you living the pay per mile lifestyle?

You may already be living the pay per mile lifestyle and not even realize it! We saved money driving an average of around 700-800 miles per month between the two of us. That’s about 25 miles per day. But even if we had driven quite a bit more, we still would have saved.

Take a look at how much you really drive in a typical month. You may be able to save hundreds of dollars per year. Pay per mile can make it work. You decide what to do with the savings.

(This post was written by me and includes my own opinions, but was coordinated with Metromile.)

Do you often find yourself wondering where your money went? Has it been proving to be such a struggle for you to truly save up and improve your financial situation? Have you been racking your brain trying to determine where the leak in your finances is and how to plug it? 

Budgeting finances can understandably be complex, but it doesn’t have to be. There are many different techniques and apps you can use to help improve your financial management know-how and skills. 

Here are a few simple tips that can get you one step closer to financial maturity. 

Make a Financial Audit

Before you jump into a brand new game plan, you should first try to have a clear understanding of your financial situation. What expenses do you have exactly, and are they recurring? It would help to make a list of all your expected bills and dues on a monthly basis, so you can have a base standard of how much you should have in your account at any given time. 

For credit or loans, make sure to account for the interest rate, and especially the due date. Missing payment deadlines do impact the amount due, so you should do your best not to miss out on any of them. If the option is available, it’s always better to enroll in autopay, which means money will automatically be debit from your linked account to pay your credit or loan through their preferred platform. 

Separate Your Savings

Anything that you will need to pay your monthly dues should be on its own account, and separate from your savings. You can either make the monthly deposit manually or enroll it as an auto-debit with your bank as well. 

The trick is to remove a set amount from your expenses account and your mind. Don’t even think that you have that money to spend–you don’t because it should be sitting nicely in your savings account instead. 

You may start small, but over time, you’d be surprised at how much your savings have already grown, for as long as you don’t keep dipping your hands into it. With an active, growing savings account, you can then look forward to the next step to financial freedom, which is investing. After all, you should only invest money that you can afford to lose. 

Identify Miscellaneous Expenses

It’s easy to overlook miscellaneous expenses as the leak because they don’t seem that much, to begin with. However, it turns out that these “small” expenses do eventually add up. Dining out, for example, can instantly bump up your expenses without you noticing it. The same goes for deliveries and online shopping.

Transportation through cabs and ride-sharing apps also do end up being very expensive, especially since the charges can fluctuate depending on a variety of factors, such as distance and traffic. 

Make a detailed note of all these types of expenses that you usually have. It should be easy to trace back based on your credit card transactions, anyway. Ultimately, the point is for you to see how much these add up to, and how much they actually impact your finances.

Use Technology

At this point, there’s no reason for you not to get the help you need from technology. Once you’re done doing your audit, and since you already have an idea where the financial leak is coming from, it’s time to rectify the situation by staying on top of things. Using budget management apps like Simplifi by Quicken can help you avoid overspending by keeping track of your finances in real-time. 

Budgeting apps only take a simple installation on your phone, so you can check the status of your finances wherever you are. You can even get budget management tips and ideas to further improve your financial literacy. Hopefully, you can finally achieve your savings goals.

This post comes from a Personal Profitability partner.

Note: This post comes to you in conjunction with a Personal Profitability partner.

What is a PPP Loan? 

PPP loans, or Paycheck Protection Program loans, are money provided by the government to encourage to keep their employees on the payroll. Nobody wants to lay off employees or cut their pay, but when times are tough, many small businesses have to do just that. With a PPP loan, however, you are given funds to continue paying your employees, including their benefits, and they can also be used to help with rent, utilities, and property damage or theft. 

Is There Interest on PPP Loans?

Yes, there is a small 1% interest rate on PPP loans. Fortunately, if you follow strict criteria, you can get your loan payments forgiven, though this is never guaranteed. Either way, the small 1% interest rate helps prevent small businesses from getting in too deep, as interest accumulates much slower than it would from a private lender that may charge several times more interest. 

Who Qualifies for a PPP Loan?

It can be a bit tricky to determine who actually may qualify for a PPP loan but enlisting the help of a trusted banker or financial consultant can help you understand if it's an option for you. Generally, people who apply for PPP loans are those who own small businesses that adhere to the Small Business Association's size standards, sole proprietors, independent contractors, and those who are self-employed. 

Non-profit organizations may also be eligible for a PPP loan, depending upon their size and specific codes. 

Can I Apply More Than Once?

Yes, some small businesses may qualify for more than one PPP loan, depending upon their own unique set of circumstances, or they may qualify for an increase in the loan they originally received. Receiving another PPP loan is called a Second Draw PPP loan, though the terms are substantially more strict than First Draw PPP loans. 

When Can I Apply for Forgiveness?

Businesses or individuals can apply for loan forgiveness after they have used all of the money, and before the maturity date of the loan passes. In many cases, the loan maturity date is about 10 months after the last date of the covered period, so it's in your best interest to apply for forgiveness as soon as possible if you qualify. 

Nobody likes filling out paperwork, and accepting help from an institution can be hard for many business owners and independent contractors. At the same time, you don't have to face this alone, and getting help in these matters from an expert can make the whole process much easier. 

This post comes to you in conjunction with a Personal Profitability partner.

This post was originally published on June 15, 2021, and updated on February 17, 2022.

What Qualifies as High Mileage Driving?

First, let's take a quick look at why high-mileage driving could result in higher insurance rates.

Simply put, mileage influences car insurance premiums because more time spent on the road means a higher risk of accident or damage. After all, if your car spends most of the time in the garage, it's not very likely to be the source of an insurance claim. If you're making a long commute every day, your accident risks are objectively higher — thus the higher premiums.

So are you a high-mileage driver? According to statistics, the average American motorist drives around 13,000 miles per year. If you fall in the range of 10,000 to 15,000 miles yearly, your premiums are unlikely to see a hike. If you drive over 15,000 miles in a year, you may qualify as a high-mileage driver. Similarly, if you drive somewhere between 5,000 and 8,000 miles a year, you may qualify for a discount as a low-mileage driver.

How Much More Do High-mileage Drivers Pay?

How much more will you pay if it turns out you are a high-mileage driver? Let's look at some average statistics from The Zebra:

Average six-month premium, by mileage:
10,000 – 15,000 miles: $965
15,000 – 20,000 miles: $972
20,000 – 25,000 miles: $974
25,000 – 30,000 miles: $976

While this is a fairly marginal change in premiums, you should also be aware that premiums can vary by state. For example, in California, rate hikes for high-mileage drivers could go up to 30% (as compared to 1-3% for high-mileage drivers in other states).

How Can High-mileage Drivers Lower Their Insurance Car Rate?

• Find a cheaper insurer. It always pays to shop around for a better deal, regardless of how many miles you drive in a year. Online tools have made it easier than ever to compare insurance rates between companies and hopefully find a better rate than you have now.
• Maintain a clean driving record. A driving record free of accidents and traffic violations is one of the most dependable ways to keep your rates low (or at least them from getting any higher). Do your best to stay out of trouble when it comes to your driving.
• Take advantage of discounts. There are almost always more discounts available to drivers than they might guess at first glance. Insurers commonly offer discounts and other perks for a variety of criteria: student discounts, good driver discounts, discounts for bundling your insurance policies or paying ahead. Get in touch with your insurance company and find out what's available to you.
• Change your coverage. If your car is fully paid off and worth less than $4,000, consider dumping your collision and comprehensive coverage. Your liability insurance should be sufficient for your needs — the rest is unlikely to do you any good until you get a newer vehicle.
• By a cheaper used vehicle. Older cars tend to attract lower rates as their value depreciates. Now might be a good time to trade down!
• Take a defensive driving course. Some insurance companies will lower your insurance if you can prove you completed a defensive driving course, which will reduce your risk of accident on the road regardless of how much you drive. Contact your insurer and see if this is a program they offer (or shop around for an insurance provider who does).
• Try to drive less and lower your mileage. While this one might seem like a no-brainer, it might be worth looking into how you could drive less often. If public transportation or biking is an option, consider giving that a try — or see about working from home more often.

Should I Install a Telematics System?

One of the major ways car insurance companies are now offering their customers lower rates: telematics. A driving tracker installed in your car will collect usage data telling the insurer how much you drive, what time of days you drive most, and what your driving behavior is like (such as force of braking, speeding, etc.)

If the data collected shows you drive safely, you can use that data to negotiate a lower rate — and many insurers will give you a discount simply for letting them collect that data in the first place. For some, this might be a privacy concern — but if you are looking for another way to save money, this might be just the thing.

Health Insurance Rates

Health insurance is a beast of an industry. While I am a big proponent of public healthcare, that is not the world we live in (if you are in the United States). Health insurance rates can be calculated using one of two methods.

If you work for a big company, your employer will negotiate a blanket rate for everyone at the company. This is based on factors such as the average age of employees, fitness levels, and so on. Your employer will generally pay a portion of your premium every month and you pay the rest. Every company is different, and you have little, if any, control over how this is handled.

If you need to find your own health insurance, a formula is used to determine your individual plan rates. The major inputs are your age, weight, family health history, your health history and pre-existing conditions, tobacco and alcohol use, past surgeries, and other major risk factors for health care costs.

Auto Insurance Rates

The auto insurance industry has done extensive research to find correlations between people and driving safety. It turns out that the statistics are pretty solid, and the industry prices insurance based on your risk factors.

The major factors for auto coverage are your age, gender, driving history, marital status, credit score, home zip code, and your car’s make, model, and color. If you are a seventeen year old boy that has had several accidents, lives in a dangerous neighborhood, and drives a cherry red Mustang convertible, your rates are going to be higher than a fifty year old married woman driving a 1980s station wagon. It makes sense.

The down side is that you could be a really safe seventeen year old boy and still get hit with high rates because other seventeen year old boys get into lots of accidents.

Renter Insurance Rates

I have renter’s insurance. I highly recommend all renters get a policy to cover your belongings. Landlords have insurance to cover the property, but your stuff is not covered by that policy. If there is a floor or fire and your possessions are destroyed, a renter’s policy pays to replace your stuff.

Renter’s policies are rated based on the location of the property, construction and building style, size of the property, type of property (apartment or single family home), and certain policy exceptions. Discuss this in detail with your insurance agent to make sure your coverage meets your needs.

Homeowner Insurance Rates

Homeowner’s policies cover the building and the contents of the building. The factors are very similar to renter’s policies, but the premiums are higher because you are covering the building and the contents.

Generally homeowner policies are bundled into mortgage payments so you just make one payment per month for your house. Property taxes are often included as well.

If you live in a neighborhood with high crime rates, your insurance is going to be higher than a safe suburb. If you live in a wood frame house, your policy will cost more than a brick or steel constructed building. These risk factors take into account the likelihood of a loss or claim.

Complex, But You Have to Understand It

The insurance world is complex. While your agent might seem like your friend today, the idea of an insurance company is to make a profit. To make a profit, they try to maximize what you pay in and minimize what they pay out.

Make sure you find a trustworthy, highly rated, well regarded insurance company. All insurers are not alike. Some people have horror stories where companies would not pay out for a claim. Others have stories about helpful agents walking them through the entire process. Read a lot about the company when you are making a selection.

This post was originally published on April 27, 2011 and updated on March 23, 2021.

Responsibilities of a CFO

Depending on the type of company a CFO works for, the day-to-day responsibilities may look a bit different. In general, CFOs fulfill key leadership roles over multiple financial departments within a business. This goes to say that this officer must monitor and respond to the work being done by a company's accountants, financial analysts, controllers and even human resources specialists.

Because CFOs are aware of so many aspects of a business's financial status, they are also responsible for making significant decisions that affect the company as a whole. In fact, some CFOs may even fulfill the role of chief financial officer simultaneously. For this reason, CFOs must be highly knowledgeable about a wide range of subjects relating to finance. In addition, these professionals frequently are required to speak in front of and direct groups of people, from their own coworkers to their shareholders. 

Education

While different CFOs may have very different educational backgrounds, this position generally requires both a bachelor's and a master's degree. If you are interested in pursuing this career path, you may want to start by focusing your undergraduate studies on a related subject. For instance, CFOs commonly major in areas such as accounting, business administration, economics or finance. If you have already completed your undergraduate degree in a different subject, not to worry. Many current CFOs didn't study finance at first. For example, the CFO of ReactiveCore, David Geithner, studied government during his undergraduate program.

It's important to do well during your undergraduate studies so that you are able to pursue a graduate degree later on. Some CFOs study accounting at the graduate level and begin their career by working as a CPA. This certification equips young professionals with a thorough understanding of various types of accounting. On the other hand, you may choose to earn a master's degree in a subject such as public administration in order to better develop your leadership and management skills.

One of the most valuable educational programs for future CFOs is a Master of Business Administration. Getting your MBA requires you to reach a strong level of understanding of numerous topics related to business. These programs often teach students about everything from marketing to ethics. If you are already working in the field of business, you may want to consider earning an Executive MBA, as this path focuses on the skills required in executive positions and allows you to continue working while you are in school.

Work Experience

Whether you enter the workforce before or after earning a graduate degree, it's important to gain experience in a variety of different positions. You may be able to accomplish this by taking on new roles at your current company or by seeking out additional opportunities in other places. Be sure to gain familiarity with a wide range of topics related to finance, such as accounting, risk management, analysis and budgeting. In addition, it's vital that you gain experience in areas such as customer service and information technology. 

As you gain more and more work experience, you may also wish to seek out a mentor. Whether or not this mentor also works at your company, he or she may be able to advise you on the types of positions or learning opportunities you should pursue in order to work towards becoming a CFO. Similarly, be sure to capitalize on any networking opportunities you may have. Establishing relationships with people inside and outside your current company may help you to be considered for a wider range of roles.

Take on More Responsibility

A final thing to note about the path to being named CFO is that you must demonstrate that you can be successful in leadership roles. Because good leadership skills can often be developed with practice, it's a good idea to push yourself by taking on added responsibility. This may involve applying for new positions or simply stepping up when a leader is needed. You may wish to seek opportunities where you can act as a director of finance, internal audit manager or a similar upper-level assignment.

The path to becoming a CFO is not an easy one. In addition to the schoolwork involved, you must excel in a variety of different work roles. Nonetheless, this position may be very rewarding for those professionals who are deeply interested in the world of finance and enjoy leading others.

This post was originally published on March 21, 2021 and updated on March 31, 2022.

Valuing a Dividend Stock

The Dividend Discount Model is the most popular method to decide the intrinsic value of dividend paying stocks (as opposed to multiple analysis or discounted cash flow analysis).

The dividend discount model says that the price of a dividend stock should equal the value of next year's dividend divided by the expected dividend growth rate. There are complexities for stocks that assume a constant dividend or continual growth, but before investing in any stock it is important to understand the intrinsic value.

Dividend Growth vs. Equity Growth

Some investors prefer dividend stocks because they pay out a nearly guaranteed cash flow

for the foreseeable future. Walmart is currently paying a dividend of 2.5% per year. Even if the stock only increases 2.5% in price, you still get a 5% return.

Companies like Berkshire Hathaway are famous for their non-dividend policy. Warren Buffet, the famous investor in charge of Berkshire Hathaway, says he can give investors a better return if he uses the cash rather than pay it back. He has been spot on, growing book value an average of 19.7% per year compared to 9.4% on average for the S&P 500.

Determine Your Goals

Are you looking to retire soon, or are you looking to save for retirement? Are you trying to build wealth or create a cash stream? Those are the types of questions you have to answer when deciding what to do with a dividend.

For investors in retirement, a cash flow is clearly the most important goal. If you can create a steady income stream without selling your capital, you are in great shape. If an investor can put a $1 million retirement account into dividend stocks averaging 4%, they will walk away with $40,000 in annual pre-tax income without touching their savings. (Remember that capital gains are taxed at a lower rate than regular income)

If you are trying to grow your assets, reinvesting is always the best option. If you believe in a stock enough to put your money there, you should believe in it enough to increase your position organically through a dividend reinvestment.

How to Start a Dividend Reinvestment

You can reinvest your dividends through one of two methods, from your broker or a DRIP.

First, you can simply select the option to “reinvest” when you buy a stock through your stock broker. In my account, it is just a simple check box on the buy screen.

Second, you can buy into a DRIP (dividend reinvestment plan) directly from the company, though the fees may be higher than from a discount broker.

Find out what the 3 best long term dividend stocks are!

What is Your Best Option?

Each investor must decide what their goals are and how to build a portfolio to reach those goals. If you are in retirement, or near to it, the best option is to take the cash. Otherwise, most investors should opt to reinvest their dividends.

What do you chose to do with your dividends? Please share your thoughts in the comments.

This post was originally published on December 16, 2008 and updated on February 28, 2021.

The company was acquired in 2009, and since then many users believe the site's functionality and support have gone downhill, sending them looking for Mint alternatives. If you want an alternative to Mint.com, here is a list of options that I, Eric Rosenberg, have tried and think could be valuable for you. Whether you have a full-time day job, are building your side hustle, or are self-employed, finding resources to help you track spending can be a great early step toward personal profitability.

About Mint.com

Mint is the original and most popular online account-tracking software. For no charge, you can link all of your bank, credit, loan, and investment accounts into one interface. The site helps you automatically track your budgets, financial goals, and all of your transactions through one login and an intuitive interface.

The site was acquired by personal finance powerhouse Intuit in 2009, and the site has undergone many changes. While some new features like credit score reporting have been added, long-time features have slipped and the switch from an outsourced account data system to the in-house system built for Quicken have caused data errors and headaches for a lot of people who are now in search of Mint alternatives. Mint.com is free.

Mint Alternatives Summary

Best Mint Alternative: Empower

This site has been a great tool in my personal finance arsenal and is my go-to resource for tracking my investments across all of my investment accounts. I track my individual stock holdings, Roth IRA, Rollover IRA, special investment accounts, and employer 401(k) account through Empower, and it has been useful and really helped me save money.

I used the investment analysis tools at Empower to bring my portfolio in line with my goals and save over $300 per year on mutual fund fees. If you have $100,000 or more in cash and investments, you will also qualify for a free investment consulting session with an Empower advisor. Empower's financial tools are free regardless, but if you opt for financial advising on managing your investments, there is a fee based on your portfolio size.

Detailed Comparison: Mint Alternative: Empower »

Lunch Money

Lunch Money is a newer app from a solo developer. She has done an awesome job building a tool for those who are doing well with their money and want better financial planning skills. It isn't quite as robust as Mint, but everything I tried worked flawlessly with Lunch Money, which I can't say about the larger competitor. The site has an active roadmap with new features added regularly. To learn more about Lunch Money you can check out the podcast interview with its founder on Indie Hackers.

Lunch Money helps you categorize your budget and track cash flow. It works well for both the United States and international users in foreign currencies. It also supports tracking cryptocurrency accounts and wallets, something most competitors have yet to touch. I've been using it myself for a little bit, and have been very impressed. The biggest downside is that it isn't free. It costs $10 per month or $100 per year, but there are no advertisements and your information is never sold. Some may call that a small cost for better privacy.

Lunch Money »

Power Wallet

Power Wallet aggregates your finances in one view, and helps you track all of your financial account data in one central place. The site has a big focus on adding budgets by spending category and tracking your spending habits against your budget automatically.

Power Wallet also offers bill reminders to help you avoid missing bills and paying those pesky late charges. The insights from this site are geared toward helping you meet your own personal finance goals. Power Wallet is free.

PowerWallet »

Quicken

Quicken is a long-time leader in desktop-based financial tracking. Quicken offers most of what you get for free at Mint.com, but in desktop form, with software you download and install on your computer.

Because the program is desktop based, the web and mobile access lack compared to Mint, but the software allows you to own and control all of your data on your own PC. More expensive versions also include tracking for small businesses, rental real estate, and investments. Quicken is paid software.

Quicken »

YNAB

You Need a Budget, known by its loyal army of users as YNAB, is a desktop and mobile based budgeting software with a major difference from everything else on this list: it does not automatically link to your checking account or credit cards.

YNAB founder Jesse Mecham believes that manually adding each transaction creates the best money management habits, and automatic tracking does not form any habits. When you make a purchase with cash, debit, or credit, you enter the purchase into your budget and get an update right away. This is proactive budgeting, not retroactive reacting.

YNAB is software that you purchase and download. Version 4.0 is currently available for $60, or you can sign up for the free trial.

YNAB »

Yodlee MoneyCenter

Yodlee was the original data aggregation provider for Mint.com, and while that site switched over to the Intuit engine, Yodlee is still a top provider of account aggregation for some of the sites in this list.

Yodlee MoneyCenter is their in-house personal finance tracking tool, and it is powerful and useful in its own right. The tools provided in MoneyCenter are focused on tracking account balances and transactions, reaching finance goals, and achieving more financial freedom.

Yodlee MoneyCenter tracks spending in categories, and allows you to track your airline miles, your net worth, and understand your investment asset allocation. Yodlee MoneyCenter is free.

Yodlee MoneyCenter »

LearnVest

LearnVest is the account tracking program created by actual personal finance advisors, so the tools are focused on how you interact with your money and the psychology behind personal finance management.

Rather than honing in on small budget categories, LearnVest breaks your money down into income, fixed expenses, goals, and flex spending money for you to do what you want. They have a major focus on getting debt free as well. The software is free, but a paid experience is available where you are assigned a personal financial advisor to give you extra help.

LearnVest »

Mint Alternatives Graveyard

Clarity Money

Clarity Money was a simple personal finance and budget tracker that was merged into Marcus by Goldman Sachs, a consumer bank, in March 2021 under the name Marcus Insights. This app doesn't offer the deep budgeting or investment tools of Mint and Empower. Instead, it focuses on giving you your current account details in an easy-to-understand view with details on the most recent transactions. In either case, if you want a simple snapshot of all of your money, this feature delivers. But an account with Marcus by Goldman Sachs is required.

Adaptu

Adaptu was a site with a focus on connecting your personal finance tracking with community support. Adaptu was one of the first personal finance tracking tools to offer a mobile wallet app.

The site shut down in February 2013.

Thrive

Thrive was an early Mint alternative with a focus on budgeting based on your behavior. The tools looked at your average spending in each category and told you how many times you could do things like go to a restaurant or bar without going into debt.

The site was owned by Lending Tree and shut down in June 2011.

PageOnce

PageOnce was built to be a dashboard for all of your account balances but didn't focus on transactions as much as the high level. It eventually re-branded as Check, a tool focused on bill payments. PageOnce was purchased by Intuit in May 2014. In December 2014, the tools was added to Mint.com under the name Mint Bills, which is still part of Mint and available today.

Manilla

Manilla provided account balances in one place, but its best feature was acting as your full-service digital filing cabinet. The site automatically downloaded all statements for debit accounts, savings accounts, credit cards, and even utility and other bills.

Manilla shut down in July 2014.

Wesabe

Wesabe was another of the original Mint alternatives. In fact, it was older than Mint.com. The site featured both personal finance tracking and a community feature. For those afraid to keep their finances on a server owned by sites like Mint, Wesabe had an online/desktop link that was used to update your transactions.

Wesabe shut down in July 2010.

I just realized through my Merrill Edge traditional IRA I am going to be charged a year account fee. I set this account up September of 2013 with a $5,500.00 deposit. At the time, the representative on the telephone never mentioned a yearly fee. I received a notice the fee was going up from $65.00 to $100.00 a year. This seems like a large yearly fee considering the amount of money in the account. I have to say I really am not educated about IRA accounts. Is this a normal fee? I'm considering moving my IRA. Any suggestions or advice would be greatly appreciated.

What is an IRA?

To start, let’s set the ground floor on what IRAs are and how they work. At the basic level, an IRA is an investment account for your retirement with tax benefits over regular investment accounts. There are two types of IRAs, the traditional IRA and the Roth IRA. A traditional IRA allows you to invest pre-tax (lowers your current taxes) for your retirement. A Roth IRA is an after-tax investment, but you don’t pay taxes on capital gains when you withdraw. In both cases, there are penalties for withdrawing before you are 59 ½ years old. There are a few exceptions, but generally this is an investment account for the long-haul. You can invest in stocks, bonds, mutual funds, or just put the money in a bank account. Due to the long-term nature of the accounts, people most commonly invest in mutual funds like a target date funds, which is a managed mutual fund for people your age, or an S&P 500 index fund.

What Types of Fees Are Possible with an IRA?

There are a few types of fees that can arise when you have an IRA account. The first is the type of fee Yvonne is asking about above. The second is a fee charged by your investment options. Another is a fee for buying and selling different investments. Let’s explore each of these and how common they are.

Account Maintenance Fees

First, the type of fee Yvonne is asking about, an account maintenance fee. Account maintenance fees are rare, but not unheard of, for IRA accounts. The fee is charged by the institution that holds your account. Examples of companies like this are Meryl Lynch, Charles Schwab, eTrade, or Vanguard. These are considered a management fee just to keep your account open. In reality, they are the investment broker gouging you for extra money in your longest term investment account you’ll likely ever have. In most circumstances, you should never, ever pay this type of fee for an IRA account. $100 per year ads up fast over time, and can take months, or years, off of your retirement.

Investment Fund Fees

If you are investing in mutual funds or index funds, the fund generally charges a fee to manage the investment for you. These are broken up into a general fund management fee, a marketing fee, and a load fee. Management fees are charged on nearly all funds you can find. They are charged as a percent of assets under management and can range from less than one percent to a few percent or more. Whether your investment goes up or down each year, the fund manager will charge this fee on all of the funds you have under their management to pay the staff and general costs of maintaining the fund. Marketing fees, also called 12b-1 fees, are often about .25% of assets under management when charged. However, I have never, ever invested in a fund that charges this fee. The funds are earmarked for advertising the fund, which benefits the fund managers but not you. Always try to avoid 12b-1 fees. Finally, load fees are charged by some funds when you invest (load-in) or withdraw (load-out) funds from the fund. Like marketing fees, I have never invested in any fund with a load fee. Fees can eat up a lot of your investment gains, so always search for the lowest fee funds available that are run by well-performing, trustworthy fund families. One of the most popular fund families is Vanguard as they are known for very low fees and generally low-risk investing style.

Trade Fees

Trade fees are fees charged by your account’s institution (the companies like Meryl Lynch that I mentioned above) for buying or selling assets on your behalf. These are common and can range from as little as $5 to $100 or more in some cases. In general, you should open your account somewhere with low trade fees. Popular options are places like eTrade, Scottrade, Charles Schwab (where I have my accounts), Fidelity, and Vanguard. Some of these companies offer some no-fee trade funds. At Schwab, I can buy or sell any Schwab fund, or a select list of others, with no fee. Others trades are about $9 each.

Learn more about buying and selling in the stock market at my guide to how the stock market works.

The Best Way to Save Money on Your IRA

The best way to save on your IRA is to plan everything out and lower fees wherever you can. Research all of the fees before you start. First, pick a brokerage to house your IRA account that has no maintenance fees to keep your account open. Then, from a short list of brokers you like, look at trade fees, no trade fee investment options, and finally fees and performance for those fund families. If you are a hands-off investor and just want things to work, I suggest most people look towards something like Vanguard. For people with more experience that want more control, Schwab, Fidelity, Scottrade, or eTrade are all good choices.

Non-Traditional Options

Outside of traditional IRA and Roth IRA investment accounts, you can also open IRAs at for non-traditional investments. Here are a few options below.

Lending Club

I have been a Lending Club investor for years, and love the high returns that come with peer-to-peer lending. If you want to learn more, check out my mega guide to Lending Club or visit the Lending Club website.

Bank Accounts

Most traditional banks and some credit unions allow you to open an account that is designated as an IRA. These are FDIC insured deposit accounts, so you know the value will never decrease. The downside is that you get very low interest, often less than inflation.

Betterment

Another hands-off investment option is Betterment. You can use Betterment to manage your own investment goals. You just add funds, tell them how risky you want to invest, and they make the investments for you. Learn more at Betterment.

Advice to Yvonne

Yvonne, it looks to me like your brokerage is pulling a fast one on you. I would get your money out of Meryl Lynch and into an account at somewhere like Vanguard or Charles Schwab right away. Avoid those fees and keep building onto your retirement funds and you’ll be in great shape.

Do you have any more advice for Yvonne? Share your ideas in the comments.

Do you have any questions about your personal finances? Send me a note through the contact form and I'll help you out too!

This post was originally published on August 11, 2014 and updated on April 6, 2021.

Investing Through Your Employer

When you get your first “real job,” or “big boy job” as my friend Rachel says, you get a big packet of important information. You will learn all about health insurance, dental insurance, vision insurance, long term disability insurance, short term disability insurance, life insurance, 401(k) plans, employee stock purchase plans, pensions, beneficiaries, pre-tax deductions, after-tax deductions, and a whole lot more.

For starting out with investing, your 401(k) is the most important tool you have. If you work for a non-profit, your account is called a 403(b) but works the same way.

A 401(k) is a tax deferred investment account. It allows you to save money for retirement without paying taxes until you withdraw. You make the investments directly from your paycheck and they are allocated to a mix of mutual funds based on your selections.

The funds you choose are very important. If you have no investment background, your best option is probably a “target date fund.” Those funds buy a mix of other funds to match suggested risk for your target retirement based on your age. If you have more knowledge of funds, you can diversify your fund selections as well.

The most important part of investing in a 401(k) is to really do it and take advantage of your employer match. If your employer matches 3% of your salary if you invest it in your 401(k), take 100% advantage. If you don’t, you are leaving free money on the table.

Investing on Your Own

If you are taking advantage of your 401(k), getting all of your employer match, and feel comfortable that your retirement goals are on track, you can invest in other places. The first place you should look is a Roth IRA. A Roth IRA is a tax advantaged account that favors younger investors.

In a Roth IRA, you invest after taxes, but your withdrawals in retirement have no taxes. If your account value goes up, as it almost surely will over a long investment horizon, you pay the taxes up front on a lower amount and get the capital gains tax free.

Some folks, such as my friend Sam at Financial Samurai, suggests you don’t invest anything outside of your 401(k) until you hit your annual max on that account, currently $17,000 per year. Others, such as my friend Beating Broke, say you should take your 100% employer match and put anything over that into a Roth IRA until it is maxed, currently $5,000 for most readers of this blog, and then go back to your 401(k).

Whatever your preference, make sure to take advantage of tax advantaged accounts first and worry about other investments later.

You can open a Roth IRA account at any major online investment provider. If you overfund a Roth and want to retire early, head to this post at Modest Money about using a Roth IRA conversion ladder.

Investing in Stocks

If you are bold, you can invest in individual stocks instead of a fund, which is a bucket of stocks managed on your behalf. Just make sure you know the risks of “picking stocks” compared with investing in a diversified investment like an S&P 500 index fund.

With a fund, if one company has poor performance, your investment goes down a little. If you own one stock, and that company has poor performance, you can lose a lot more.

When buying individual stocks, it is important to know how to do a fundamental analysis and know when it is best to buy and sell stock. Don’t get wrapped up too much in technical analysis and timing the market. Follow the Warren Buffet strategy and find undervalued companies to invest in for the long term.

The Most Important Rule

Keep investing! Put at minimum 10% of your salary into investments every month. If you can do more, by all means do it. I save 15% of my paycheck automatically each month through my employer’s 401(k) and my Roth IRA. By putting money away every month, you will build a solid foundation for your future.

What advice do you have for new investors? What have you learned and what would you have done differently? Please share your thoughts in the comments.

This post was originally published on July 30, 2012 and updated on January 13, 2021.

I took the plunge four months ago, after working like a fiend for six months working both my full-time job, and nearly full-time side hustle. The 80-90 hour work weeks were wreaking havoc on my sanity and personal life. It was then that I realized that my side hustle income had nearly matched my low nonprofit salary. After deliberating for a while, I made the decision to leave my job and haven’t looked back. It’s been a fun and wild ride and I have learned so much in such a short time.

Perhaps you also work full-time and side hustle in your free time, or maybe you are unemployed and dreaming of creating your own job. Whatever your situation may be, the prospect of self-employment can be seductive. No commute. You can sleep in. No more office politics.

Sounds great, right? Well it is, but remember the grass is always greener. That is not to say that pursuing self-employment isn’t worth it, but there are definitely things you should (seriously) consider before taking the leap. Below are five things to consider before making the jump:

Taxes

There are two things that are certain in life: death and taxes. And I swear it feels like self-employed people pay more in taxes. Now that you are running your own business, it’s your job to take out taxes. To stay on top of your taxes, start taking 30% off the top of each payment. I know, it’s painful. But it’s better safe than sorry. I have always gotten a tax refund and this year was the first year that I owed Uncle Sam. Even though it was a few hundred bucks, I felt like I was caught off guard. Now, I’m much more diligent with saving for taxes. I have a separate Capital One 360 saving account named “Taxes.” After I receive a payment, I immediately transfer over some money.

Long-term Sustainability

Self-employment isn’t a vacation or something you should do “just to try.” It’s important to consider the long-term sustainability of your product or service. It’s easy to fail, and it’s hard to go back and find a full-time job. You will need to make your work sustainable and scalable, so that you can continue to grow.

Being the Boss

One of the most rewarding and most difficult aspects of being self-employed is that I’m the boss. For the first month of self-employment, my schedule was completely out of whack. It was the first time in my life I had no one telling me what to do. I could, technically, do whatever I wanted. At first, there were days of staying in my pajamas, or wasting too much time on Facebook. Then I realized, that’s not really how I want to operate day in and day out. It’s nice to have the option to do that, but I wanted to really focus on my work.

Learning how to stay focused was much harder than I thought. It was weird too, because I love the work that I do and I enjoy working for my clients. But without someone peering over your shoulder, clocking in and out, and checking in every day, it is easy to lose track of where your time is going. As the boss, you need to stay focused and manage your time and projects. It’s all you.

Another aspect of being the boss that I found difficult was actually embracing the idea that I was the boss. Transforming from the employee mentality to the boss mentality was harder than I thought. A common mistake that many new freelancers make is thinking that their clients are their bosses — and all of a sudden they feel like they have 10 mini-bosses and it is just as bad, if not worse, than having one boss at the old job.

The people you contract with are your clients, not your bosses. Yes, you still rely on payment from them and you have deadlines to abide by. But at the end of the day, you set the terms. If you are sick of working for a client, find a new one. If you are unhappy about the pay rate, negotiate.

Embracing the boss mentality is key to getting over lingering issues from the employee mentality that can so often hold us back.

Wearing Many Hats

Being self-employed means that you wear many hats at all times. All of a sudden you are a one person show that acts as the HR department, marketing department, accounting department, operations and more.

You are never just your work title. Essentially, you do all the work of a small agency to make sure things keep running. So while you may be fantastic at what you do, you have to be prepared for some of the more unglamorous aspects of self-employment. Some days it feels like you are trying to herd cats, or that no one is getting back to you. It is in these moments where self-doubt can easily creep in, so it’s important to be confident and have a strong emotional (and financial) foundation to keep you steady.

Ask the Hard Questions

Before you take the leap, ask yourself some difficult questions:

• How much do you have saved up, in case all your clients dropped you?
• What are you willing to give up, in order to succeed?
• What is the bare minimum you need to survive financially?
• How does this align with your life goals and values?
• How will you know when it’s time to dump a client — and how will you do it?
• Can you see yourself doing this in 5 years? 10 years? 20 years?
• What makes you stand out? Or, why should people want to work with you?
• Can you handle putting 30% of your money to taxes?
• Can you handle an irregular paycheck (sometimes waiting over a month)?
• Do you consider yourself confident?
• How will you deal with an unhappy client?
• Do you have a mentor to guide you? (you should have one!)
• Do your friends and family support what you are doing?
• Are you doing this for the money? If so, it’ll be a tough road.
• What sort of checks and balances will you have in place to measure success?
• What is the worst case scenario?
• What systems do you have in place to stay on task and organized?
• Do you consider this a hobby or a profession?
• What do you want to learn from this?

Answering those questions can help guide you through the process to see if self-employment is right for you. Being self-employed requires a lot of tenacity, focus, perseverance and most of all faith. You have to have a strong core to handle the rocky waters of self-employment — but the view can be quite beautiful.

This post was originally published on November 13, 2014 and updated on January 5, 2021.

When many of us think of interest, our thoughts go to credit cards and high interest rates. While compound interest can, indeed, be problematic, the truth is that, like so much in the financial world, interest can be a millstone or a tool.

Paying compound interest is no fun. When you are paying interest to someone else, your resources are going directly to enrich others. You receive no benefit – beyond the fact that you were able to borrow money – when you pay interest. This is why you should try to be on the receiving end of interest.

What is Compound Interest?

Compound interest is basically interest that you earn on interest. With credit cards, your interest charges are added to your balance, and then you pay interest on it. Compound interest works the other way, too.

Certain products will pay you interest on the interest you earn. Various banking products often offer this ability. When you have a savings account, your monthly compound interest means that each month, the interest you earned is added to your balance. During the next month, that interest you received is now earning its own yield.

Investments can also earn you compound interest. As the value of your investments increases, you can use your returns to buy more of an asset, and use that money to keep earning for the future. Even if you just follow a dollar cost averaging strategy, the more you buy, adding to your portfolio, the greater your potential returns.

One of the best strategies, though, is to use dividend stocks. Reinvest the dividends, and reap the benefits. For those who don’t like stock picking, there are index funds and income ETFs that pay dividends and automatically reinvest them.

Compound Interest Can Be Your Friend

Over time, compound interest can actually be your friend. As long as you take steps to ensure that you are earning interest and not paying it, compound interest can help you build wealth. Because of the way compound interest works, your gains build on themselves, helping you increase your wealth at a faster rate over time.

In fact, without the help of compound interest, it is unlikely that you will reach your long-term retirement and wealth goals. It’s the most efficient way to amass a solid nest egg.

Achieve Best Results from Compound Interest

Compound interest can help you build your portfolio at a better rate, and help you improve your long-term prospects for wealth. But it doesn’t just happen; you need to create a plan to help you achieve the best possible results from compound interest:

• Start early: The earlier you start, the better compound interest works for you. Starting just five years sooner can mean tens of thousands of dollars more in the long run.
• Choose accounts that compound more frequently: Accounts that are compounded more frequently offer the best results. Some savings accounts compound daily, and those provide you better results than those compounded monthly or quarterly, since your interest is busy earning more interest.
• Invest consistently: One of the keys to maximizing the effects of compound interest is to invest consistently. If you start early and invest regularly, you can turn $50 or $100, or $200 into a good account over time.
• Don’t just rely on the “safest” investments: While many cash accounts offer you the ability to earn compound interest, you won’t see huge success – especially if you only put in small amounts of money. Instead, you need to add some risk to your portfolio. Don’t forget index funds and carefully considered dividend stocks.
• Keep your money in the account: The longer you can keep your money in your account, compounding, the better off you are. Use a tax-advantaged retirement account for a dividend paying investment, and you can increase the benefits even more.

With a little planning and consistency, you can put your money to work for you, building wealth through compound interest.

This post was originally published on October 10, 2012 and updated on August 31, 2022.

Study the Demographics

Before you even consider making a real estate purchase, you must understand which neighborhoods are healthy and growing vs. those that have high crime and drug use. While the high-crime area might seem to produce the best bargains, the long-term outlook of these properties is sure to leave you with empty pockets and headaches.

I would advise that you look online at Zillow or Trulia and study which areas are increasing in value and which properties would produce the best rental option for the individuals or families that you would like to see renting your property. After looking at the numbers online, be sure to walk or bike these neighborhoods to get a feel for who lives there and how well they maintain their yards and homes.

By studying the demographics first, you immediately save time by not reviewing homes that are outside of your desired demographic.

Know the Rental Property Values

If you are looking to earn an income with this property, you should know what you can expect for rent (as in the value you can charge your renters each month). Sure, the house might seem like a deal given the area, but if the typical rent amount does not cover the mortgage costs, then it certainly is NOT a good deal for you.

If, however, the rent will cover the mortgage expense, utilities, and maintenance each month, then you likely have a decent deal on your hands and should pursue this option further. Zillow offers a rental estimate that you can look at as a reference point to get a rough idea of what you may be able to charge.

Find a Project Home

As a rule of thumb, if you find a house that is completely renovated and updated, you will not be getting a great deal on this property. It just doesn’t happen. However, if a home has ugly orange walls inside, you might be able to get a $5,000 discount on this home (even though the fix is incredibly simple and cheap).

When I look for homes, I look for ugly houses that can easily be turned into beautiful dwelling places for families. My current home had ugly, worn-out carpet that definitely needed replacing. However, instead of looking at this as an annoyance, I took a peek under the carpet and saw beautiful hardwood floors that were original to the house! I paid $20,000 less than what the house was actually worth, got the floors refinished for $3,000, and today I have a home that is worth $40,000 more than what I originally paid just three years ago. I now live in a beautiful house that could easily be sold or rented out tomorrow if I chose to do so.

You might not be the handiest person, but I’m sure there are still many things that you are capable of doing. Painting is simple and can add much value to any home. Tearing out carpet can be done by anyone, as can vacuuming and cleaning. Tackle projects that you can handle, and add tremendous value to that ugly house.

Take Your Time in Your Search

Far too often, people get it in their heads that they want to invest their money and feel as though they need to take action NOW! Sure, this life moves by quickly, but that doesn’t mean we should rush into investment options that make no sense. I have seen this happen with many of my friends. They have a great ideas (such as buying a rental or getting out of a car lease), but because they have absolutely no patience, they made bad decisions and ended up costing themselves money in the long run.

Wealth does not typically happen overnight, so don’t plan on making a large financial move tomorrow. If you are on the hunt for a rental property, plan on searching for 6 months to a year before finding the property that is right for you.

Have a Large Cash Reserve

As with any business, cash is the key to survival. The same is true for rental property investments. Houses require upkeep, and that upkeep will cost you money. Sometimes your rental homes will only require a hundred-dollar fix here and there, but other times you might have to drop $2,500 on a repair. If you want to get into the real estate game, you must have an emergency fund set aside for the properties as well. As a rule of thumb plan to have 10% of the house value set aside for repairs. This will enable you to act quickly for your renters (it’s always a good idea to serve your customers well) and will protect your large-dollar investments for the long term.

And remember, becoming a landlord isn't always as simple and easy as it seems even for the financially savvy.

Are you ready to invest in a rental property? Share your thoughts and stories in the comments.

This post was originally published on September 25, 2014, and updated on March 31, 2021.

I’m in a similar scenario as Sheena and was about to ask the same question. Though – ours is more serious because we are more than 10 and 18 years older. We have been putting it off for years for numerous reasons, much of it the above belief of not having enough, but this is the year we have to start socking away as much as we possibly can. The problem is, I have no idea where to start and who to trust. Years ago I lost a fairly substantial amount in my first and only attempt at working with a broker who invested too much in tech stocks. After that I got scared, and I don’t think we have a huge risk tolerance now. On the one hand we need to accumulate as much as possible because of our age and lost time to make up for, but for the same reasons we can’t afford the losses that go along with those higher risk/potentially higher gain stocks. We also want to invest in ethical, socially responsible companies not just the ones that will give the biggest return. We’re self-employed, so no 401(k). What do you suggest for people like us? I feel like you need a degree in stock picking and investing unless you are lucky enough to choose the right adviser.

That is a big gauntlet of questions, but I have answers to all of them. I’ll go through them one by one below.

Starting Your Retirement Savings in Your 40s

You are not alone in this one Diana. One of the top financial regrets for most people is that they didn’t start saving early enough, and that they didn’t save enough when they started. But all hope is not lost, you just need to act today to get the ball rolling.

First, because you are only about 20 years from retirement, you have to contribute more to retirement plans to “catch up” than if you start when you are 22. But 20 years is a long time to save and build up a solid retirement fund.

First, you have to decide how much you need at retirement and work backwards. AARP has a great retirement calculator that takes you through the steps to figure out what you need and what you need to save. Bloomberg has a simple retirement calculator if you’ve already figured that part out.

Also, remember to take into account all of your current assets. You may not receive as much as current retirees, but I would say you can safely assume you will get something from social security. Because you are self-employed, you will likely be able to sell your business or keep working part-time in retirement to keep income flowing in past 65.

For me, I don’t ever want to quit working completely, I just want to save for financial freedom, where my own business can support my family and will not take full-time dedication later in life. You are already closer to my own goal than I am!

Make Retirement Savings a Priority

First, take whatever you think you can save and start today. Whether it is $10 per month or $5,000 per month, anything is better than zero. Don’t berate yourself for what you didn’t do in the past, take proactive steps to make a positive influence in your future.

Because you are self-employed, you can’t simply pick a percentage of your pay to go into a 401(k) account (we’ll get to accounts in just a minute). Instead, you should pick a fixed amount to deposit on a regular schedule, ideally aligned with when you are paid by your business.

The best strategy to start is optimistic but conservative. Try to come up with a number you can comfortably save every month to start. A higher number is always better, but don’t be discouraged if your number is as low as $10, $50, or $100.

Once you get used to contributing that much each month, raise it a little bit. Just last month I increased my own contributions by about $30 per month. Over 20 years at 5% interest, that $30 each month is worth almost $12,400.

Overcoming Past Losses

Sometimes, investment ideas don’t pay off. Taking the advice of an investment advisor during the high flying dot com boom was very common, and a lot of people lost a lot of money. It’s sad to hear about your experience, but it shouldn’t scare you away from investing forever.

In the long run, the market as a whole tends to rise. From 1970-2012, the S&P 500 index had a compound annual growth rate of nearly 10%. That’s a big gain that you can be a part of. I have had single stock picks go up or down, but over time my wider investments have always gone up.

Low Risk Tolerance

Investing with a low risk tolerance is common and understandable. Higher risk can lead to higher returns, but it can also lead to bigger swings and losses. Finding the right place for your goals (retirement), time horizon (about 20-25 years), and risk tolerance (low) will help you choose the right investments.

The best way to avoid risk is to diversify your investments. A combination of many stocks and fixed income (bond) investments will lead to the best outcome for you. It is all about avoiding keeping all of your eggs in one basket. If you only invest in one company, or one sector (like tech companies), you are at a much higher risk for losses than if you invest across many companies and many sectors.

To learn more about how the stock market really works, I suggest taking a few minutes to read my ultimate guide to the stock market.

Socially Responsible Investments

This one can be a bit trickier. Socially responsible companies often do great things for their customers, employees, and the environment. Many companies call this the triple bottom line – people, profit, and planet.

Just because a company makes a lot of money does not mean it is bad. That said, many companies with overly large focuses on the environment may not earn you as big of a return. There is always a sweet spot in the middle.

When you invest in funds across industries, you often don’t have much control over the specific companies. Bigger companies often get bigger investments. Widely held companies today include companies like Exxon and Apple. But other funds may hold companies like Whole Foods or Starbucks with well-known environmental policies.

To start, look at the list of the top sustainable publicly traded companies (according to the study author). There are also mutual funds focused only on sustainable companies, but the fees they charge can take a big chunk out of your profit.

For me, I trust that most companies are move more and more toward sustainability and better environmental practices. I would rather focus on the best investments for my long term success than limit myself.

Retirement Savings Options for the Self-Employed

While setting up 401(k) accounts for your company might not be feasible, there are lots of great options to save for retirement in a tax advantaged account when you are self-employed.

I recently wrote an in-depth article on retirement plans for self-employed entrepreneurs, but will only highlight the most relevant for your situation here.

First, you can open an IRA or Roth IRA online in just a few minutes. A traditional IRA is funded with pre-tax dollars. That means at the end of the year you get a tax deduction based on the amount you contributed, but you pay taxes on money you take out at the end. A Roth IRA is funded with after-tax dollars, but you don’t pay any taxes when you withdraw during retirement. The 2013 maximum to contribute to an IRA is $5,500.

You can also look at an SEP, or Simplified Employee Pension to fund your retirement, up to 25% of your take-home pay per year, from your business funds rather than your own.

If you have maxed out these options, don’t stop. You can put the rest in a regular old investment account and don’t have to worry about waiting until retirement to withdraw without penalties.

Do You Really Need to Pay an “Expert”

No. You don’t have to pay someone to tell you what to do with your money.

The markets can be scary, but it is easy to pick a conservative strategy and administer it yourself. Those guys usually take a good chunk of your money as a fee and don’t offer much that you can’t do yourself with a little research.

What to Do Today

First and foremost, open an IRA account. For people in their 20s-30s, I always suggest a Roth IRA. For people in their 50s+, I always suggest a traditional IRA. For you in the gray area in the middle, it really depends on what your likely investment returns will be compared to taxes and inflation over the next 20 years.

In your situation in particular, I think a traditional IRA would be best because you get the tax benefit this year, which you can re-invest each year moving forward. That will help compound your investments as you move forward.

Next, setup an automatic investment plan. Most finance bloggers call it “paying yourself first.” You can setup recurring, automatic investments from any brokerage account. Just set the amount you want to save each week, every other week, or month and it will take care of the transfers for you so you don’t forget.

To make life easy on yourself, I would probably pick Vanguard as a brokerage in your scenario. They offer tons of very low fee mutual funds. To get started, I would pick a target date fund, which is automatically invested by a skilled team to become more and more conservative as you get closer to retirement. You can take a look at this page for which funds might be most appropriate.

In the long run, you can always diversify out of one account. To avoid annual account fees (about $20), many Vanguard funds have a requirement of $10,000 saved. That doesn’t happen overnight, so I would just put everything into one target date account until you have at least $20,000 or more to spread among other investments, such as dividend stock funds, bond funds, and other options.

What Did I Miss?

Do you have any questions based on this post? Any suggestions for Diana that I missed? Please share your thoughts in the comments.

This post was originally published on June 12, 2013 and updated on June 16, 2021.

Timing the Market to Buy Mutual Funds

Because the best mutual funds and index funds for individual investors are broad market funds, such as an S&P 500 index fund, you cannot based your buy and sell decisions around the performance of any specific company. Instead, you are buying into hundreds of stocks with one transaction.

Some people have a full-time job where all they do every day is try to time the market when buying and selling giant lots of options. Hedge fund managers may make a leveraged bet on market trends. However, even with their fancy Ivy League investment degrees and 100+ hour per week schedules, they are still wrong a lot of the time.

You and me, we don’t have 100+ hours per week to spend evaluating market trends and economic factors. Even with my fancy private school MBA, I don’t try to time the markets. If the best in the world at what they do are only right some of the time, we should not gamble waste our time trying to do it.

If you think you can time the market and make money consistently, you are in a big group of people who think they are smarter than everyone else. But if everyone could do it, we would all be trading based on market trends making millions of dollars and could leave our day jobs. Most people who think they can time the market still have day jobs.

Warren Buffett on the S&P 500

Instead of trying to time the market, I like Warren Buffett’s advice, and a bet he put his own money in against one of those fancy hedge fund managers. It is advice he has given again and again, and people would be wise to listen.

In his last annual report to shareholders, Buffett said that he suggests the majority of Americans should just buy a low-cost S&P 500 index fund, naming one from Vanguard as a favorite, and wait. A long time.

Since its establishment in 1871, the S&P 500 has yielded a compound annual growth rate (CAGR) of 9.11%. Of course there are good years and bad years. But even with the Great Recession, the CAGR of the S&P 500 over the last decade is 7.93%. For the last three years, the CAGR was over 20%!

When to Buy and Sell Index Funds and Mutual Funds

You can probably tell where I’m going with this, but I want to be very clear and spell it out. Do not try to time the market. You win if you buy low and sell high, but how do you know when the market is low and when it is high?

The best time to buy is every month, and the best time to sell is in retirement, if ever.

Smart investors save as much as they can each pay period and make automated investments into an S&P 500 index fund. My brokerage allows me to do this, but I like to be a little more hands on and buy in lump sums when I get them, or when I save up enough through my Digit account that it is worth making a buy.

If you buy consistently when the markets are both good and bad, you will ride the market down in the bad times, but also ride them back up in the good times. And, over time, the market has always gone up.

This is the strategy I use myself. I call my overall investment strategy my “portfolio snowball.”

Building a Portfolio Snowball

So, how do you build a portfolio snowball? It is quite simple. Buy diverse funds you believe will go up in the over the long-term and reinvest your dividends. It is quite simple.

I don’t have all of my money in S&P 500 index funds, but I do have quite a lot there. I also own target date funds, which include some international and fixed income investments. I have plans to add in a REIT fund as well.

Here is a full list of funds and stocks I own in my Rollover IRA account:

• Stocks: BRKB
• ETFs: SCHX
• Mutual Funds: VEIPX, VHDYX, VSIGX, VGTSX

Here is what I own in my Roth IRA:

• Mutual Funds: SWPPX, VEIPX, VHDYX, VFIFX

You can look those up if you want, but they are pretty much all target date funds, equity income funds, high dividend stocks funds, and S&P 500 index funds. The only exceptions are an international equity fund and the stock Berkshire Hathaway, which I have a soft spot for. Mr. Buffet has grown my investment well, so I plan to keep that for a long time.

In retirement, you can turn the reinvest dividends switch off and enjoy a nice cash flow based on everything you’ve saved. And thanks to the compounding returns of your investments, if you keep up a good savings rate, you will end up in a good place at retirement.

How Do You Invest?

How do you choose your investments? Is it like my strategy, or totally different? Please share that, and any questions, in the comments.

This post was originally published on March 16, 2015 and updated on June 14, 2021.

Start Saving for Retirement as Soon as You Can

One of the best steps to start saving for retirement is simple it’s often assumed – start! I know, real original, but it’s incredibly true. There are numerous excuses from the belief that we don’t have enough to invest to not having time. However, that’s all they generally are – excuses. The simple fact is that the sooner you start the better. Time, when it comes to investing in the stock market, can be your greatest ally or biggest enemy. Don’t let it be the latter. You should start saving as soon as you can, I encourage you to start investing in your 20s as time will aid your wealth building greatly.

Take Advantage of Free Money

One of the greatest tools to any retirement plan is right in front of many, and that is the 401k match that many employers provide. The common excuse is not being able to afford to have the money come out of the paycheck. What is often missed though is that it’s free money, and I don’t know anything better than that. 🙂 Added to that, it lowers your tax liability so you get a double bonus. Even if your 401k plan is loaded with high fee funds, you should be able to find a few index funds to put your money in that should serve you well.

Automate So You Don’t Forget

Life is busy and it can be easy to forget putting money aside to be saving for retirement. I understand that and the simplest way around that is to automate your investing. Automation is available in most 401k plans and most brokerages offer automation as well. You can choose from a variety of frequencies, including weekly and quarterly withdrawals and automation is an easy way to get money into action for you. My suggestion is to view it as a bill to yourself that you pay each month and by automating it you’ll be less likely to feel the money coming out.

Saving for Retirement Takes Time, Keep it Simple

Saving for retirement takes time and it can be a lot of work. That doesn’t mean it has to be difficult. Many times I would see individuals make investing too difficult on themselves by engaging in activities they had no business doing. If you’re just starting out saving for retirement, my suggestion is to make it as simple as possible and start investing in a handful of solid index funds. That’ll take a lot of the guesswork out of the investing for you and help you to invest with the market as opposed to trying to beat it. If you’re ready for a little more excitement, explore the possibility of adding a few solid dividend paying stocks to the mix.

How did you get started saving for retirement? What are some other simple ways you would suggest for someone to get started?

This post was originally published on December 5, 2013 and updated on June 16, 2021.

So how can you go from completely debt ridden to wealthy? Here comes secret number two – it doesn't necessarily depend on how big your income is each month. There are plenty of folks with six-figure incomes that have more money going out than coming it. Having a large income doesn't mean that you're wealthy and without debt, it just means that you can make bigger mistakes with your money. Big income or little, if you currently have debts to pay then you're normal. And, if you actually want to get rid of those debts then you are a brilliant individual. So, let's revisit this question, “How can you go from completely debt ridden to wealthy?”

The Reason Why Most People Fail While Paying Off Debt

The most important lessons in life should really be learned by someone else. If you could spare yourself the pain and agony of going through trials yourself, I would highly recommend it. In order to dodge one more failure, let me whisper to you secret number three – people love to sprint, but can never seem to finish a marathon (or even a 10k for that matter). Aren't quite following?

Basically, people are fantastic starters but are terrible finishers. They start thinking that maybe it would be wise for them to live within their means and pay off debt. So, they cut their grocery bill in half, they stop going out with friends, and then they decide to give each other nothing for Christmas – all in an effort to reduce their debts. It sounds noble and seems to be the right thing to do, but it is very short-term thinking and simply doesn't last for months or years. At best, it can last a few weeks until somebody snaps and goes on a spending spree. Cutting all expenses down to practically nothing is not the way to get rid of your debts.

Reward Yourself Instead

It may sound counter-intuitive, but in order to pay down your debts over the long term, you must spend some money on yourself. And specifically, you'll want to spend money to reward your debt payoff efforts.

Thankfully, I put this into practice when I decided to pay off my home mortgage. In one year I wanted to pay off over $50,000 in home loans which is obviously no small feat. In order to stay focused and on track I decided to set up some goals for myself along the way. I decided that when I would pay my mortgage down to $40,000, I would buy myself a new bicycle (which, by the way, helped me get a personal best time in my August Triathlon). Then, if I were to get my mortgage down to $25,000 I would buy myself a new tablet. And finally, once I make the final payment I would go on a tropical vacation!

By setting up these goals along the way you are transferring your focus from a huge insurmountable goal into small achievable ones. If you have a goal to get completely out of debt, set up some small goals along the way. Put a date and a dollar amount on them. If you hit them, then allow yourself to buy that reward. It sounds fairly simple, but boy is it effective! It's fun and it will actually get you to your goal faster!

What is your big goal? Are you rewarding yourself along the way?

This post was originally published on October 5, 2020,  and updated on January 26, 2022.

Startup Phase and Investor Funding

When a business begins, it generally starts as a “bootstrapped” company, or one paid for by a founder, or a small group of founders, who work on the business while earning virtually no income. They pay for the basic founding costs out of their own pockets, or from small investments from family and friends.

As the business grows, the company will eventually see revenue begin or fail right away. A commonly cited statistic says that about 90% of businesses fail within the first few years of starting and rarely make it through the stages of trying to generate their first profits.

Some companies, particularly in online and high tech industries, begin to show promise early on and can attract investments from wealthy individuals, known as angel investors, and specialized investment companies known as venture capital firms, or VCs.

When these investments take place, a company is given a valuation. This is the value of the assets of the company, fewer liabilities, plus the estimated current value of future earning power. The method for estimating these values can vary widely, and the inputs used to account for the valuation factors are usually just a very educated guess by people with experience valuing companies from time to time. This valuation is the first concrete step in determining a future stock price for the company’s IPO.

Pre-IPO Business Development and Growth

As an investor, you probably have not heard of most companies in this stage. But business owners are hard at work looking to increase the company value. A higher value means a higher IPO price, and ultimately more value for owners and investors.

As the company begins to grow, it is time to really focus on how the company is going to make money. Many growing companies are not immediately going to be profitable after receiving seed funding. This is why they needed funding in the first place. But this is when the viability of the idea and turning revenue into profits is going to start coming into focus.

As a growing business, this is the phase to use the prior round of funding to hire more employees, move into better office space, and grow the business to bring in more revenue, customers, and really market the business for future success. Many companies fail at this point, but success takes you one step closer to the coveted IPO.

Companies in this phase often exhaust their funding while paying a growing staff and investing in the business. Owners must look past angel investors for larger cash infusions. These most often come as funding rounds from larger investors such as venture capital funds.

Venture capital funds are large pools of money raised from a group of wealthy individuals or companies. Funds can range in size and purpose. Some funds will only invest in companies with $1 million or more in annual revenues. Others might only invest in companies with $10 million. Some invest only in product-based companies, while others only invest in online service businesses. Some have fewer rules, some have more rules.

This type of funding may come from one company or a group of companies as a funding round. This is usually called Series A funding, Series B funding, and so on for each round of investments. With each round of investments, the current owners and existing investors negotiate with the new investors to create an updated valuation for the company, usually much higher with each additional funding round.

With each investment, the company is expected to use the funds to spur further growth. Eventually, many companies will reach a point where management will decide to raise funds by selling shares to the general public. This step is called an initial public offering, or IPO.

The Steps for an IPO

IPOs are complex business processes. They involve existing owners and investors, outside advisors, underwriters, lawyers, and investment banks. Advisors, underwriters, and lawyers often charge tens of millions of dollars for their services, which are vital to bringing the shares to the public and bringing in a large capital infusion.

These are some of the important steps companies must follow to begin the IPO process.

1. Engage Advisors – Advisors are investment bank teams with a specialty for taking companies public. They are commonly large, experienced investment banks such as Goldman Sachs, Morgan Stanley, or JP Morgan Chase. Advisors help the company establish an IPO valuation and help determine the number of shares sold and the IPO price.
2. Hire Underwriters – Underwriters are also generally large investment banks. They are usually separate from the advisors due to a conflict of interest but usually come from the same group of companies. Underwriters take the biggest financial risk in issuing the new shares. The underwriters sell the new shares on the company’s behalf.
3. Attract Investments – Companies hope that their IPO will be well subscribed by a variety of investors, but to ensure success owners might go on a “roadshow” to attract institutional investors, such as mutual fund managers, who can invest millions of dollars at once, as opposed to retail investors like you and me who generally only invest hundreds or thousands of dollars at a time.
4. Determine Offering Amount – With the aid of advisors and earlier investors, the company will decide how much money to raise through the IPO. The largest IPO of all time was the Chinese online marketplace Alibaba, which raised $25 billion. IPOs are often in the billions but can be much smaller. The recent GoDaddy IPO brought in about $500 million to the company.

Setting Up an IPO for Success

What makes a successful IPO? The most common yardstick for success in raising the targeted capital while holding the share price even, or increasing it, after the shares go on sale. This is a harder task than it might sound, which is why companies pay so much to their advisors and underwriters.

In order for a company to raise billions of dollars, it needs to find investors willing to pay billions of dollars for the company shares. Some companies have millions of shares, while others may have hundreds of millions. There is no right or wrong number of shares. It just depends on how the company was initially founded and received investments along the way.

Contrary to a popular misconception, a company’s share price is not the main driver of its value. The metric to look for is market capitalization, often shortened to “market cap” by experienced investors. The market capitalization is the total number of shares times the stock price. A company with 10 million shares worth $5 would be valued at $50 million. A company with 5 million shares trading at $10 is also worth $50 million. There is no difference, even though one company’s shares are traded at twice the price of the other.

In the months leading up to the IPO, the investment bankers are hard at work determining the company’s value, or market capitalization, to raise as much money as possible for their client without having the stock price fall in the days, weeks, and months following the IPO.

There are many methods used to determine a company’s value at this stage, which is much more formal and data-driven than in the early funding stages. At this point, the bankers are using complex valuation models taking into account these very important factors, in addition to many proprietary models developed by the bank itself. These two tools are referred to as “fundamental analysis,” as the values are derived based on the company’s fundamental financial performance.

Discounted Cash Flow Analysis – A DCF model is one of the most important tools finance professionals have to value a company. The DCF model projects future revenue and expenses to determine a projected free cash flow, which is the cash the business generates that can be used to either reinvest in the company, save for the future or pay a dividend to investors. Banks then apply a formula taking into account the risk of future failure to create a current value of future cash flows, which is a proxy of the company value.

Multiple Analysis – When you look at a company’s financial performance indicators, you will see many ratios used that, on their own, tell us as investors information such as the risk of default on debt obligations, the value of assets, and returns on invested capital. Investment bankers and analysts use the IPO company’s ratios compared to other companies in the same industry to help estimate the value compared to the company’s peers.

Once the company value has been established, the bankers have the total market capitalization. Based on their best estimate for investor demand, they will determine the portion of the company be sold in the IPO, which can come from current owners and investors as well as raising funds from an increase over prior valuations.

Splitting Up the Proceeds

When the company shares go live on the market, a certain percentage of ownership is made available to the public. Similar to prior funding rounds, existing owners will maintain their level of ownership in the company unless they sell a portion of their shares with the IPO, which is a very common practice. Ownership can be diluted by issuing new shares, but this is more common well after the IPO.

The issue with existing investors selling their shares is that if all owners sell their shares at the same time, the market will be flooded with shares and the price will fall. Large investors risked their money in the company to turn a profit, and most want to sell at a point early on to “exit” their investment and turn their shares into big profits to pad their bank accounts. Large early investors usually agree on a contracted date when they can begin selling shares sometime after the IPO.

With the assistance of advisors and underwriters, the existing founders and investors can determine a safe number of shares to sell from their own holdings at the time of the IPO. If they sell with the IPO and the price increases after, they lost out on potential profits. If they hold and the price falls, their profit falls with it.

There is no rule on how to split out the shares sold in the IPO. It is a crucial negotiation that must be considered by all existing owners to ensure everyone does not lose their investment from one bad move.

Pre-IPO Public Communications

Before the IPO, the company going public is required by law to disclose certain financial information. This information comes in the form of a prospectus. It includes the main financial statements, plus additional information on company risks, and very extensive notes explaining the items in the financial statements.

The core financial statements are:

• Balance Sheet – This statement includes a snapshot of company assets, liabilities, and shareholder equity.
• Income Statement – This statement contains profitability figures for a period of time. Revenue, cost of goods sold, SG&A (sales, general, and administration) expenses, income taxes, and interest paid to make up the majority of this statement.
• Statement of Cash Flows – This statement shows cash inflows and outflows from both company performance and internal and external investments.

The company also provides the number of shares outstanding and a projected IPO share price. Outside financial analysts use this information to make their own estimate of the company’s intrinsic value to decide whether to invest. Individual investors can do the same but usually use fewer complex models.

As the IPO gets closer, the company provides a target IPO share price range. Just before the IPO, the final IPO share price is set based on investor demand and the company’s estimated market capitalization.

Signing Up for an IPO

Generally, IPOs are limited to institutional investors and very wealthy investors with preferred status from their brokerage. Depending on demand, an IPO may be oversubscribed. In this case, everyone who wants IPO shares cannot get them but has to wait until they go on sale, usually at a higher market price than the IPO price.

If you are a wealthy investor or have access to the IPO from other means, you can subscribe for a certain number of shares. Most major stock brokerage firms are given an allotment of shares and can decide how to allocate them to their investors who subscribe. This can be based on how valued the client is to the firm, the order investors sign up, or an even allocation by percentage to the investors who sign up.

If you are able to sign up, you might not get all of the shares you ask for, but you have to fund your account with cash ahead of time to get your shares as requested.

IPO Day

On the day of the IPO, all of the money and shares move between the investors, underwriters, and the company. At the time of the IPO, which is usually at the opening of the market for the day, the cash moves from the investors through their brokers to the underwriters. The shares are distributed from the underwriters to the brokers and onto their clients. After the IPO, the underwriters send the cash proceeds to the company.

From that point on, the shares can be bought and sold on the secondary markets. The most popular markets in the United States are the New York Stock Exchange and the NASDAQ. The shares are only bought and sold on the specific market where the shares are listed, though sometimes very large deals can be negotiated at a specific price outside of the market price.

Investors looking to buy can enter an offer price and shareholders looking to sell can enter a selling price. When the two prices meet, the shares trade and that price is the new published share price. Multiply that by the number of shares and you have the new market capitalization.

In some instances, there are problems on the IPO day, such as the infamous Facebook IPO on the NASDAQ. With this IPO, a technical glitch prevented shares from trading as expected. In this case, trading was delayed until later in the day and some trades failed to execute, costing large investors millions of dollars.

Add On Sales

In some cases, an IPO is so successful that the company decides to offer a second public stock offering, called an add-on or secondary offering, several days or weeks after the IPO. The fund's transfer process works similar to the IPO but adds more shares of stock to the secondary market.

Remember that the number of shares is fixed before the IPO. Any add-on does not change the number of shares outstanding, it just transfers them from the company, investor, or founder ownership to the public. The only time the number of shares changes after the IPO is with a split or a reverse split.

Operating as a Publicly Traded Company

At this point, the company is a public company and must follow all rules and regulations for public companies. For companies listed on United States exchanges, namely the New York Stock Exchange or NASDAQ, the companies are required to follow GAAP, Generally Accepted Accounting Principles, and publish regular financial statements.

The most important statements to investors are the 10-K, an annual financial report, and the 10-Q, a quarterly financial report. The company must also publicly report material stock purchases and sales by company executives and board members and executive compensation summaries.

The company should be using the invested dollars to help grow the business, as a higher market capitalization leads to a higher stock price, and the executives work for the company shareholders, who are represented by the elected board of directors.

What This Means for You

As an individual investor, most IPOs are going to be out of reach unless you qualify as an accredited investor. Accredited investor requirements can be set at the state level, but follow the guidance of the Securities and Exchange Commission, SEC.

In general, to participate in an IPO, you must have a high income or high net worth. However, some stockbrokers, such as Loyal3, allow investors to buy in without accreditation at a lower investment level. In some cases, companies can make an effort to include more investors as well. A recent example is Lending Club, which invited its investors to participate in the IPO without being a super-wealthy investors invited by their stockbroker.

If you want to buy into an IPO, visit your preferred brokerage website and look up the IPO requirements. Another option is to look to brokers like Loyal3 where you can join in an IPO without accreditation.

Typically IPOs see a stock price increase of 20% or more on the first day of trading, sometimes doubling or more. Even without tens of thousands of dollars to invest, that is something all investors can get on board with.

However, before you join in, understand the risks of investing in individual stocks and IPOs. Accreditation requirements exist to protect small investors from losing money they can’t afford in the stock market. Anything you invest in an IPO should be money you can afford to lose. While we all hope our investments will grow, only time will tell how successful our investments will be.

If you are comfortable with the IPO process, visit your stockbroker and watch finance news to see which IPOs are coming soon. Your big investment payday may be coming soon.

This post was originally published on June 25, 2015, and updated on March 31, 2022.

What is a Checking Account?

A checking account, or a demand deposit account, is a consumer or business bank account used for daily transactions. There is no limit on the number of daily or monthly transactions in a checking account, though some banks charge fees for high activity volumes.

How to Deposit Money into a Checking Account

You can deposit or withdraw money via a variety of methods. You can deposit cash or checks in person at your bank or at your bank’s ATM. Many banks also allow checks to be deposited through a mobile phone app.

You can also make deposits to your account via ACH (automated clearing house). ACH deposits are electronic transfers between your account and an external account. This includes electronic transfers that you send from other bank accounts, investment accounts, or direct deposits from your employer.

You can also add money via a bank wire, though wires generally have high transaction fees.

Side note: If you've found an old check that never got deposited, you might be wondering if you can still cash it. Here's your answer!

How to Withdraw or Send Money from a Checking Account

The easiest way to withdraw money from a checking account is its namesake, with a paper check, or with a debit card. However, checks are becoming less popular, as most consumers and companies prefer electronic transfers. I urge you to avoid using a debit card. I will explain a bit more about why below.

Virtually all banks now offer a free online bill pay feature. I highly recommend you use this to pay all of your bills that do not accept a credit card. Credit card and utility companies will accept the payment electronically. The bill pay feature also allows for a paper check to be mailed at no cost.

You can also initiate electronic withdrawals through other companies or to transfer to other accounts. For example, I use the electronic transfer feature in my bank account to send money to my investment account.

You are also able to withdraw cash from an ATM or send a bank wire. Again, most banks charge a substantial fee for a wire transfer.

How to Use Your Checking Account

Your main checking account should be the single entry and exit point for money going into or out of your possession. This allows you to easily track and manage your income and expenses. The only exception I encourage is for automated investments.

It is important to keep a small cushion in this account to prevent overdrafts on your account. I plan and understand every single payment that comes in and goes out of all of my accounts, so I never have a surprise expense or fee.

Once the cash comes into that account, you can use transfers and bill payments to get the money where you want it for the long-term.

How to Not Use Your Checking Account

Keep in mind, a checking account is not a savings account or investment vehicle. Even if you get interest, you should not use a checking account to store your money. Savings accounts always have better interest rates for your quickly accessible emergency fund, and investment accounts are better for the long-term.

Also, don’t assume everything is working in your account. Monitor it regularly to ensure you will not overdraft or pay any fees. Your checking account shouldn’t cost you any money. If your bank is charging you, look for better options elsewhere, whether it is online or at a local credit union.

More Tips on Checking Accounts

While your debit card may seem the easiest way to spend your money, I suggest you put 100% of your spending on a credit card. Credit cards get you awesome rewards for things like free flights and hotel nights. If you are not excited by free travel, you can always get cash back.

Another reason to use a credit card to pay over a debit card is fraud protection. If someone steals your debit card number and drains your account, you are likely going to be in a bad situation until you get the money refunded. That can easily take several weeks. You would also have to change your account number. A credit card gives you better protection and you are not responsible for paying for fraudulent transactions.

Don’t pay ATM fees. If you have a good bank, they will not charge you any fees. If you plan correctly, you will not have to pay other bank’s fees. If you have an awesome bank, they will refund other bank’s fees. In a worst case scenario, get cash back at the grocery store. Don’t pay to get to your own money.

I rarely use cash at all. As I wrote above, I use my credit card nearly 100% of the time to get points and miles. The only exception is when I am traveling abroad. If you have a good bank that doesn’t charge foreign use fees, you can get money for free at a fair exchange rate from an ATM. Just make sure you read the fine print on your accounts to know what kinds of charges your bank imposes before you use an ATM abroad.

My Favorite Checking Accounts

Capital One 360

Capital One 360 (formerly ING Direct) is the go-to online bank for most personal finance bloggers, and for good reason. I opened my ING Direct Electric Orange Checking account on November 28^th, 2007, the week I stopped working at a local bank. I knew all the tricks traditional banks pulled to make more money from us, and decided it was time to find a better option.

I still have my 360 Checking account today, and I have the 360 Savings account to go with it. If you are looking to start with online banking, they have a great product suite and features including free transfers to other banks, automated savings plans, and mobile check deposits. You can also order a check book if you still need to write paper checks.

Charles Schwab Bank

In addition to my other accounts, I also have a checking account at Charles Schwab Bank. I was already a customer of their brokerage products, so adding on a quick way to move money in and out of my accounts made sense for me. They charge no fees and reimburse all ATM fees worldwide, so it is my first choice when traveling abroad.

If you already have a brokerage account, check with your broker about their checking account options.

Make Sure to Track Your Account

I track my bank accounts with free money management tools that manage my budget, transactions, and all of my accounts for me.

I suggest taking a look at Empower or Power Wallet to track your transactions and Manilla to file away your statements. I use those sites regularly and love how they help me manage my accounts and keep track of balances.

How Do You Do Checking?

What bank do you use for your checking account? Do you have multiple accounts for different purposes at different banks? Share your strategy, what you like, what you don’t like, and any questions in the comments.

This post was originally published on March 11, 2013 and updated on June 16, 2021.

Prepare For a Rainy Day

As many of you probably already knew, when one prepares for a rainy day, they are socking away money not for when it literally rains, but for when something devastating might happen to their finances. This fund could be set up in case you lose your job, get an illness, or in case you get hurt in an accident. If any of these things happen, then you can simply open up your rainy day fund and continue to survive, even with your misfortune.

The Reality Today

Did you know that the average credit card debt per person exceeds $10,000 today? Not only are we not saving for a rainy day, but we're digging ourselves further and further into debt!

If the chart above isn't bad enough, a recent article in USA Today informs us that 1/3 of Americans today have less than $1,000 tucked away that could be used for a future event like retirement! So, not only are we building up debt, but we're saving absolutely nothing at the same time. When that rainy day comes along, what do you think is going to happen to these people? Nothing good, I can tell you that much.

Let's put ourselves in the scenario above (which is apparently pretty common when reading through the percentages). Let's say that you and your spouse are both working and earn $3,000 a month after taxes. You have $9,000 in credit card debt and you've got $500 in the bank. Most of the time, you put no additional money into savings, but if you really scrimped and saved, you and your spouse could probably hold onto about $200 after all the bills were paid and stomachs were fed.

Unfortunately, that fateful day has come; the rainy day. You didn't see it coming at all, but your company has decided to downsize and your job has been eliminated. Without warning, your income is gone. What do you do?

• Live off your savings? Oh wait, you only have $500 in there
• Live off unemployment? Crap, that first check won't come for about a month and is only 60% of your regular paycheck, so that won't pay all the bills anyway.
• Find another job quickly? Nothing with comparable pay is available. You can find a job quickly, but the pay is lousy, so you may as well just hold out and take unemployment.
• Live off credit cards? That seems pretty scary, but it looks like it's the only option.

Well crap, you lost your job expectantly and now your only lifeline for your family is your credit card. You don't need me to tell you that this could go south very quickly and land you in bankruptcy court. It's a scary thing to think about, but it's real. What can you do to avoid it? Say it with me: PREPARE FOR A RAINY DAY.

How to Prepare For a Rainy Day

This may seem pretty basic, but saving money isn't all that easy. It requires discipline and consistency with your money. To start saving effectively, you really need to write out a budget plan for yourself. That is step 1.

1) Write out a budget – It isn't fun, but it is super effective. After you write out a budget, you're going to realize that you had no idea what you spent your money on each month! It happened to me, and it will likely happen to you too. But, as you get better at understanding your spending, you can move on to step 2 and cut down on some of those senseless costs!

2) Cut your costs – When you know what you're spending your money on, it becomes natural to question “Why?”. When I started to question my expenses, I made some phone calls and got my bills reduced! I called the cell phone company, the insurance company, and the bank. Each one of these phone calls saved me hundreds of dollars per year and allowed me to save more money each month.

3) Force your savings – As you get more comfortable with your budget and cut out some costs, you'll probably be able to save $400-$500 a month instead of the measly $200 you were able to scrounge up before. To stay consistent with these savings, it is best to force them directly into your savings account with your direct deposit. With each direct deposit, you can actually direct a certain percentage (or dollar amount) of your funds to various accounts. Use this tool to put your money directly into your savings to prepare for a rainy day!

Are you ready to prepare for a rainy day?

This post was originally published on February 19, 2015, and updated on May 29, 2022.

No Magic Bullet

There is no magic bullet to getting ahead financially. If there were a way, everyone would be doing it. While we all dream of a big jackpot, very few people win the lottery. More people lose their savings in Vegas than walk away with a retirement fund. Most of us just keep going to our jobs and hope for some magic event in the future.

I have bad news for you, it probably is not coming.

But here’s the good news. You can get ahead. Every day you have a new chance to take small steps to build your fortune. Quit thinking about get rich quick schemes. Let’s start thinking about how to build your fortune the old fashioned way, with hard work and ingenuity.

Use these three steps as ideas for how you can get yourself out of debt and into a comfortable lifestyle. We may not be billionaires, but we can certainly live a rich life. Here are my favorite ways to get ahead.

Get Ahead with Each Paycheck

I write about entrepreneurship a lot on this site. While I am constantly working on new projects, at the end of the day my biggest source of income is my job. Through hard work and consistently delivering high quality results, I have more than doubled my day job income from my first job after graduation eight years ago.

But even if you have not doubled your income, your best bet is to double down on your career. That is your bread and butter. That is where you should start trying to get ahead.

Be a high performer every day. I recently read a study that found a small portion of workers to be “high performers.” The research found that high performers are typically four times as productive as the average worker. Four times! If you are a high performer, your company will work hard, and pay well, to keep you.

Until you get your big raise, use each paycheck to help you get a little further ahead. Pay yourself first. Take advantage of 100% of your 401(k) match options, then put a little more. Automatically deposit into a Roth IRA each payday. Even if you can’t hit the max, deposit something, and make it automatic.

If you can save extra here and there, do it. Put the money in a savings account for a rainy day, an emergency, or investments. If you don’t know where to start or have trouble keeping yourself in line, check out the automatic savings account Digit. I saved $500 in my first two months with Digit.

If you live within your means, saving will not push you into debt. Think about each purchase to keep your spending in line with what you can afford, and automatically save each payday. If you do that, you are doing more than most Americans to save for a prosperous future.

Get Ahead with Lump Income

When you start a new job, you fill out a tax form W-4 telling your employer how much to deduct from each paycheck. If you follow the form instructions, you should end up each year with a modest tax refund. What they don’t tell you is that you can change that you can deduct more for taxes, or less, from your paycheck.

If you deduct more, you are setting yourself up for a bigger refund. If you deduct less, you are setting yourself up to owe taxes in April. While there are financial arguments against a high deduction, think about the benefits. If you withhold an extra $50 each pay period, you will end up with an extra $1,200-$1,300 at the end of the year.

Whatever you get back at tax time, don’t squander it. Don’t blow it on a vacation. Put it in an investment account. Save it for the future.

If you are on a career path that gives you performance or an annual bonus, follow the same logic. While it may be tempting to go to the jewelry store on the way home to get something shiny, leave it in the bank. Even better, top off your Roth IRA or start a regular taxable investment account.

Over the years, those lump sums will add up.

Get Ahead with Each Free Hour

After working a forty-hour (or way more) work week, going back to work might not sound like the most fun idea. I am “lucky” to have the workaholic bug. When I get home at the end of the day, I just want to write, create videos, design websites, and start new projects to help supplement my income.

Whether you are inspired by online income or prefer the offline route, there are plenty of opportunities to earn more on the side. When I share my online income reports each month, I am not trying to show off. On the contrary, I am trying to show you what is possible.

I recently had a record month bringing in over $5,000 on the side, but I didn’t start there. My first online income was a $5 check from Yahoo for 5-cent advertising clicks. Eight years ago it was $10 payments for online articles. Today that has turned into thousands of dollars each month.

Even Warren Buffett started somewhere.

What are YOU waiting for?

Enough about me. Let’s talk about you. Do you feel like you are chasing each paycheck to stay afloat? Are you struggling to pay the bills? Let’s try to help you get on track to getting ahead. Here are my Personal Profitability Rules for Getting Ahead:

1. Only spend on what you value. Think before handing over the cash, swiping the card, or clicking the purchase button.
2. Take advantage of your employer’s 401(k) match, and then save a little more.
3. Put something in a Roth IRA each payday. Even if it is just a little. Make it automatic. Increase it when you can.
4. Thou shalt always save lump income. Maybe go to a nice dinner, but not too nice. Save the rest.
5. Earn an extra dollar on the side. See how it feels. If you like it, earn more. Repeat.

Anyone can follow those five rules. Follow them to get out of debt, and keep following them to build your nest egg. We can still be jealous of people like Mark Zuckerberg who become billionaires in their twenties, but we will know that we are on the right path to financial freedom. We can achieve Personal Profitability.

Today is day one. Go!

This post was originally published on May 25, 2015 and updated on May 29, 2022.

Note from Eric: This is a guest post from my very good friend Martin Dasko of Studenomics, where he covers topics ranging from finding the best renter's insurance to making money with Airbnb Experiences. Martin brings the experience of a seasoned side hustler who has worked for himself full-time for quite a few years. I enjoyed reading his thoughts on taking a side hustle full time, and I'm sure you will too!

Martin takes it from here:

After chasing side hustles you're eventually going to want to do your own thing. You're going to want to quit your job so that you can be the boss. I can relate to that. It's a struggle when you're stuck at a job you hate and so desperately want to quit to be working on something that's actually yours where you make the majority of the money. Let's look at how you can turn your side hustle into your main hustle. Don't worry I won't be selling you the dream here. This is a practical guide for how to quit your job to focus on your side business. Let's go all in…

Disclaimed: Quitting your job isn't easy. It's tough to replace that income. It took you many years of college/training to earn your current position and salary. You had to work your way up. You had to hustle and put the time in. It's not that easy to just call it quits. This means that you shouldn't expect to go full-time with your side hustle after one profitable weekend. You shouldn't expect to make a full-time income from a new business idea right away. Too many people sell the dream on social media when it comes to starting a profitable business. You know what I'm talking about…

• “Make passive income from the beach.”
• “Start a business and never work a day in your life.”
• “See how this young couple lives in a van and makes ten million dollars a day.”

You get the point. It's annoying. It's frustrating. It makes you feel like giving up before you even start because you'll never live up to that hype. I want you to forget about all of the success stories for now, furthermore, I want you to only think about yourself. This is your story. You can't expect to start the next Facebook. You can however, quit your job to work on your own business.

What do you need before you quit your job for a side hustle to become your main gig?

MONEY. You need money if you want to quit your job. Your business has to be bringing in money and equally important you need to have savings in the bank. Next you need an income from your side hustle with a plan to make even more money to replace your current income.

Here's a list of things for example, that you don't need to quit your job:

• Crappy motivational quotes.
• A course on courses.
• Another Gary Vee podcast loaded up.
• Another dozen books on entrepreneurship to read.

Here's a list of what you actually need to quit your job:

• Money coming in from your side hustle.
• Money saved up in the bank to cover your expenses just in case.
• A plan to bring in more money so that you replace your income.
• A reduction in expenses so that you can survive lean times.

How much money do you need to quit your job? You have to save money so that you can cover your expenses for at least 6 months. When you work for yourself anything can happen. You can go through some lean times. Savings is what will help you get through this. You need money in the bank to survive the issues that can happen as an entrepreneur (losing a client overnight or Google wiping out your traffic with one update). There will be times where you go months without bringing any money in. Then there will be periods where you feel rich because you have money coming in from all angles. This then leads us to an important question.

What if your side hustle isn't making any real money yet? Should you quit your job?

“But Martin, I have such a good idea. I just need to quit my job so that I can focus on it.” I get this all of the time. It feels like your day job is holding you back so you want to quit so that you can finally get rich with that new side business you've been working on. Here are two important aspects to keep in mind about going full-time with a side hustle…

1. You have to earn your freedom. There's no other way around this. You can't just quit your job because you hate your boss or because you want to call yourself the CEO in your social media profiles. Freedom has to be earned. You have to start making money with your side hustle. Your finances must be a priority.

2. You have to wait until your side hustle makes more money to be 100% on your own. You can find part-time work/freelance work. Quitting your job won't be glamorous for the first little while. You're going to have to serve drinks or work a part-time gig on the weekends; moreover, you're going to have to do something to bring some cash in.

“A good plan, violently executed now is better than a perfect plan tomorrow.” — George Patton

How do you make the transition to full-time?

The goal is to ease into your transition of going from employee to being self-employed. You don't want to jump all in and then become frustrated when you have to go looking for work again in 4 months.

You have to try to test the waters as you work on your business ventures.

Have you tried to work on your own full-time? It's not easy. More free time doesn't mean that you're going to get more work done. I urge you to use a week of vacation to see what it's really like to work for yourself. You may even discover that you don't mind keeping your side business on the side.

Find ways to make more money.

We have to look into ways to make more money. There's no way around this. Here are ways to make more money:

• Add a product.
• Consider expanding your side hustle.
• Look for more clients.
• Switch up your offering.
• Upgrade your skills so that you can charge more money.

You have to be thinking of ways to make more money.

Save every penny that you can before you quit your job.

It's a huge privilege to be able to quit a job so that you can do what you love. You have to cut back on everything that you don't need as you're trying to quit your job. The more money that you save, the more money that you have to put towards debt and savings so that you can become free from your job. You're going to have to save like mad and get a little creative so that you have a financial cushion.

You set a deadline.

The late nights and early mornings will eventually get to you. It's important that you set a deadline for when you want to quit your job. What's your deadline? Set it and write it done everywhere. Announce it publicly to hold yourself accountable.

Be merciless about making this happen.

It's easy to find excuses or to let distractions get in the way. You can't let that happen. You have to be 100% ruthless. What does this mean?

• Saying no to weekend plans.
• Turning off the game to work on that proposal.
• Spend some money on investing into your business.
• Save, save, and then save some more.

Yes, I know that this doesn't sound like fun. I'm not here to lecture you. I just want you to know that quitting your job to do something that you love can be the most rewarding thing ever.

“To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.” — Steve Jobs

Can't I just quit my job like they do in the movies?

Sure. You can quit your job without a plan… If you want to be broke and miserable. However, telling someone to quit a job without an income is a recipe for disaster. Money is never an object in the movies. In real life, you have bills. I don't want you to have to move back with your parents or to have no money. Working for yourself is supposed to be fun, not something that stresses you out and ruins your life.

The final words on quitting your job…

The idea of quitting your job is something that I've been writing about for years. I've helped readers quit their jobs and I've seen friends go all-in with their business ventures. If you're in the trenches right now, then keep on going. Here are a few final practical tips for how to quit your job to focus on your side hustle:

• Study those who have done it already. You don't have to guess. There are hundreds of entrepreneurs sharing their journeys on social media.
• Pay for coaching if you have to. You don't have to do this alone.
• Find a practical business model that has a proven track record of bringing money in. No pyramid schemes and no selling teas.

For some quick motivation, see how Eric quit his job to become a freelance writer. Eric shares practical advice for how he quit his corporate gig to be the boss.

Good luck.

“Having a vision for what you want is not enough. Vision without execution is hallucination.” — Thomas A. Edison

Learning About Money Through Banking

The first step to learning how to manage your own finances is to have access to them. Your bank account is the hub of your personal finances, and that should be the first step for a young adult to learn to manage.

Understanding how checking accounts work, how your income relates to your savings and purchasing abilities, and that an overdraft is a very bad thing should be the basis of a strong financial foundation.

Learning About Money Through Budgeting

Once your high schooler, or you if you are an awesome high school student ahead of the curve, has an understanding of their bank accounts, they should take over managing them for themselves. Mom and Dad won’t be there in college to hold hands and walk through everything, so it is important to feel comfortable with personal finance before leaving for school.

The next development step after banking is budgeting. Learning to spend less than you earn is important for everyone, and good habits start at an early age. Knowing what can be spent on dining out, entertainment, pizza delivery, and beer is also important at any age but comes in particularly useful during the first years away from home.

Develop Good Spending Habits

Budgeting is about spending less than you earn and planning for savings, but the next level up on the hierarchy of personal finance achievement is to understand needs versus wants and how to judge a good purchase compared to a bad one.

Using our money to enhance our lives is good, but wasteful spending on crap we don’t need is far too common. Learning what we value and focusing our spending there rather than on stuff that sits in the back of the closet and clutters up a home is an important skill, and knowing the difference is not always an easy distinction. But good guidance at a young age will again create good habits.

Learn the Benefits and Pitfalls of Credit Cards

Credit card companies have some restrictions when selling cards to college students compared to when I was in school, but that does not mean they are not still their hocking cards at kids for a free pizza or t-shirt. I will not sign up for a new card for anything less than 40,000 miles, a free pizza is chump change in comparison.

Using a credit card has many benefits, such as delaying having to pay for some purchases, keeping your bank accounts more secure from fraud, and getting great perks like miles and points and cashback. However, treating a credit card as free money will lead to huge expenses later on, not to mention bad credit.

Getting started with a free credit score and free credit report can help a student understand what makes up their credit and how to build it for a successful future.

Practice for Personal Finance Independence

Practice makes perfect, and overbearing parents mean well but are not instilling the independence needed to manage a successful financial future. Only through practicing good habits and learning from their own mistakes will a young person learn the best habits and tricks for managing their money.

If you are a parent, let your child take over managing their own money. Maybe even give them a glance into the family finances so they can understand what housing, food, and other necessities cost and what it takes to budget for the fun things in life.

If you are a student, send this over to your parents. You are already a rock star for taking interest in your finances, and you are on the path to good things ahead. Stick around and keep reading and always practice good habits. Find a financial mentor, whether a parent or other trusted adult, that you can go to for guidance when you have questions or need help. And I’m always just an email away too.

Do you have any questions about finances for young adults and high school students or any stories to share? Please do in the comments.

This post was originally published on June 15, 2015, and updated on August 25, 2021.

Allow Yourself Fun Money

After setting up a budget, this was the first thing I was directed to do as I was paying off debt. While it seems counterintuitive, it was a life saver numerous times in my debt payoff journey.

Debt fatigue can be as real as it gets and having a little fun money helps you combat that fatigue. How much money this is depends on your particular situation, of course, but set aside that money however often you deem necessary – I did mine once a month along with my budget. That money can be used on anything you want; in my case, it often provided for fun things I was rarely able to enjoy.

Plan Your Purchases

This might seem somewhat obvious, but the point is to develop a discipline that will help move you forward financially. Not only will this require you to save up the money to buy whatever it is you want, but it’ll also help you determine if it’s something you truly want and will get value out of.

More practically, you need to know how to include these “fun” purchases in your debt responsibilities. There are various tools available, from Empower which allows you to track your debt and investments, to plain and simple Excel. The point is to find something that works for you so your planning can be effective. Personally speaking, that makes the purchase I want that much more satisfying and enjoyable knowing that I planned, saved, and worked for it.

Look for Lower Cost Alternatives

We often get ourselves caught in the trap that there is only a certain number of ways to do something. Well, when you’re paying off debt, you’re required to find cheaper alternatives to things you would do otherwise. If you don’t, then you’re likely just going to be disappointed.

Whether you like to go out to eat on occasion, go to the movie theater, or go on a nice vacation I believe you can still get the same enjoyment but do it cheaper – such as:

• Ordering take out or cooking a meal with friends
• Netflix, Hulu, Amazon…you get the point
• Have a staycation or do a local day trip

What I found while I was paying off debt was that I genuinely enjoyed some of these things more than what I’d normally do otherwise. In fact, I still do some of them today. Ultimately, it just requires a little creativity to pay for the things you want while paying off debt as it’s not impossible; it’s just a little more difficult.

Are you paying off debt? What do you do in order to have money to spend on things you want?

This post was originally published on March 20, 2014 and updated on June 29, 2022.

Start to Save for Retirement With Your 401k

I know that a 401k is the obvious answer to saving for retirement. That said, many either overlook it altogether or assume they can’t afford to. The latter of those two is perfectly understandable, though it looks at the situation in the wrong way. I believe even if you’re on a limited budget you can still save for retirement through your 401k and not have to cut back because of it.

The beauty of the 401k comes in with contributions lowering your tax liability as they’re pre-tax and thus lower your tax hit. This is also not to mention the fact that it’s usually done via payroll deduction so you don’t even “feel” the money being transferred out. This is of course assuming you’re okay with getting potentially free money through an employer match. 😉

Cut Back on Subscriptions

If you’re struggling to begin saving for retirement one of the first areas you should look at is your monthly expenses for things like subscriptions and memberships. Do you have a gym membership you rarely use or some magazines you get but rarely read? Those could easily begin to add up to $50-100 per month. Of course, you shouldn’t stop working out, but there are other ways to do it than at the gym.

Take a look at your spending, analyze your priorities and shift some of that wasteful spending towards investing for retirement. That amount may not seem like much, but it’s a great start towards building a retirement portfolio.

Monetize a Skill

More people are starting side hustles as a way to monetize their skills. Why not use your side hustle to help you save for retirement? I know it’s not the most exciting reason to start a side hustle or even something that may be tangible in the beginning, but if it takes off then you could have a nice amount you could put aside for retirement.

The beauty of the side hustle, assuming you can turn it into a business of some sort, is that you also open up the potential to start a SEP IRA that would allow you to contribute on top of what you may already be doing through your employer. With the potential contribution limits a SEP IRA has, that can turn in to a pretty substantial amount to put away for your retirement needs.

How do you save for retirement while on a somewhat limited budget? What are some of your creative ways to put money away?

This post was originally published on April 17, 2014 and updated on June 16, 2021.

Cut Your Transportation Costs to Save Money Between Jobs

The cheapest (and healthiest) ways to get around are cycling and by foot. If you don't already have a bike the expense might sound like a lot, but with gas and maintenance, you might make your money back in less than a month. Take a look at Craigslist for a cheap commuter bike for sale. You can often find one for less than $100. If you can go completely without, you might be able to save as much as $100 per month on insurance (or more depending on your policy) and $50-$100 per month on gas. That $150, or even just a couple of months of fill-ups, can cover the cost of the bike. Or just walk if you live in an urban area for free.

Stick to a Budget and Manage Your Money Between Jobs

Until you find work, your finances are likely to be pretty limited, so don't just spend as you go without thinking about the future. You'll need to set a budget and stick to it while in between jobs. Budgeting used to be a lot of work, but with free online tools like Empower or Mint, you can track your budget for free online without doing much work. PowerWallet is free and offers great advice to get you started budgeting if you are new to tracking your finances. The first budget you create doesn't have to be super detailed or complicated.

Your budget can simply list out high-level categories like rent, bills, food, transportation, entertainment, and everything else. Your budget should assign all costs to one of those buckets and you can track it against a goal. Make sure enough money is set aside to cover your essential monthly costs before you spend anything on things you don't really need. Every penny counts when you are living without an income.

Remember that a budget while you are working, is different from managing your money between jobs. After you find your next gig, you can adjust your budget to fit your new income.

Save Money Where You Can

Coupons can save you a lot of money on spending you have to do, like groceries and personal care items. You can find coupons in the newspaper or on popular coupon websites. My favorite coupon tool is the free Chrome plugin Honey, which searches for coupons on purchases you are about to make online.

The easiest way to save, though, is by cutting your spending. Really think about each purchase before you spend the money. Only buy what you need and hold off on wants until you have income again. You'll be surprised how much you can cut if you put your mind to it.

Earn More!

The best way to get by is to earn more. Even if you have a full-time job right now, you can always earn more on the side. I make money on weekends and evenings in my web design, freelance writing, and social media management business. I also had a business that ran flash mobs. Combined I made more than $1,000 each month on the side.

Even if you make $5,000 or $20,000 each month, earning more on the side is always an option and something that can help you out if you ever get the dreaded pink slip.

This post was originally published on December 27, 2010 and updated on June 29, 2022.

Even though the spread of COVID-19 has effectively shut down many major sports leagues for the current season, it hasn’t kept dozens of millionaire athletes, their team investors, and venture capitalist owners from staying in the game. While many athletes have kept up with their rigorous diet and training routines, several sports icons and team owners have made moves to help out their communities during the time of economic hardship that the coronavirus has brought to the globe. Here is the shortlist of players, teams, and owners that are making a financial contribution to COVID-19 relief efforts, though dozens of other entities have made similar efforts.

The Atlanta Braves

Freddie Freeman, the All-Star first baseman, has pledged $50,000 to both the Giving Kitchen and the Atlanta Food Bank. He has also donated an additional $25,000 to the Salvation Army.

The Atlanta Hawks

The major city of Atlanta has been a hot spot for coronavirus cases, and prior to the shut-down of the leagues for the season, the Hawks team owner Tony Ressler had already decided to take care of the franchises workers. In an article published in The Atlanta Journal-Constitution, Ressler is quoted as saying “if we shut down, we have to take care of our part-time employees” to Hawk CEO Steve Koonin.

The Bostin Celtics

The team playing out of Boston’s TD Garden is reportedly paying the team-employed game-night staff throughout the remainder of the regular season. This will include ball boys, locker room attendants, stats crew, performers, and the crew for the scorer’s table.

The Brooklyn Nets

Spencer Dinwiddie, a Nets guard, sent out a tweet that instigated a response to take care of non-salaried arena workers. These workers should receive the paychecks that would have typically been earned at Nets games through the end of May. The care package is also extending paychecks for events at the Barclays Center venue that were canceled.

The Charlotte Hornets

Both team players and team owners are working together to provide for the salaries of part-time workers at the Spectrum Center for games that were scheduled through April 13^th. This includes any of the G League Greensboro Swarm games that were scheduled.

The Chicago Cubs

Noted right fielder Jason Heyward has donated $200,000 to relief efforts in Chicago. The funds have been equally split between the Greater Chicago Food Depository and MASK, an organization that has been collecting food and supplies for families affected by the virus.

The Cleveland Cavaliers

The first player in the league to donate funds to event staff was the star forward Kevin Love, who announced on social media that he was giving $100,000 to the workers. The remaining Cavaliers then decided as a whole to take care of all the hourly staff employed at Rocket Mortgage Field House.

The Dallas Mavericks

After the league announced the postponement, billionaire investor and team owner Mark Cuban immediately put all the employees who would work games and events at the American Airlines Center on notice that they would be paid during the break. The Mavericks also released a statement that employees who ate breakfast or lunch at local Dallas-area restaurants would be reimbursed, as an effort to help keep local businesses alive as well.

The Golden State Warriors

Owned by venture capitalist Mark Stevens, the Warrior family made the decision to contribute one million dollars to a disaster relief fund developed for the Chase Center employees. The team made the announcement with the intention of easing the financial pain of the hard-working men and women who create an incredible game-night experience for the guests and fans at the center.

The Houston Astros

Another star stepping forward, George Springer made a pledge of $100,000 to help the employees of Minute Maid Park. For him, the donation was about taking care of the families that took care of his family with each game he played.  Alex Bregman also made a personal contribution of 1,000 quarantine food kits to the Houston Food Bank and urged others to do so as well. The food kits could feed a local student for 28 meals.

The LA Clippers and Lakers

Both the Clipper and the Lakers play their games out of the Staples Center, along with the NHL Kings franchise. These three teams have established a fund to compensate the 2,800 contract and part-time workers that would typically staff the Staples Center during the NBA and NHL seasons. This relief extends to announcers, dance teams, and team statisticians. On his own, Lakers forward Anthony Davis partnered with Lineage Logistics to help displaced Staples Centers workers find employment while the NBA is suspended. The partnership has also promised to match donates to Feed the Frontlines LA for up to $250,000 throughout the pandemic.  

These are just a few examples of generosity and philanthropy coming out of the professional sports industry. From the athletes to the investors or owners of the teams, everyone is rallying around the employees that are taking the brunt of the financial hardship from the suspension and postponement of the national sports leagues.

This article comes from a Personal Profitability partner.

This post was originally published on May 22, 2020 and updated on August 31, 2022

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In reviewing the data, non-housing debt has actually been on the rise since 2011. More specifically, student loan debt and auto loan debt have been the loans of choice for the past few years, as more and more people borrowed money for college and for that new hot ride after graduation. In my opinion, both of these debts are completely unnecessary.

How to Avoid Student Loan Debt

I have talked to quite a large number of folks about student loan debt over the years, and for those that borrowed much, the reasoning always sounded the same. When these students were entering college, they knew that they would not have the money to pay for their education and were therefore already doomed into debt by way of student loans. Once this realization happened, taking on more debt was no longer a difficult choice. In fact, it became a normal way of life and was not hardly thought of throughout their college years.

Debt was thought of as a tool to get the education needed in order to succeed in the world. And, when debt becomes a tool it no longer carries a bad stigma and is therefore much easier to borrow. Students that had this mindset regarding debt often left with $50,000 or more by way of student loans. Only after graduation did they realize how this loan would negatively impact their future.

It is a personal passion of mine to keep kids from going into student loan debt, and with the correct mindset I believe it is certainly possible for many students to achieve. With just four key actions, students could graduate completely debt free:

1) Apply for Scholarships!

It absolutely floors me when I talk to kids that have not applied for any scholarships whatsoever. Either they think that debt is a necessary tool for college or they think they're not smart enough to get scholarships. But, neither of these thoughts should even be entertained! Scholarships can be won by almost anyone. Just ask Kristina Ellis, who has won over $500,000 worth of scholarships in her lifetime, and she wasn't the glowing straight-‘A' student that you might think she was. Her tips? Get involved in community service (to boost your resume) and seek out local scholarships over the mammoth ones that thousands apply for. By simply applying for scholarships, many students could more easily avoid student loan debt.

2) Work During School

The second best way to avoid college loans is by actually working during school. Sure, your grades might slip from an A- to a B+, but by working 30 hours per week and working a full-time job in the summer time, many of your debts could be covered by your own two hands! Work hard throughout your college years and enjoy a debt free life for many years afterward.

3) Live at Home

For many students, their mom and dad are often happy to host them while they're taking college courses. It may not be a great spot to throw those college parties that you've been dreaming of, but there will always be friends that live on campus if you really want to experience the college life. Avoid on campus housing and you could save yourself $10,000 a year or more, which will definitely help you avoid student loan debt!

4) Eat Cheaply

If you decide to live at home, eating cheaply is easy! But, if you desperately want to live on your own then you will need to learn how to eat inexpensively. Of course, there's Ramon noodles, but this won't help your brain-power much since the nutrients are lacking. Instead, choose eggs, bread, tuna, beans, frozen corn, bananas, and carrots. While I wouldn't recommend eating all of those together, they are tasty cheap staples to include in your diet.

How to Avoid Auto Loan Debt

This one is simple. To avoid auto loan debt, keep driving the car that you had in college. Done. Seriously though, why is it that so many students need to reward themselves with a new car after they graduate? Sure, it's great that you got your degree, but we all know that a degree does not guarantee that you'll get a job, and it certainly doesn't guarantee that you'll keep one, so why is it that we're tacking $20,000 onto the average student loan debt of $30,000? For those that do this, I think they probably should have taken an extra class while in college called, “Common Sense 101”.

If you are worried about what people might think of your crappy college car, don't. I honestly have more respect for those that live with their parents and drive around their beater car than those that are trying to put on a show with their upscale apartment and new car, all while obviously drowning in debt!

Consider Where You'll Be With No Debt

The average college grad has about $30k in student loan debts. If they take out a loan for their car, then they typically add at least $20k to that, which rounds out their debts to about $50,000. If they earn $30,000 (after tax) and have yearly expenses of $20,000 (which is living pretty cheap), it will take these average students at least five years to claw their way out of debt! 

What if you graduated with no debt?

In those five years where your friends are trying to get back to a net worth of zero, you could be building yours exponentially. With $10,000 a year of disposable income, if you choose to invest that money and could earn 10% interest, your net worth would build to $83,000 at about they time they get up to $0.00. And, if you left that money alone until your retirement years, guess how much it would be worth? $2,300,000! Yeah, I'd say that would be worth staying out of debt in your younger years, don't you?

This post was originally published on March 19, 2015 and updated on May 21, 2020.

South American investment opportunities have been booming over the past few years, with a large number of industries in many of the continent's countries gearing up for higher demand and easier access to international trade. A lot of the boom has been fueled by infrastructure development projects in Colombia, which has acted as a hub for imports to many nearby nations. Those infrastructure contracts brought first foreign construction investors and then, later, contractors interested in managing the ports and investing in the many industries that are strong in the region. Now, after a few years of development, nearby countries are feeling an increased demand in many industries, making investment opportunities plentiful. One place with a lot of opportunities for global investors is Guyana, which has seen an uptick in demand for its locally-produced resources and goods, as well as increased tourism. If you're looking for a place to invest, here are four great ways to put your money to work there.

1. Contact GO-Invest About Opportunities

Guyana has been declared open for business by both private and public sector leaders over the past couple of years, meaning they are actively encouraging investment in-country. To facilitate that, the GO-Invest office has been established and empowered to provide a range of incentives for new investors. From tax opportunities to brokered deals with the government and other industries, there are a lot of ways to learn about new opportunities through this office. They can even help things go more smoothly when you're investing in a joint venture with local businessmen. Here are a few other things they do:

• They provide a summary of the necessary steps for investing in businesses in-country
• The office also helps exporters bring their goods to an international stage
• Exemptions on customs duties for equipment and other vital business infrastructure for new companies
• They draft the investor agreement with the government when you're backing projects in the country

2. Invest in Existing International Ventures

Another way to put your money to work in Guyana is to invest in a business that already operates there. As the gateway between South America and the Caribbean, Guyana is uniquely positioned to participate in both regional communities. That means there are a lot of existing ventures that bring local produce from farms in the country to their island neighbors. There are also food processing ventures and commercial fishing opportunities that operate in multiple countries. One great way to get started with Guyanese markets is to put your money to work in another country where you already have holdings, investing it in an international operation that also operates in Guyana. It's a good way to get your feet wet in the market without going through the complex steps needed to establish a new venture in a new country. Of course, you'll need to plan for those steps when you're ready to move from ventures that also operate in Guyana to investments directly in the Guyanese industry.

3. Establish In-Country Accounts To Operate Locally

It's easier to put your money to work in a country when you have local funds in a bank and ready to go. That way, no money needs to cross borders when you are ready to put it to work. Establishing a banking presence in Guyana also means having a place to receive dividends without sending them outside the country, so it's an important step even when you're not using your banking presence as a way into the market on its own. Institutions like GBTI Bank work hard to provide foreign investors with opportunities and easy access to banking. They facilitate everything from opening local businesses to participation in ForEx trading and other investments for locals and international finance professionals alike. The right bank can be a source of great opportunity when you're investing in a new region, providing you with a means of discovering new investment opportunities before starting formal negotiations to draft an investor agreement.

4. Invest in Publicly Traded American Companies Coming to Guyana

Did you know there are over 100 companies already in line to bring operations to Guyana? That's only counting the ones from the United States, too. If you're looking for the simplest way in to investing in Guyanese opportunities and you don't have the option of investing in an international operation elsewhere in the region, another option is to start by putting your money into a company that is already negotiating for investment opportunities locally. The best part is that with the right due diligence, you can find just the right industry to suit the rest of your portfolio. There are so many opportunities, American companies in practically every industry niche are gearing up to start working and trading in this busy South American nation.

Advice for New Investors

If you're new to investing outside your home country, it never hurts to look at multiple paths to opportunity in Guyana. In many cases, a simple investment in an established company serves as a great way to test the waters while you set up your own ventures and negotiate the tax incentives and other operational agreements you need to get started.

This article comes from a Personal Profitability partner.

Overspending in the U.S.

The citizens of the U.S. are no strangers to overspending. As you can see from the chart below, the average person in the U.S. spends 95.7% of their yearly income and saves only 4.3%. To put that into perspective, if your family earns $35,000 a year after taxes, you'll likely only save $1,500 after one entire year. That means you're only putting away $125 into your savings account each month! What if you have a major emergency like your car breaking down or your furnace taking its last breath during the winter months? Your savings account from one entire year will be totally depleted!

There is absolutely no excuse to save such a small amount of our incomes. In years past, the United States used to save an average of well over 8%, sometimes even 12% or more! Believe it or not, there are some countries that still have excellent savings rates. Take a look at the top 5 countries below and their rates of saving.

1. Ireland — 19.3%
2. France — 16%
3. Spain — 13.1%
4. Belgium — 12.2%
5. Germany — 11.4%

Now, this is where we belong! These countries have excellent savings rates and are therefore ready for anything life throws at them. So how can we begin to save high rates of our income once again? How can we raise our average savings rate from 4.3% to 8% or more once again? Speaking in terms of the individual, this is actually a fairly simple feat.

How to Cut Your Monthly Expenses For Good

If you are dead serious about cutting your monthly expenses, then we need to put the 80/20 rule into practice. In other words, we need to find out what items are causing your largest expenses and start making cuts there.

For the majority of the population, their largest expenses can be found in three major areas:

• House
• Car
• Food

No big surprises here. On average, people spend the most money per month on their house, the second-largest amount on their car, and the third-largest amount on food. While these may seem like costs that are difficult to change, they are really not. But, you might need to get a little radical with your mindset here.

Reduce the Size of Your House

One of the quickest ways to cut your monthly expenses is to get used to a smaller house. I know I know – you are gasping right now because you couldn't possibly move into a home with fewer square feet! After all, what would your friends think? Honestly, who cares. Your friends aren't managing your budget, you are. Get over yourself and do what is best for your family's security.

The average square footage of a home in the U.S. in 1975 was 1,535. Today, families have gotten smaller and the houses have gotten larger – to the tune of over 2,200 square feet! It is absolutely ludicrous! If you truly want to cut your monthly expenses, then downsize your house. This method could easily save you $500 a month, which would certainly improve your monthly expenses – and your sleep at night!

Reduce the Cost of Your Ride

We live in a world today where nearly every possession comes with a payment. Nobody pays outright for anything anymore, and it's killing our monthly savings rate. You see, every time you purchase something on credit, it comes with a monthly price. Purchase enough items and your monthly expenses can easily grow to the amount of your income. And then you are stuck.

This happens all the time with car purchases. People want a car that far exceeds what they have in the bank, so rather than drive something that's a little less impressive, they start making payments on their “dream car” and are immediately caught in the debt trap.

To cut your monthly expenses, you should sell that jaw-dropping ride of yours. Take the money that you have in your savings and purchase an ugly car that will get you from point A to point B. This simple move saved me so much money and allowed me to get out of debt so fast. It absolutely works, you just have to have the guts to try it.

Cut Your Food Expenses

This method isn't quite as effective as downsizing your home or getting rid of your pricey car, but by watching your food costs, most families can save an additional $100 or $200 every month.

First of all, you must cut back on going out to eat – not only to the fine dining restaurants but to the fast-food joints as well. The cost of McDonald's seems cheap, but it's still three times the cost of dining at home!

If you do not dine out often, there are still likely some savings to be had in your grocery bill. Instead of buying your food from Walmart or from the fancy grocery store down the street, try visiting one of those discount grocery stores. The food is actually of great quality and the costs are far less than even the “low prices” at Walmart! Do yourself a favor and try it out. I bet you won't be disappointed.

Cut Your Monthly Expenses and Grow Rich!

If you can successfully cut your monthly expenses, then you have already taken care of one part of a two-part equation to wealth! First, you need to learn to cut your expenses. The next step is learning to increase your income. Do your best to master step number one, and we can later discover the secrets of beefing up your income. Again, it might seem difficult at first, but it is absolutely possible!

Are you ready to cut your monthly expenses today?

This post was originally published on February 5, 2015 and updated on May 29, 2022.

This post comes to you in conjunction with a Personal Profitability partner.

Bookkeeping Records

Many businesses employ bookkeepers or use bookkeeping software to track their own finances. A CPA can review these records for accuracy and compliance with the law, and use this information to prepare tax documents and provide financial advice. They can also help you set up your record-keeping procedures if you're just getting started or give you suggestions for improving your current system. 

Financial Statements Audits

An audit is an independent examination of a company's financial statements. After auditing the statements, the CPA issues a report with their opinion of the statements. These reports are required by some government agencies, such as the SEC. Additionally, publically traded companies are required to be audited once a year and must furnish the audit reports to any shareholders they have. Creditors may also sometimes request these reports. 

Break-Even Analysis

A break-even analysis is an important tool for businesses that are considering expanding their operations, offering a new product or service or making a major purchase. A CPA can perform this analysis, which includes a comparison of current costs and revenues versus projected costs and revenues after making the proposed change, to determine how much revenue would need to be generated to reach the break-even point if the change was made.

Financing

Whether you need a loan to get your business started or to make a major purchase or fund an expansion, you will need to make the case to your potential lender that your business is a good financial risk. A CPA can help you make your case by gathering the necessary information, investigating different funding sources, and completing a compelling loan application. They can also help answer any questions the lender may have about your business's ability to repay the loan.

Tax Advice

CPAs are required to have a thorough knowledge of state, local and federal tax laws in order to pass the CPA exam and maintain their license.  CPAs can provide advice to help you stay compliant with tax laws, keep efficient and accurate records, and maximize tax deductions. They can also prepare and file your tax returns and represent you in the event that your business is audited by the IRS. Additionally, they can assist with calculating estimated taxes that may need to be paid throughout the year, payroll taxes and other tax obligations. 

New Businesses

If you are planning on starting a new business, a CPA can help you with the process by drafting your business plan, choosing and setting up your accounting software, making sure your accounting procedures comply with the law and helping you determine the best legal structure. Getting financial advice from the start of your business can help you avoid any costly mistakes that could derail your start-up or get you in trouble with the law. 

Financial Health

A CPA can help you evaluate the financial position of your business and give you advice on how you can improve it. Many businesses choose to have their financial health evaluated once per quarter so that they can stay on top of financial trends and fix issues or take advantage of opportunities promptly. CPAs can also help prepare quarterly reports for stockholders, creditors, and others. 

Risk Management

Businesses face many different kinds of risks. CPAs have been trained to spot potential risks and recommend solutions. Risks that a CPA might evaluate include uninsured or underinsured property, liability risks, legal compliance and security threats. 

Key Performance Indicators

Key performance indicators are performance measures, such as job cost, inventory turnover or daily sales that can be used to judge the success or failure of a particular aspect of your business. CPAs can help you identify what your key performance indicators are and how to use them when evaluating your business operations. 

Chief Financial Officer

Small businesses may find it more economical to outsource the duties performed by a Chief Financial Officer to a CPA. CFOs typically oversee activities such as bookkeeping, financial statements, cash flow management, and forecasting, payroll, tax obligations, and reporting. 

Business Value

There are many reasons you may need to know the value of your business, such as seeking financing or investors, deciding whether to sell your business or planning for retirement. A CPA can both help you calculate the current market value of your business and help you maximize that value. 

Contracts

It is common practice to have an attorney review contracts and other important documentation to ensure compliance with the law. It can also be a good idea to have a CPA review any contract that could have financial consequences. A CPA can make you aware of any tax or cash flow implications and suggest any changes to the language that might be necessary. 

Business Operations

CPAs can help with day-to-day business operations in a number of ways. A CPA can explain your financial statements to you, ensure that employees and contractors are classified correctly, provide tax advice, and handle payroll. If you're not sure where to find a CPA to assist with your business operations, you can use the CPA Directory website to locate accounting professionals in your area.

Whether you need a professional to oversee the finances of your company or you just need to get your taxes done, a CPA can be an asset to your company. CPAs provide expertise and advice that can help almost any business improve its operations. 

This post comes to you in conjunction with a Personal Profitability partner.

Small business ownership has its perks: You get to be your own boss, work when you want, and control your own destiny. But business ownership isn't for everybody, nor is it always the best option. It can be a huge financial risk—one that requires a lot of time and mental commitment. In fact, timing and readiness are going to be the determining factors of whether your business succeeds or crashes. After all, the latter is a reality for millions.

Consider this: According to the Small Business Administration (SBA), around two-thirds of businesses that employ workers survive past the two-year mark, while only half make it to at least five years. The reasons for the flameouts vary but failing to understand the risk is a big part of it. From measuring the financial challenges, hiring the right personnel, finding the right balance between growth and stability, or even just finding the right location, small and young businesses owners often don't realize how huge of an undertaking making their business run smoothly actually is. 

Owning a business can be downright scary, but also extremely rewarding. While you'll never know completely when you are ready, there are telltale signs it just may be your time to make the leap.

How to Know You Are Ready to Start Your Own Business

1. There's Great Passion Inside You

Anyone can start a business granted they have the capital to get it off the ground. But the ones that are truly successful are those that have a passion for the product or service they are hawking, not just trying to get their business off the ground because they can make money that way.

Take organic food for example. The entrepreneur who has a love of natural foods is going to enjoy learning and sharing that knowledge with customers. The one who is just jumping on a trend won't be as convincing when a potential customer walks through the door. If you don't care about the underlying products or services your business offers, other than their money-generating ability, you are less likely to invest the time to make your business grow and get established.

Truly loving what you do will ensure that business owners won't turn into the equivalent of taking any old job with a day-to-day toil. Starting your business with passion and no plan can sometimes be more valuable than having capital and a plan, but no passion. 

2. You Have the Time for the Commitment

Getting a business up and running is tough enough. But then there's the work of growing your baby, which requires blood, sweat, and tears. If the thought of pouring countless hours into your endeavor leaves you wishing you were getting a tooth pulled, then business ownership probably isn't for you. But if knowing you will be breathing, eating, and sleeping your small business gets you pumped up, that's a surefire sign it's time to execute.

Successful entrepreneurs bring all sorts of things to the table, but a shared characteristic is commitment. Without it, you won't be giving your business its best chance of success. As a result, your personal circumstances can be a good predictor of your readiness to go it alone. If things change in your life—such as a new addition to the family or an impending divorce—it's probably not the best time to test your business acumen and idea. A baby requires a lot of attention, not to mention creates sleep deprivation. Although different, a divorce is also a big distraction.

If there is upheaval in your life, you may want to hold off launching your new business. But if everything is smooth sailing and you are ready to give it your all, then it could be the best time to pull the trigger.   

3. You've Been Thinking About It for a While

Giving up your career to start your own business isn't something that you decide overnight because you're angry with your boss or unfulfilled at your job. Many entrepreneurs worked for someone else, in lots of instances for years, all the while plotting and planning before they made the leap—and sometimes kept working for someone else even after launching their business. It's not like age is a barrier or a stigma anymore.

The Great Recession of 2008-2009 changed the makeup of small business owners and entrepreneurs, with scores of older individuals using downsizing as the impetus to branch out on their own. Consider this: according to the Kauffman Foundation, a non-profit focused on entrepreneurship, the percentage of entrepreneurs aged 55 to 64 jumped to 25.8 percent in 2015 from 14.8 percent since 1997.  

Although age doesn't determine success, time considering an endeavor can. The last thing you want to do is launch a business because you feel forced to for whatever reason. Lots of people will take the leap solely because they hate their job, wrongly assuming that leaving will fix everything. If you fall into that category, there's a high likelihood you'll still be unsatisfied and quickly resent it, which is a recipe for disaster for any business owner. Leaving your problems behind doesn't resolve them. 

4. You Can Do It Better

For some individuals, the light bulb to branch out on their own comes from watching the mistakes of their boss or upper executives in an organization. Maybe it's how they interact with customers that they are doing all wrong, or perhaps it's the lack of openness they have to what could be game-changing ideas that have you frustrated. It could be a cultural thing or watching corporate waste in action that's led you to dream about how you would do it better.

Heck, it's not unheard of for an employee to quit a job only to resurface a few months later as a competitor, so why can't you? Questioning the abilities of your boss in and of itself isn't enough of a reason to start your own endeavor, but if you find yourself repeatedly about how you can do it better than your boss or management, then it's a big sign it's time to show them.

Final Thoughts

Small businesses are the backbone of this economy, employing millions of people—or close to half of the private workforce—according to the SBA. But just because owning your own business puts you in control doesn't mean it's right for you. There has to be a passion, a willingness to commit, a business sense, and confidence in your ability to make what will undoubtedly make a success out of a struggle.

Without it all, pursuing a career within an organization may be the better action.

If anyone has first-hand experience with making the wrong decision when quitting his job and launching his business, Tyrone DeMarco is it. He worked for Corporate America for a decade before finding himself so resentful of his workplace that he ventured out on his own, only to fail miserably when launching his first business. Since then, he’s readjusted his priorities and is a very successful real estate investor, finding the best fixer-uppers around the United States.

This post was originally published on March 13, 2018, and updated on March 31, 2022.

Have an Emergency Fund

First, before facing unemployment, it's smart to have an emergency fund in your bank account. If possible, everyone should secure an emergency fund of at least six months of expenses to help them survive in case of a job loss. If you have prepared for this and have an emergency fund ready to go, it will make unemployment less painful. If you weren't able to stock an emergency fund like millions of Americans who live paycheck to paycheck, don't panic. There are other ways to help yourself financially after a job loss.

File for Unemployment

After losing your job, one of the most important first steps is filing for unemployment. You'll need to go to your state's unemployment office or website and fill out forms indicating a job loss. Once your paperwork gets processed, you'll receive regular payments of a portion of your salary for a period of time. While it won't be as much as you would normally get from working, at least you'll get some income to keep yourself afloat.

Cut Back on Expenses

Getting through a period of time when you're unemployed is easier if you work diligently to lower your monthly expenses. That means no eating out at restaurants or getting carry out, no going to the movies, and no purchasing anything that's not necessary. Cutting back on wasteful spending will help you get more wiggle room in your budget and be able to pay for the necessities.

Ask for Discounts

You can also get more out of your new, lower monthly budget by seeking out discounts. When you desperately do need to purchase something, such as medicine, food, or other essentials, ask about discounts. You can also call companies like your car insurance company, internet provider, or gas and electric company to see if there are temporary discounts available to those suffering from financial hardship. Keep junk food off of grocery shopping lists and buy only wholesome ingredients. Many companies may surprisingly provide a discount to people who are recently unemployed.

Talk to Creditors

If you have credit card debt, be sure to also reach out to your creditors and negotiate lower payments while you're not working. You may also be able to ask about getting rid of late payment charges and interest during your time without a job. Loan providers, such as mortgage holders and car loan operators, may also help you get some payment relief if you call and speak to a customer representative.

Monitor Your Score

Even when you don't have any income and you're overwhelmed with monthly bills, it's also incredibly important to monitor your credit score. Watch out for any big changes that impact or lower your score during this difficult time period. If you see any significant changes because of late payments, talk to your creditors and ask them to remove any negatives related to your job loss. This can help keep your score from dipping and preserve your financial health.

Consolidate Debt

It may also make sense to apply for a debt consolidation loan if you lose your job and are struggling to pay bills. If you have loans with a high-interest rate, you can take advantage of the most recent changes to the country's interest rates and get a loan to consolidate your high-interest debt. Paying everything off as one big loan with a low-interest rate may save lots of money each month and give you some financial relief.

Look into Government Programs

Another option is to turn to the government for help during a tough economic time. This year, millions of Americans are due to receive a stimulus check of approximately $1200 from the government. Additionally, families can get up to $500 per child under 16. If you aren't sure if you qualify to get these payments, make sure you check your income tax forms from 2019 and 2018. There are strict income requirements to get the $1200, but most people should be able to get the payments of $500 for each child.

Search for a Job

Once you lose your job, you also want to get right back into the workforce as quickly as possible. Start searching for your next opportunity right away. Update your skills and resume to make yourself more marketable for a variety of jobs. Take the initiative and reach out to potential employers to find a viable job opportunity quickly in your field.

Make Some Side Income

A job search in today's economy may be long and frustrating. While you search for the right position in your industry, be sure to take on some side projects or work to help bring in extra income while you're out of work. Consider selling things you have in your house and don't use anymore on secondhand yard sale website groups. Offer your professional services to friends and family if possible. You may also want to consider being a part-time driver or delivery shopper for people ordering groceries and supplies.

Borrow Money

Finally, don’t be afraid or too proud to ask for help if you need it. For most people, there is at least one person in their circle of friends and family members they can turn to in a time of financial need. If you're struggling to pay your rent or buy food for your family, ask for help. It can be in the form of a loan that you slowly pay back when you get back on your feet, or someone may be willing to simply help you without expecting anything in return. Don't let things get too bad before asking for help.

While losing your job can be terrifying, there are some actions you can take to help keep your finances healthy and steady. Follow these tips to give yourself a way to survive during a tough economic time.

This article comes to you from a Personal Profitability partner.

This post was originally published on April 24, 2020, and updated on February 17, 2022.

That all changed once my wife and I stopped working for our employers and went to work for ourselves. Taxes became even more complex when we saw our business take off. I know there is some debate as to whether or not you should pay someone to do your taxes, but for us, it made sense to go that route. That, however, does not let us off the hook in terms of tax preparation. With that in mind, I thought I’d share some of my tax tips to help out if you’re self-employed.

Keep Things Separate

The first thing I learned in terms of taxes and running a business was to have separate bank accounts. I know it can be a hassle, but it streamlines your finances and makes keeping track of both personal and business expenses easier.

This same idea also applies to credit cards. If you are self-employed and plan to do much in terms of business spending then you’ll likely want to have a separate business card. Be careful though as many business credit cards charge an annual fee. While they can be deductible you want to avoid paying too much in fees. As you will likely be filing separate business taxes this will make the process simpler to manage.

Automate Where You Can

If keeping things separate was the first tax tip I learned after starting my own business, then automation is a close second. Running your own business can take a ton of time (major understatement I know) and you want to cut down on the time-consuming tasks on your plate.

I personally do this through Freshbooks as it allows us to manage our invoicing and expenses, though there are many other options available. If automation is not your thing then you can always set up a simple spreadsheet to keep track of your tax-related issues. Just don’t do what I did…the first year of our business I avoided doing any of this and paid dearly in terms of time when it came time to prepare our taxes.

If you're looking for free simple tax filing or low-cost tax filing options, check out TaxSlayer!

Retirement is Your Friend

Retirement may seem like an outside-the-box tax tip for self-employed individuals, but it very much fits here. If you run your own business you likely aren’t receiving any kind of 401k match so retirement falls on you as the individual.

The great thing is that the IRS encourages you to save for retirement if you’re self-employed. There are a number of options available, with SEP IRAs, Solo 401ks, and SIMPLE IRAs being the most common. In most cases (keep in mind to speak with your tax professional) all of these allow you to contribute significant amounts towards retirement. If that isn’t beneficial enough, another big carrot is that the contributions have a direct impact on your taxable responsibility…which is a double bonus in my book!

Are you self-employed? What are some of your tax tips to make tax filing simpler? Do you prepare your own taxes or pay someone else to do them?

This post was originally published on August 7, 2014, and updated on January 25, 2022.

Payroll Allowances and Payroll Tax Deductions

Each time you start a new job, you are required to submit a W-4 and I-9 form. Those forms tell your employer how much tax to deduct from each paycheck and verify that you are a legal US resident who can take a job. Most of us only spend a few minutes on those forms but don't understand the long-term ramifications. Take your time to understand how your allowances impact your paycheck. Also, be aware that you can update your W-4 selections at any time, so even if you made a mistake you are not stuck with it forever.

Taxes Owed vs. Tax Deductions

Each year, your taxes are going to be the same no matter how much is deducted from each paycheck. If you have a low number of allowances, your employer will deduct more from each paycheck to be sent to the IRS. If you choose a higher number, your employer will deduct less from each paycheck. That does not impact your taxes owed to the government at the end of the year.

The taxes you owe to the federal government are determined based on your total gross income. That is income before any deductions, other than tax-deductible items that lower your tax bill. Taxes are calculated using a graduated scale. That means you pay a higher tax rate per dollar on higher income. It is important to understand, though, that earning more will not increase your taxes on the money you already earned. Someone who makes $20,000 per year and someone who makes $2,000,000 per year pays the same rate on their first $10,000 of income.

Payroll Tax Deductions – How Many Allowances Should You Choose?

So that form you fill out when you start working, form W-4, actually does a lot. (You can update your W-4 any time you like. I updated mine last year to lower my allowances.) It directly impacts your take-home pay each time you get a paycheck.

Some people have different philosophies, but I believe you should try to match your payroll deduction as closely as possible to your actual taxes owed, erring on the side of getting a refund. If you take too many allowances, you will owe taxes at the end of the year. If you take too few allowances, you will get a refund back from the IRS.

Think about it. If you get a refund of $2,000, you get $2,000 at the end of the year. Sure, you gave the IRS an “interest-free loan,” but with current interest rates, that probably cost you less than $5. Planning to owe the IRS, though, means you have to really plan out what you owe and save up to pay Uncle Sam on tax day. I would happily give up $5 to get a refund at the end of the year rather than owe money that will likely have to come from an emergency fund.

For most single adults, it makes the most sense to take 1 allowance. When I was single, because I made money from a handful of side hustles, I would rather have the extra taxes taken out of my regular paycheck to cover my taxes, so I took 0 allowances.

What You Should Do

It is up to you to decide which option is best. You can also talk to a tax professional to decide. If you want a little extra help deciding, BankRate.com has a great payroll deductions calculator to help you through the math. Just be careful not to be too conservative and get too big of a refund, or you will put a big crunch on your monthly budget.

Getting ready for tax time

To get ready for tax season, I always make a full list of what I expect to get and check things off as I go along. Taking the time to prepare in advance saves even more time when your taxes are due.

1. Make a list of all of your bank accounts (even ones that you do not use). As your forms start to come in the mail (or are available online), check them off of the list. Most bank tax forms start to come around the end of January. These come in the form of IRS tax form 1099.

2. Make a list of all investment accounts. Like banks, you will get forms starting at the end of January. Unlike banks, most investments do not require that you pay taxes until the investment is sold (realized gain or loss). Your investment firm will take care of tracking that for you and send you the detail. These come in different versions of the 1099 and several other forms.

3. Make a list of jobs or income sources that will provide income reports to the IRS. I had two jobs this year, but expect three W-2 forms from an extra income source.

4. If you have a mortgage, add that to the list. Form 1098 shows interest paid for a mortgage, which is tax-deductible.

5. Collect any other deduction forms. These can relate to education (direct school expenses and student loan interest) or donations. I keep my school book receipts and get a tax form from my school for tuition. I also make donations (not too big, as I am paying for school) to charities that qualify for a tax deduction. You can also find energy tax credits for home improvements.

I know taxes are not fun, but it is one of the two certainties in life.  Since you are reading this, the other one does not apply.  You have to pay taxes.  Get a jump start on planning and it will make your life a lot easier come April 18^th rolls around.

Hire an Accountant or Do It Yourself?

When tax season comes around in April, it's time to file your taxes for the prior year. You can actually file almost any time starting around the end of January. The earlier, the better! However, you do have to wait for all of your tax forms to come in before you can file. Here are some considerations for hiring an accountant versus doing your taxes yourself.

Hire an Accountant

The biggest benefit of working with an accountant is the low level of effort and knowledge needed to do your taxes. When you hire a licensed tax professional, you know your taxes are going to be done well and you have a built-in support system in case of an audit or hiccup with your taxes. You don't have to worry about knowing which box to check or adding up any numbers. You can pay to have someone do that for you.

If your taxes are simple and you only had one job as a single income source, you are certainly going to save money by using the software. However, if your taxes are very complicated, it is smart to hire a professional. With my financial knowledge and background, I have done my taxes myself since 2013. Prior to 2013, I had an accountant do my taxes. However, saving money was not the only reason I switched.

I found my accountant made a few errors here and there over the years. This isn't a big deal, mistakes happen, but when I found some silly mistakes that would have cost me thousands of dollars, I decided it was time to take over my taxes on my own. No one knows my finances better than me, after all, so doing my own taxes is the best path to an error-free return.

Online Tax Programs

Popular tax software like H&R Block, TurboTax, TaxSlayer, and TaxACT are great options for millions of people each year. If you have taxes on the simpler side of things, these programs can do absolutely everything you need. Many offer 100% FREE tax filing if your taxes are simple. Even with my self-employed income, I can still file with an online program.

In my experience, tax programs can handle any common tax situation with ease. If you have a load of complicated 1099s from freelance work, contracting, or an active investment account, you have to pay for the higher versions of the programs. I found that all major tax software, both online and desktop based, cost about $400 less than my accountant charged.

If you have the most simple taxes, you might even be able to file with a mobile app! You only need basic computer skills to file using an online system. I have used both H&R Block and TurboTax over the last four years. I found H&R Block does everything just fine, but I like the interface better at TurboTax and also found completing my taxes there to be a little faster.

Keep Organized All Year

Nothing makes taxes tougher than scrambling to get all of your paperwork together last minute. Keep your expenses and forms organized to make the process as simple and smooth as possible. I use Empower to track my investments and other spending. If you don’t like the online-only options, you can also use a program like Quicken to keep your financial info in one place on your home computer. Financial aggregators are particularly helpful if you plan to itemize your tax deductions.

After you file, be sure to keep your bank statements and tax records for future reference. If you do any freelance or contracting work, I suggest a program like Quickbooks to track your income and expenses. I use Quickbooks Online for my business, and use those reports to file my taxes myself. You might not be filling in your 1040 every day, but spending a little time each day can save you a ton of time and work when it comes time to gather your deductions and receipts for tax time. This is my favorite and most useful tax filing tip.

I keep three files in my file cabinet for the types of receipts and transactions I need to track for my personal tax return, and each time I get a receipt that I need to track, I drop it into the right folder. Some people have different deductions, so your folders may vary a bit from mine, or you might just combine them into one folder.

• Medical Expenses – Medical expenses can be reimbursed through a health savings account, so knowing how much to reimburse and being able to prove you incurred those expenses to qualify for the HSA tax deduction is important. If you don’t have an HSA, you may also qualify for a medical expenses tax deduction, so you’ll want to track your medical expenses either way. Qualified expenses include doctor visits, prescription medications, and any tests ordered by your doctor.
• Charitable Donations – If you itemize your tax deduction, you will want a record of every donation you make throughout the year. I put the receipts for each non-profit donation in a folder so I can quickly add them up at tax time. You can include cash donations or receipts from donations to organizations like Goodwill.
• Business Expenses – Even if your business is not registered as an LLC, if you earn money from a hobby or side business, you can deduct your expenses per IRS guidelines. I enter all of my expenses as they come in with my accounting program, but I also keep hard copies of every business expense by year in case I ever get audited.

Keep a Tax Forms File

Starting around mid-January, you will start receiving tax forms in the mail from your employer, bank, stockbroker, and any place that paid you more than $600 in non-employee compensation. Some people just get one W-2 form, but others get a stack of 1098 forms, 1099 forms, and others depending on your family’s finances.

On January 1^st, I put a new folder on my desk for the year’s tax forms. I always print hard copies and create an online backup just to be safe, as these are very important for tax preparation. Each time a new form shows up in the mail (or email), I put it in that file.

Keep Business Files Up-to-Date Monthly

Earlier in the article, I briefly mentioned how I track my business expenses. To make your tax preparation easy, you should keep your business accounting up-to-date all year. I enter expenses as they occur, and enter income monthly based on bank transactions.

Keeping my P&L updated took some time to set up the first month, but now I update everything the first week of each month and it only takes about 20 minutes per month. If I were to try to do this annually, I would spend much more than the four hours per year I currently spend on my books. Plus, I can better track invoices, revenues, and expenses with fancy one-click reports.

All of the information I enter into my accounting program goes into my Schedule C, which is an addendum to the 1040 for business income.

Tax Credits and Deductions

Here are the basics on deductions and credits. This is not a list of types, but an explanation of the impact credits and deductions have on your taxes.

The baseline on your taxes is your income. That is why taxes are often called “income taxes.” For simplicity (this is by no means accurate for tax brackets) let's say I made $40,000 in 2008 and pay 25% in taxes. I would have a $10,000 tax bill for 2008. (Those are not my income or tax numbers, this is just an example).

It is not that simple if you are a student or support a student (credit) or make donations to a qualified non-profit (deduction). Student loan interest (deduction), kids (credit), mortgage loans (deduction), and many more normal activities can lower your $10,000 tax bill.

In 2008 I had a tuition bill of $24,000. Tuition and related expenses (not room and board) can qualify for the “Hope Credit” or “Lifetime Learning Credit” depending on the situation. I qualify for the lifetime learning credit, which is a 20% tax credit up to $2,000. 20% of my tuition is $4,800, so I qualify for the maximum credit of $2,000. Because it is a credit, I can take that $2,000 off my tax bill and would owe $8,000 for 2008 in the example above. A credit subtracts from the total tax bill and has a bigger impact than a deduction.

Let's say I donate $2,000 to my synagogue in 2008. (I did not donate that much, but did donate something). Because a non-profit donation is a deduction, I would subtract $2,000 from my income of $40,000, leaving me with a taxable income, also called an adjusted gross income, of $38,000. At 25%, my taxes would be $9,500.

So a $2,000 impact on my taxes could have an adjusted impact of only $500. That is $1,500 less than a credit. That does not mean you should not donate to your favorite 501(c)3, but you should be aware of the difference between a deduction and a credit.

Should I itemize my deductions?

Every year, millions of Americans gather up their W2, 1099s, and other various forms to file their federal income tax forms. About 33% of all Americans itemize their deductions. It is important to understand how itemized deductions work to ensure you get the best tax rate possible.

Standard Deduction

If you are single, you automatically get a standard deduction of $5,800. Couples filing jointly get a standard deduction of $11,600 (2011 rates). The standard deduction acts as a minimum deduction amount if you do not qualify for higher deductions. 66% of taxpayers use the standard deduction.

Here is how it works in practice. If you earn $40,000 and file a standard deduction, your taxable income is $34,200. You deduct that amount from your income and calculate your taxes based on that lower rate, called your taxable income.

If you qualify for deductions higher than the standard deduction, you can itemize your tax deductions. The most common itemizations are listed below.

Retirement Account Contribution

If you have a self-directed IRA or small business SEP account, any contributions you make are pre-tax. If you contribute, it will lower your overall tax liability. If you have enough in your savings, you could even direct your employer to put 100% of your final paychecks into a 401(k) (up to a certain annual contribution limit), which makes that income tax-free.

If you own a business and do not have any employees, you can set up an SEP, or simplified employee pension. This works like a 401(k) for small business owners. All you need to do to open an SEP is to submit a form 5305-SEP at your bank.

Principal Residence Mortgage Interest

If you own a home, you can deduct the interest paid on your mortgage. I bought my first home this year, and I have been paying interest on my mortgage payment every month. You will receive a tax form 1098 from your bank giving you the qualified interest amount for the deduction.

Non-Profit Donations

When you give money to a 501(c)3 non-profit, save your receipts. If you donate anything to a non-profit, save all of the paperwork they give you. Every non-profit donation counts if you are going to itemize your taxes.

Be warned that disproportionately high donation deductions are considered suspicious by the IRS. Keep your receipts in case you are audited.

Education Expenses

If you are going to school, you can deduct tuition and related expenses such as books and fees. You cannot deduct room and board. Your school will give you a tax form listing your tuition and fees, but you are responsible for keeping receipts for your textbooks.

If you have a student loan, you can also deduct the interest expense for the life of the loan. While I am about two years out of school, I am still deducting about four hundred dollars from my student loan interest in 2011.

Business Expenses

This is a tricky area, but very important for the entrepreneurs out there. If you own a small business, you can deduct the expenses directly related to operating it. I deduct the expenses from running my websites, for example, web registration fees, hosting expenses, design expenses, and a portion of my internet costs.

Just beware that the IRS may consider your business a hobby if you are not profitable for five consecutive years. Beware podcasters and other hustlers, I lost money on my DJ business in 2011 because of the expenses to start up. Once you're profitable you'll have to pay taxes on that income.

Everything Else

There are tons of deductions, and I can’t write about all of them. Lucky for us, the IRS already did. You can get the details for every type of expense at the IRS website. When in doubt, you can call the IRS or ask your accountant for advice.

What to Do If You Forget a Tax Deduction

The day is finally here: You can mail off your tax return to the IRS and cross that dreaded chore off your list. You checked and double-checked your math, made sure that you dotted all of your i’s and crossed your t’s, and have all of the documentation required to prove your income and deductions. As you drop the forms in the mail, you breathe a sigh of relief . . . that is, until a little voice in your head reminds you of a deduction that you forgot.

It seems unlikely that one might forget a tax deduction. After all, every deduction you make lowers your tax bill and puts money back in your pocket. Yet for various reasons, ranging from simple forgetfulness and disorganization to delayed paperwork, every year thousands of taxpayers leave money on the table because they don’t claim those deductions on their taxes. The good news is, though, even if you already filed a return, you can still make those deductions.

Amended Tax Returns 101

According to the IRS, every year, millions of taxpayers file amended tax returns. Usually, these amended returns are required due to unreported income. It’s common for self-employed individuals, for example, to receive a 1099 or K-1 form after they filed their taxes, which necessitates filing a new return. As long as you catch such an error before the IRS does, and your original return was correct to the best of your knowledge when you filed (i.e., you did not deliberately commit tax fraud), there are no penalties for filing an amended return.

However, you can also file an amended return if the required changes reduce your overall tax burden.  The IRS allows taxpayers up to three years to make changes to filed returns. This means that if, say, you forgot to include a deduction for a boat you donated to charity, you can submit an amended return within the next three years to receive a refund on the tax you paid.

Keep in mind that in order to make a late deduction, you must file an amended return for the year in which the deduction applies, and you cannot just take the deduction the following year. In other words, if you donated a boat in 2015, you cannot take a deduction on your 2016 taxes if you forgot to include it when you filed for 2015. The IRS will reject the deduction, and you may face penalties for making a false return. To get credit for your donation, you must file an amended 2015 return.

How to Make the Changes

Amending your tax return requires submitting a form 1040X, Amended U.S. Individual Tax Return. You will need copies of the return and supporting documentation you already submitted, but you do not need to submit that paperwork again; it is only for reference while you fill out the 1040X.

You will also need documentation to support the deduction that you’re claiming. Review the rules for charitable donation deduction to ensure that you have all of the documents you need. Depending on the deduction you’re claiming, you may need a copy of an appraisal report as well as a receipt for the donation from the qualifying nonprofit organization.

Once you have gathered the paperwork, follow the instructions on the form, being sure that you fill in the correct tax year for which you are filing. Essentially, you will need to enter the amounts from specific lines on your original return with the amended amounts. You’ll also need to provide a written explanation as to why you are filing the amended return and submit the appropriate documentation.

Once you submit your amended tax return to the IRS, you can generally expect a refund within 12 weeks of receipt, provided that you don’t already owe taxes. Depending on the value of your donation, the amount of the refund you receive can vary from a few dollars to several hundred dollars. Keep in mind that amending your federal tax return can have an effect on your state return as well, so double-check to ensure that your state return is still accurate, and follow your individual state’s procedure for amending a state return.

If you worked with a tax professional to file your federal return, that same person can help you make amendments. Often, tax preparation services will offer the service at no charge. Whether you use a service or do it yourself, though, don’t end up kicking yourself for missing a deduction. As long as you have the paperwork you need, you can still get your money back.

The Most Common Tax Forms

As we reach the end of the year, it is time for that lovely American tradition: tax season.  Starting January 1st, keep your eyes on the mailbox (and e-mail box nowadays) for tax forms from employers, banks, investment companies, and other income sources.

To get ready, I always make a full list of what I expect to get and check things off as I go along.  Here is a re-visit of a post from last year about preparing for tax time.

Only three months to tax day. It is probably time to start getting ready. Here are my two cents on early tax preparations. The first steps involve making lists and gathering documents needed for tax preparation.

1. Make a list of all of your bank accounts (even ones that you do not use). As your forms start to come in the mail (or are available online), check them off of the list. Most bank tax forms start to come around the end of January. These come in the form of IRS tax form 1099.

2. Make a list of all investment accounts. Like banks, you will get forms starting at the end of January. Unlike banks, most investments do not require that you pay taxes until the investment is sold. Your investment firm will take care of tracking that for you and send you the detail.  These come in different versions of the 1099 and several other forms.

3. Make a list of jobs or income sources that will report income to the IRS. I had two jobs this year, but expect three W-2 forms from an extra income source.

4. If you have a mortgage, add that to the list. Form 1098 shows interest paid for a mortgage, which is tax deductible.

5. Collect any other deduction forms. These can relate to education (direct school expenses and student loan interest) or donations. I keep my school book receipts and get a tax form from my school for tuition. I also make donations (not too big, as I am paying for school) to 501c3 charities that allow for a tax deduction.

This is not an exhaustive list, as everyone has unique circumstances. I fill out a form for my accountant listing everything above and give him the big stack of tax forms. I found that a professional preparer is worth the cost in my case because my combination of income, expenses, scholarships, and deductions fall under so many different tax laws that only a professional could ensure I get every deduction and credit that I deserve.

The “Other Income” Tax Form: 1099

Not all 1099 forms are created equal. Depending on the source of the income, you may receive a 1099-MISC or a 1099-DIV. Maybe a 1099-INT or a 1099-R. There are many versions of this form for different purposes. Below is a list of the most common 1099 forms and what they are used for. Here is a list of the types of 1099 forms you may stumble upon in your tax preparations:

• 1099-A: Acquisition or Abandonment of Secured Property
• 1099-B: Proceeds from Broker and Barter Exchange Transactions
• 1099-C: Cancellation of Debt
• 1099-CAP: Changes in Corporate Control and Capital Structure
• 1099-DIV: Dividends and Distributions
• 1099-G: Government Payments
• 1099-H: Health Insurance Advance Payments
• 1099-INT: Interest Income
• 1099-K: Merchant Card and Third Party Network Payments
• 1099-LTC: Long Term Care Benefits
• 1099-MISC: Miscellaneous Income
• 1099-OID: Original Issue Discount
• 1099-PATR: Taxable Distributions Received From Cooperatives
• 1099-Q: Payment from Qualified Education Programs
• 1099-R: Distributions from Pensions, Annuities, Retirement Plans, IRAs, or Insurance Contracts
• 1099-S: Proceeds from Real Estate Transactions
• 1099-SA: Distributions From an HSA, Archer MSA, or Medicare Advantage MSA
• 1042-S: Foreign Person's U.S. Source Income
• SSA-1099: Social Security Benefit Statement
• RRB-1099: Payments by the Railroad Retirement Board
• RRB-1099R: Pension and Annuity Income by the Railroad Retirement Board
• RRB-1042S: Payments by the Railroad Retirement Board to Nonresident Aliens

1099-INT

The first 1099 I ever received in my life was the 1099-INT, for interest received. Most banks send you a 1099-INT if you earn more than $10 in interest during the calendar year from bank interest, though some banks send them regardless of the interest earned.

Interest earned and reported via a 1099-INT is taxed at your regular income tax rate and is treated as regular income.

1099-DIV

Stock market investors are generally familiar with the 1099-DIV, as it is used to report dividend earnings from stock investments. If you own any dividend-paying stock, your investment company will prepare a 1099-DIV form for you.

The 1099-DIV has different boxes used for different types of dividends, which do have an impact on your tax filings and tax rates. The most common boxes most investors will deal with are related to capital gains and cash dividends paid.

Investors may also receive a 1099-OID, which stands for Original Issue Discount. These forms are issued for certain types of debt investments, such as my investments with Lending Club.

1099-MISC

The 1099-MISC is a catch-all form used for income that doesn't fit into the other 1099 forms. All income has to be reported to the IRS, even if you don't receive a 1099 or another form. The 1099-MISC is used for freelance income, landlord rental income, royalties, some insurance proceeds, and “other income.”

As a blogger and freelancer, I have received 1099 forms for royalties, freelance writing, and affiliate revenues. These forms are most commonly issued to self-employed people or anyone with a sole proprietor business earning more than $600 per year from specific vendors.

1099-R

Most readers of this site are far from retirement, but as good retirement investors, we will all receive form 1099-R in the future.

Your 1099-R form will be sent by the investment company holding your retirement accounts when you take distributions. Depending on the type of retirement account you have, such as an IRA vs. a Roth IRA, your taxable income from a 1099-R will vary.

1099-Consolidated

I know what you're thinking, 1099-Consolidated isn't on that list I just read. WTF is a 1099-Consolidated?

A consolidated 1099 form is often provided by investment companies who would have to send you a stack of 1099 forms for your various investments. You may receive a 1099 consolidated form, which includes interest, dividend, and capital gains information, from both your brokerage and Betterment for the most recent tax year.

Using Flexible Spending Accounts to Save on Taxes

Tax season is approaching, and I have looked at ways to save on my taxes.  It is too late to sign up for 2011 unless you change jobs, but Flexible Spending accounts can save you big money on medical, commuter, and childcare through tax incentives.

What is Flexible Spending?

Flex spending accounts (FSAs) are a government approved method to pay for certain expenses before tax.  For commuters, parking and monthly public transit costs are allowed.  For parents, day care is allowed.  For all people, certain medical expenses are permitted.

In my last job, I took the Light Rail to work every day.  I ordered a monthly pass through a flex spend account and was able to pay for it pre-tax.  I am preparing for PRK laser eye surgery, and will be paying for that from a health care flex spend account.

How Do You Fund It?

FSAs are funded through payroll deductions from your employer.  When I was buying a $60 monthly pass, I had thirty dollars deducted from my account every paycheck to cover the cost.  The deduction was pre-tax, so I had a lower taxable income.

I knew in December that I would be getting eye surgery this year, so I did research to find the average cost.  I put in a conservative estimate ($3,500) to be deducted from my paychecks in 2011.  That means about $135 will be deducted from each paycheck pre-tax.  This will lower my taxes by about $1,000 this year, so the incremental cost for the surgery is only $2,500.

Commuter flex spend accounts can be enrolled or dropped at any time.  If you have a fixed monthly parking cost or transit pass, just add it through your company’s HR department.  It is that simple.

Health and dependent care accounts are set during your annual enrollment period or right after you are hired as a new employee.  Some life events, such as marriage or the birth of a child, allow you to make mid-year changes.  You are required to make a selection for your account before you need the money, so you have to estimate.  Guess conservatively; keep reading to find out why.

How Do You Spend the Money?

IRS publication 969 gives you the details of what is considered an eligible expense.  For the most part, any doctor appointments, hospital visits, prescription medication, medical devices, eye care needs, and medical operations are eligible.  Over-the-counter medications are not eligible as of 2011.

If You Don’t Use It, You Lose It

That’s right.  If you don’t use it, you lose it.  If you make an election for $1,000 and only have $500 in medical expenses, you lose the $500 you didn’t use.  Bummer, right?  So estimate very conservatively.  This is not a method for tax dodging, it is a tool to make certain expenses more affordable.

If you are a single twenty-something, you probably don’t need a health care FSA.  I had a very specific need for the account, so I was able to accurately estimate the amount.  However, I am healthy and rarely go to the doctor, so I will probably skip it in 2012.

Your “Right” To Lower Credit Card and Tax Debt

I occasionally hear a radio commercial saying that if you call a business, they can help you with your “right” to lower your debt. You do not have any right to lower your credit card and tax debt. That is a fallacy. You might have the option to negotiate lower debt, but that might not be the best option.

If you owe $20,000 to a credit card company, it is because you bought $20,000 dollars worth of stuff. You bought it. The company did not force you to buy it. If a credit card company negotiates a lower balance with you, it looks really bad on your credit report. It might feel like you are saving money, but you are probably doing much more harm in the long run.

When a company “forgives” debt, they are writing off the debt as a loss. This is reflected in your credit report. A write-off looks much worse than a late payment. Late means you still paid. Write-off means you did not. It is that simple from the eyes of a lender.

The same goes for taxes. A tax settlement might get you out of some of your debt, but it looks really bad. To get to the point of settling, you probably already went through a rough spot and collections. All of these things look bad on your part. It is no one's fault but yours.

I know it might sound hard if you are in a tough spot, but you should figure out a budget and figure out how to pay off your debt. Once it is paid off, you have that much more cash to save and use to help you live a better life. It is a short-term struggle with long-term benefits.

5 Ways to Use a Tax Refund

Cover Your Bills

If you are already in a bad situation, make sure to pay your bills. Pay them on time.  If you are having trouble making ends meet, though, it is probably a good idea to start a top-down financial overhaul and fix your spending problems. Remember, it is no one else’s fault that you are in debt or can’t make payments. Take responsibility for your personal finance and fix it.

Emergency Fund Savings

We have seen a lot of people come up short over the last couple of years. If you want to avoid the situation above, save up for a bad day. You never know when your income may be disrupted or you will have an unexpected expense. That is why it is called an emergency fund, after all, you can't plan for when you need it.

Automated Retirement Savings

Why not take that refund and put it straight into a Roth IRA or 401(k)? You are already used to living without that money, so stay used to it.  Put it away for your future in a tax advantage account. Automation is key to ensuring you don't spend what you should be saving.

If you think about it, the social security tax is going to “fund your retirement” anyway, so use that part of your budget as it was intended.

Take a Class

People will save up to $2,000 in 2011 from this tax cut. Why not take a class that will pay off in the long run by helping your career or income prospects. Learn a skill that can pay you, like bookkeeping or photography.

Buy a Stock

A lot of investors don’t know where to start, so they are not an investor yet. Put the money into a brokerage account and learn how to invest. Buy a stock, ETF, or other investment. It could pay off in the future. Use it as inspiration to learn more about investing.

This post was originally published on September 28, 2017 and updated on November 27, 2021.

There are ways that you can save money without sacrificing your soul or overall happiness.

Here's how:

Create a Values-Based Budget

Every day you choose what to spend money on. Yes, some of the things you spend money on are needs, like rent and food, but a lot of it wants as well.

In order to save money without feeling like you are giving up everything and sacrificing your soul, you need to create a values-based budget.

A values-based budget focuses on the things that provide value in your life and cuts out the things that don't serve you.

Start by looking at your expenses, and categorize each one as a want or need. Then, start looking at everything in the want category. Does everything in the want category align with your values? Or is it mindless spending, while going through the motions?

Oftentimes we may think we spend money on our values — but if you want to know your values in reality, look at where you are spending your money. For example, if you value books, but choose to spend money on video games instead, your budget and your values are misaligned.

To reconcile your values and your spending, create a list of things that you really value — things that truly make you happy, that bring value to your life and your relationships, and make your life easier.

Once you have created a list with your values, make room in your budget for them and ruthlessly cut out other unnecessary items. For example, my priorities are getting out of debt and traveling. Because of these big priorities, I choose to live a minimal life. I live in a studio apartment with my partner and don't have a car, don't have a TV or any pets. Would I enjoy some of the things I choose to live without? Sure. Would they make my life more convenient? Sometimes. But I don't need them and they don't offer the same value as getting out of debt and traveling do.

An exercise that helps me stay focused on spending on my values, is realizing that spending money is a political act. Every time you spend money, you are supporting something or someone. Who or what do you want to support? This exercise helps me be more intentional with my spending and support the things I love in my life.

Automate Everything

Saving money can feel like work, but a great way to free up any brain power is to automate everything. I am a huge proponent of automating your savings. Before moving to New York for graduate school, I saved $14,000 using the power of automation.

Each paycheck, I would automatically contribute $600 to my savings account. Because it was automatic, I didn't even have time to miss it. Saving money, like anything else you want to master in life, requires persistence and positive habits. For me, automating my savings ensures that I am sticking to my goals and putting myself first.

As my old acting teacher would say, “there are a million reasons not to do something, but you just need one good reason to get started.” I believe what she was saying is that excuses are everywhere. They are the poison of productivity and will sway your thinking. With automation you are taking yourself out of the equation, so you can save money where it counts, and spend time on the things that really matter.

Make Saving Money Like a Game

Imagine you are playing a game and the goal is to save as much money as possible but still buy the things that you want. This is a real game I like to play any time I spend money. When I think about it this way, and know what I'd do with the money saved (pay off debt + travel), I am motivated to look for deals.

If you are doing any shopping, look for coupon codes and other money-saving deals on sites like RetailMeNot first. If you are wanting to go out for dinner on the town, save some money and use Groupon. If you still want to enjoy nice luxuries like a massage, or pedicure, go to a beauty school.

I've gone to beauty schools several times and have always enjoyed their services. The services require a bit more time, but it's worth the savings for me. I have gotten a pedicure, haircut and facial for around $30, which is hardly the price for one of those services at a professional salon.

The Bottom Line

When you know your values, it's easy to find ways to save money elsewhere, so you can spend it where you really want. Think of saving money like playing a game and ask yourself, “Can I get this cheaper? How?”

In short, saving money doesn't have to be a daunting task that you “know you should do”, but haven't gotten to yet. Forget about mindless spending and invest in relationships and hobbies — things that are everlasting and will offer value for years to come — not momentary blips of happiness.

Saving money so that you can spend money where it matters, hardly feels like saving. It's a simple mind shift that focuses on appreciating what you have and spending on your values.

Do you have any savings hacks to help spend on your values?

This post was originally published on December 25, 2014 and updated on August 31, 2022.

A global financial crisis erupts when the value of financial assets in the global market drops rapidly.  This can occur due to investor behavior or assets being overrated.  When the global stock market crashes and the markets become extremely volatile, both businesses and consumers are affected. The interest rates increase, and banks become reluctant to allow consumers and companies borrow money, while charging higher interest rates on credit and loans.

Because of fear of not being able to afford their lifestyle in the future, consumers tighten their belts and spend less. As a result, companies are not making enough profit.  This can force them to increase their service or product price, make employee cutbacks or shut down some of their divisions. Thankfully, though, experts believe there is a way to protect your stock portfolio against the global financial crisis.

Stock Investment Risks

The two risks involved in investing are un-diversifiable risks and diversifiable risks. Un-diversifiable risks are caused by inflation rates, interest rates, natural disasters, war and other related factors. Any event occurring due to these factors will affect any company regardless of the industry.  This is a risk investors can do nothing about. Conversely, diversifiable risk can be reduced by distributing investments between different financial assets. This type of risk is typically related to a particular market, industry, country, economy or company.

Diversification is Key

Diversification is simply a technique of reducing investment risk by investing in different industries and financial instruments. This is because different categories, industries and instruments react differently to the changes in the market. The same event may receive different responses from various investment categories.

Diversification does not necessarily mean you will not lose, but it can be used for long term financial objectives and for minimizing the risk. A diversified portfolio can tolerate the risks much more greatly than a portfolio that isn’t diversified. For example, if your portfolio bag is filled with minerals like gold and platinum and the mining unions decide to go on an indefinite strike like it usually happens in South Africa, the share prices of gold and platinum stocks will drop, as they would not be production for the duration of the strike. In addition, your portfolio value will also drop.  However, if you invest in minerals, grain and other categories, only part of your stocks will be affected by the mining strike.

Diversification is important to reduce volatility and manage the risks. It is important to remember that you can only reduce the risks associated with stocks of an individual company or industry, but the risks of the general market are unavoidable. To create a risk tolerant portfolio, you have to master the art of asset mixing.  You can do this by studying the market or seeking help from experts. Putting your stakes in different sectors or stocks is currently the only efficient protection against the global financial crisis. Diversification is not necessarily foolproof against stock meltdown impacts, but getting the correct diversification mix can greatly protect your investments.

This post was originally published on October 3, 2013 and updated on June 17, 2021.

Luckily we live in an age where online tools and apps can help us save time and money dealing with our personal finances. Read on for some amazing tools to simplify, organize, and manage your finances.

Manage Your Day to Day Finances

Between your checking account and all of your debt accounts, you have a lot to keep straight. Plus, if you have as many accounts as me, it can take hours each week to log in to each account and make sure everything is working as you expect.

There are many tools and apps built just for this purpose. Here are a couple of favorites that can help manage your finances:

• Mint.com – Mint.com is one of the original online budgeting applications. Connect your bank accounts to get daily updates on your balances, and transactions, and watch your spending on debit and credit cards automatically populate your budget for simple, easy tracking. Mint.com is free to use.
• You Need a Budget – YNAB has its budgeting philosophies built around giving every dollar a job. If you earn a dollar, it should be assigned to a budget category like groceries or rent, or a savings category like an emergency fund or Roth IRA. YNAB takes a less automated approach than Mint. YNAB is free for 34 days, then $5 per month or $50 per year.
• Quicken – If you love the idea of automatically tracking your financial accounts but don’t trust web-based security, Quicken is the best option for you. Quicken is the leading desktop-based budgeting app, and it connects to all of your accounts for automatic updates and categorization.

Manage Your Investments

Your investments need different attention than your other accounts. Investments should be set up to work for you over time and do not require daily check-ins or tinkering. There are special tools to help you there.

One such tool is Empower. Empower offers tools to analyze your investments and investment fees and offers alternative suggestions to align your portfolio to your own investment goals. Using the tools at Empower, I was able to save over $300 per year in 401(k) and mutual fund fees. That will save me tens of thousands of dollars by the time I retire. Empower also offers checking, savings, credit card, and loan account tracking in addition to investments.

If you want extra help with your investments, new advisor services are designed to help you manage your money with as little work as possible. These services also charge far lower fees than traditional financial advisors. Empower offers this type of service if you want to work with a human advisor. If you are okay with computer algorithms managing your investments, Betterment, Blooom, and Wealthfront are excellent options.

Automate to Save Time and Money

Now that you have your finances organized and are on track to get out of debt. Using free online tools, you can further automate your finances to save even more time and money.

Most banks offer free online bill pay. Using this tool, you can turn some bills on autopay while paying others manually through one central dashboard. This is much easier than logging into each site to pay. or sending a paper check in the mail like it’s 1986.

Does your employer offer direct deposit? If you are not taking advantage, sign up right away. It is much easier to have your money just show up in the bank on payday rather than getting a check and physically depositing it.

Did you know that most large employers also allow you to split your direct deposit? Put the majority in your checking, but automate your investments and savings by sending a portion of your paycheck to a savings or investment account. Depositing $200 into an IRA or Roth IRA automatically each paycheck will get you most of the way to maxing out that retirement account each year, which can lead to big tax savings.

There are so many tools and options to automate your finances today. Don’t let your finances hold you back from living the life you want, use your finances to follow your dreams. It all starts with a good budget, automating where you can, and putting your finances on autopilot. You’ll be amazed at how easy and fun it can be to keep your personal finances on a plan. If you follow through and take the time to set everything up right, you’ll be in great shape for many years to come.

This article is published in conjunction with InvestmentZen. To learn more about investing, credit cards, and managing your money, check out InvestmentZen today!

This post was originally published on March 24, 2020, and updated on August 31, 2022.

However, depending on the amount that needs to be repaid over time, a ten-year duration often forces student borrowers to pay an amount that far exceeds their financial means. Whether you are a student borrower in repayment or still in deferment, it is important to understand the student loan repayment plans available and which works best for your circumstances.

Related: PPP010: How to Pay Off Student Loans

Federal Student Loan Options

Nearly 90% of all student loan debt in America is in the form of federal student loans, given the degree of ease borrowers can acquire the amount of funding they need to attend a college or university. Under the federal student loan program, borrowers have multiple options as it relates to repayment which makes it challenging to know which one is best-suited for each situation. Here is a breakdown of the eight federal student loan repayment programs, and borrowers who likely benefit the most from each.

• Standard repayment – under the standard repayment program, borrowers are placed on a predictable 10-year repayment schedule, where the same monthly payment is due in month one as it is at the end of the term. All student borrowers qualify for standard repayment; however, individuals with significant amounts of student debt may not be able to afford the monthly payment easily. Additionally, borrowers who qualify for a program that forgives any remaining balance at the end of the repayment term may benefit more by selecting a different repayment plan.
• Graduated – similar to the standard repayment, borrowers who select a graduated plan pay over ten years and no forgiveness is available at the end of the term. However, payments begin at a lower amount and increase every two years on a set schedule. This repayment plan is a strong choice for borrowers who know their income is slated to go up over time, enough to afford the payments as they increase.
• Extended – under an extended repayment plan, borrowers who have Direct and FFEL loans dispersed after October 7, 1998, and a balance of more than $30,000 can have repayment spread out over 25 years. The monthly payment is calculated as a percentage of discretionary income, either 10 or 15%, and changes over time as earnings increase or decrease. Extended repayment plans are suitable for borrowers who have a substantial amount of debt to repay or those who do not qualify for a forgiveness program.
• Income-based – borrowers who meet the criteria of a financial hardship may qualify for an income-based repayment program. Monthly payments are either 10 or 15% of discretionary income but never more than the standard repayment amount, and repayment is extended for 20 or 25 years based on the total amount due. Borrowers who work for in public service and select an income-based repayment plan can request forgiveness of the remaining balance after ten years, while those who work in the private sector may request forgiveness at the end of the repayment term.
• Pay As You Earn – borrowers who have direct loans funded after October 1, 2007, and experience a partial financial hardship are eligible for Pay As You Earn plans. Monthly payments are capped at 10% of discretionary income and change as income increases or decreases. As with income-based repayment, public service forgiveness is available after ten years while all other borrowers have their remaining balance forgiven at the end of the 20-year repayment term.
• Revised Pay As You Earn – any borrower who has a direct loan qualified for the revised pay as you earn plan. Repayment is extended either 20 or 25 years, based on the amount due, and monthly payments cannot exceed 10% of the borrower’s discretionary income. Both public service forgiveness and full term forgiveness are available.
• Income-contingent – borrowers with direct loans qualify for income-contingent plans. The repayment term extends up to 25 years, and monthly payments are the lesser of 20% of discretionary income or what the borrower would pay on a 12-year fixed payment plan. Public service forgiveness and full term forgiveness are available to qualified borrowers.
• Income-sensitive – under an income-sensitive repayment plan, borrowers with FFEL loans can extend repayment over a 10-year period, and monthly payments are based on annual income determined by the lender. Forgiveness is not available with income-sensitive plans, but borrowers with small loan amounts and lower income may find this plan the most suitable.

When selecting an appropriate repayment plan, it is important not only to consider monthly budget constraints but also to recognize that any amount forgiven under an income-based plan is taxable in the year forgiveness takes place. Here is another resource on the topic of income-driven repayment plans.

Related: How to Manage Student Loan Payments When Self-Employed

Loan Consolidation and Refinance

Borrowers with student loan debt through the Department of Education have an opportunity to consolidate multiple loans into a single, easier-to-manage loan through this site. Consolidation offers borrowers the benefit of one monthly payment and simple organization of student debt. However, the interest rates across all federal student loans are aggregated into one which may end up being slightly more. This could cost borrowers more over the life of the loan. Most income-based repayment plans encourage the process of consolidation of eligible loans so that the servicer can calculate accurate monthly payments.

For borrowers who have federal, private, or a combination of federal and private student loans, refinancing may be an option for lowering monthly payment obligations as well as the overall interest rate. Refinancing is similar to consolidation in that it involves taking out a single, large loan to cover all student loans, but instead of being serviced through a Department of Education partner company, a refinanced loan is managed by a private lender. Refinanced student loans are available to borrowers who have a strong credit history and a proven track record of earnings, and interest rates offered by private lenders are either fixed or variable. However, once student loans are refinanced, there is no option to reduce the monthly payment or switch to an income-based plan with a private lender. Refinancing is a smart option for borrowers who have high-interest rate loans, or those who do not qualify for income-based repayment plans through federal programs.

Managing student loan repayment requires some work from borrowers. Start by understanding what types of student loans are in play, and then focus on the repayment programs available for either federal or private programs. Take the time to work through income and other expenses so that you know for certain a repayment plan fits within your monthly budget, and work directly with your student loan servicer to change your plan as needed.

What is a Data Breach?

A data breach happens when hackers are able to break into a company’s computers and steal customer information. This happens when a very smart hacker, or when there are unsound security policies. This has happened to big companies, government agencies, and universities over recent months and years. And the trend is not slowing down.

In 2013, Target was hacked and 42 million people had their information leaked, myself included. When Home Depot was breached a short time later, 56 million card numbers were leaked along with 53 million email addresses.

Those are the two highest-profile breaches, but there have been plenty of others. Each time this happens, your personal information is at risk. When the Target breach took place, my credit card number that I used for a purchase at a Target store became public information for sale to the highest bidder.

While that sounds like a scary proposition, you can take steps to prevent any financial losses. Being proactive is important to keep hassles and losses to a minimum.

What to Do When You are the Victim of a Data Breach

If you have received word from a place you’ve shopped, your bank, or the media that your data was leaked in a data breach, don’t panic. Everything will be fine.

If fraudulent charges are made on your credit card or debit card, you are not liable for the charges. Your cardholder agreement protects you from fraud. Your bank and the merchant share some liability for the fraud. In most cases, the bank will cover the cost of the fraudulent charges.

That said, you should still act proactively to ensure you don’t suffer any undue hardship, or even worse get stuck with the bill for fraud.

How to Prevent Problems

After my card number was stolen, I received a letter from Chase telling me that my card information was stolen and to be alert for any possible fraudulent transactions. Eventually, the bank relented and sent me a new card with a new number.

I was not worried about fraud, because with a credit card my personal assets are protected. If you ever see fraud on your credit card account let the bank know (immediately). They will remove the charges from your account.

If your debit card information was stolen, that is a whole different story. It is important that you demand a new account number right away, even if the bank does not offer one.

If someone gets ahold of your debit card number, they can drain all of the funds out of your bank account. While you will get the money back after filing a fraud claim, it can take weeks, or in the worst case months, before you get your money back. This is one of the reasons I encourage people to use credit cards for all purchases – in addition to miles and points, if you are able to avoid excessive spending and pay off your balance in full each month.

To summarize, if your credit card number is stolen, keep a close watch on your statements, and report any fraud if you see it. If your debit card is stolen, request a new one right away.

Questions and Stories

Have you ever been the victim of credit or debit card fraud? Please share your story and how you solved it. If you have any questions, leave them in the comments below.

Bills Calendar

Most of our bills are on the same date every month. You can print out a bills calendar that sits by your computer, desk, on your fridge, or wherever you do your work best and won’t forget. That simple calendar may be all it takes. Here are some blank calendar templates to get you started.

Another option is to use an online calendar. I already use the free Google Calendar for all of my planning, and it ties into my email, smartphone, and work calendar so I only need to look one place. You can set up recurring reminders for each bill with an email to you so you don’t forget.

Set Your Bills On Auto-Pay

If you are anything like me, you’d probably rather just skip the work and have the bill pay itself. For every bill other than my credit cards, that’s exactly what I do.

My internet, cell phone, and Netflix bills are automatically charged to my credit card every month. Nothing to worry about. And I get miles from paying my bills. With a Chase Ink card, you get 5x points for phone bills.

My mortgage is paid using my bank’s bill pay automatically each month. My mortgage is paid electronically, but it can also send a check for businesses that are not set up to receive electronic payments.

The only bill I pay manually is my credit card, which I pay more than once per month to keep my balances low.

Bill Reminders

As an extra reminder, most of your billers probably offer an email reminder option. If you are not on auto-pay, you can set up the site to send you an email reminder before each bill is paid so you don’t forget.

If you are not able to set up a reminder, you can also use a to-do list tool like Wunderlist to send you emails every month before your bill is due.

Batch Your Bills

If your bills are due on different days all over the month, you may be able to get the dates moved to all be due on the same day, or at least the same few days, during the month.

Almost all credit card and utility providers are happy to change your due date if you call and ask. Some even let you make the request online.

If you pay all of your bills at once, you are less likely to forget that odd bill due another time of the month.

How Do You Remember Your Bills?

What tricks and tips do you have to remember to pay every bill on time? Please share your best ideas in the comments. Who knows, maybe you’ll even help me make my bill payment better!

This post was originally published on August 14, 2013, and updated on September 29, 2021.

1) Impacts Your New Job Opportunity

If you have a below-average credit score, then you realize that you might pay a higher interest rate for a car loan (even though I would never suggest doing that), but who would have thought that your bad credit history could impact a future job opportunity? Most people don't consider this, but it's absolutely true. This is one of the many reasons why a credit score is more important than one might think.

While employers can't pull your actual credit score, they often do review your credit history. If they discover that you often miss payments on your bills or have questionable transactions, then they might deduce that your character is suspect. After discovering this, they could choose not to hire you and instead hire someone else that has similar qualifications but has a glowing credit report. This probably doesn't happen all that often, but it definitely CAN happen when you are on the hunt for that new job. Be sure to check your credit history once in a while to be sure that you don't get caught in this situation.

2) Affects Your Insurance Rates

Another area we hardly think about is insurance. Insurance is one of those things that we sign up for because we have to, and then we just ignore it for many years because it's confusing, boring, and can be a hassle to dig into. However, if you have bad credit, your car insurance and home insurance might be almost double what they have to be. Again, bad credit is a red flag for those that are trying to understand your character. If their model shows that people with poor credit history get into more wrecks and have more claims than those with sparkling credit, then you'll have to pay more, plain and simple.

3) Impacts the Need for a Security Deposit

When I was young and had very little credit history, I remember having to pay security deposits for things like my new cell phone plan and the utility bill. I didn't think much about it at the time – I just assumed everyone had to do the same thing. As I think back to those days though, I had to put $250 down on my cell phone bill because they checked my credit history and saw that I had no credit (which is equivalent to bad credit in their eyes). After a full year of payments on my phone service plan, I was able to get my $250 back. The same was true with my utility bill. I was living in a house with five other guys during college and I never had any other bills under my name before. Since they had no record of me or my past history, they required that I pay $200 in order to transfer the utility bill into my name.

This doesn't sound like a huge deal, but when you have bad credit, quite a lot of your money will get tied up into security deposits when it should be in an account or an investment earning you more money! Bad credit is not only costing you money, but it's keeping you from earning more.

4) Affects Banking Services and Fees

Banks love customers that are trustworthy and consistently pay their bills on time. On the flip side, they aren't so fond of those that constantly cause them headaches. If you have bad credit, then you likely won't qualify for those free bank accounts. Instead, they might require you to pay a small fee each month to house your money with them. And, in addition to this, you'll likely get high fee credit cards offered to you in the mail.

Having bad credit is a terrible thing, even if you don't want to borrow money. Keep an eye on your credit history at least once a year and be certain that it is accurate. If there is a mistake that is hurting your credit, do everything in your power to get it removed so you can keep your credit history clean. After all, it could make the difference between a high paying job with a large cash flow and a terrible job with a million fees and security deposits. Which would you rather have? Check your credit today.

This post was originally published on April 16, 2015, and updated on November 27, 2021.

Where did you come up with the idea to open an eBay store? How did you get started?

For a while I was working in a local used bookstore and I started noticing books I thought were vastly underpriced. With the help of some coupons I managed to pick up a first edition copy of The Return of Sherlock Holmes for about $15 and a first edition copy of For Whom the Bell Tolls for under $3. I listed these books along with some lots of less valuable books from my collection in an attempt to downsize what was rapidly becoming unmanageable (shelves lining each wall and stacks of books on every flattish surface).

With this early success I realized this was something that could potentially be quite lucrative and at the same time keep me around the books that I love so much. I started buying up deals when I saw them either in person or through strategic internet scrolling—something I soon found myself doing whenever I was bored or had a little free time. I started the eBay store specifically for the reduced fees and extra free listings, but I have found that it makes a nice front for my merchandise and has the added benefit of a nice easy link to refer potential customers to my business.

What is the biggest lesson you've learned when creating eBay listings to drive the most sales?

Some of the biggest lessons I learned early on weren’t from anything I did myself but from watching other people’s mistakes. I could spend hours combing through eBay auctions tailored specifically to the type of books I want to sell and it was rare that I would find anything priced significantly low enough to make enough money after fees to even put in the effort of buying and reselling them. But the few things I did find with a significant profit margin were books that were just poorly marketed. I’ve bought books with the title “book”; I once bought a biography of President Truman that mentioned it was signed but didn’t mention it was signed by the president.

These sellers were losing a lot of money just by being too lazy to list their items properly or simply not using common sense in their listing titles (I just hope these types of sellers aren’t reading this now or it’s going to severely affect my revenue stream). I don’t use buzz words or anything in my listing titles but I do make sure that the most valuable pieces of information are readily available, otherwise how are the people willing to give me money going to find my shining needles in the giant stack of hay that is eBay.

Is your eBay store your primary income, or a side hustle? Do you have plans to make it a full-time living?

At the moment eBay (and hopefully soon other marketplaces) is my primary income but mostly because I haven’t found a decent full or part time job. The best part about this business is how well it works as a “side hustle”. I started selling books while I was still working 30 hours a week at the used bookstore and started making money pretty much right away.

By the very nature of being a primarily online business I get to set my own hours, work only when I want to, and exchange any time I can/want to for profit. I would love to eventually make this into a full time career, either working for myself or for one of the big names in rare books, but as of right now it’s really not enough to live too comfortably on.

Where do you source your books for sale? How much do you like to keep in your inventory?

I started out primarily buying books from the store I worked at and from various websites. Since then I have moved into visiting other local businesses: from flea markets, antique malls, and used bookstores to yard sales and estate sales. I don’t really worry about a set inventory. I buy books that I know I can make money on and as long as I can still move about in my apartment without directly stepping on books I will continue to purchase as many books as I can find. The books that I deal in (primarily rarer books whether antique, signed or first edition) tend to be niche items that can take a while to sell so my inventory has grown rather steadily.

What was the most expensive book you have ever purchased? What was the highest priced sale you have ever made? How do you know you have the value right when you buy and are getting the best price possible when you sell?

I bought a signed copy of Jack London’s Call of the Wild (unfortunately a 10^th printing) that was in rather rough shape for $100 with the intention of having it repaired and reselling it for upwards of $1000. I ended up listing it as is and still sold it for $525 making it the most expensive single book I’ve ever bought and sold (so far).

I came into this business with a decent knowledge of books; between working in a book store, majoring in English in college, and having a lifelong passion for reading. This basic knowledge tempered with insight gained from running the business means I generally have a good idea of how much a book is worth without doing much outside research. That being said before I make a purchase of any significant amount I do use varying online sources (eBay sold listings, vialibri.net, Amazon) to come up with a full picture of both asking prices and selling prices.

Sometimes (if I’m lucky) the books I’m buying and selling are one of a kind and it can be a risk spending a decent sum of money on them, but so far using my knowledge that always seems to be a risk that was worth taking. eBay can be a risky place to list your items if you don’t use it properly. Something as simple as listing a high value item with a low starting price in the auction format in a time frame that is bad for sales (for instance immediately after Christmas) can mean your item sells for significantly less than it’s worth.

I avoid this by starting auctions at a reasonable selling price or listing items as buy-it-now with best offer so I’m never taking a price I’m not comfortable with. On the other hand I know for a fact some of the one of a kind items I sell are going for less than their worth simply because I don’t have the right connections to sell them at their potential value.

For instance I sold a copy of Carl Sandburg’s autobiography signed to then president of CBS and television hall of famer Frank Stanton for $500, and while this was a great profit on what I bought it for I think it could have been worth substantially more if I knew anyone at CBS nowadays. Right now I have a set of books that have been in the Ewing-Sherman family for well over 100 years and are signed by General William Tecumseh Sherman’s wife to their children, as a high value item they will most likely sit on eBay for a while whereas a few decent connections could have them sold tomorrow.

Do you run your online business out of your home, or do you have outside space you use? How do you store your inventory while waiting for buyers?

I do run my business out of my home at the moment. I still have the bookshelves lining every wall but I've gotten rid of most of my personal collection and now instead of cheap fantasy books and beat up Mark Twain novels they’re covered (quite liberally) in my much more valuable inventory.

What is the biggest thing you've learned from your eBay store experience that you wish you knew when you started?

One of the biggest ongoing mistakes I made early on was my inability to separate perceived value from actual value. A lot of my early purchases were made along the lines of “this book is too cool not to be worth more than that.” Sometimes that steered me well,, but especially without figuring too much into fees and shipping costs early on I did make a few purchases that resulted in a net loss.

If you were going to start over today with a new eBay store, what steps would you take to start earning a profit as soon as possible?

Honestly I’m pretty happy with the way I started my business. There were a couple mistakes value-wise early on but the total net losses have been pretty low. Some of the only things I could really have improved on were basic costs that could have been minimized if I had been better informed: I used to buy shipping materials at big box stores and spent way too much money on them compared to buying in bulk online like I do now. Even now I’m still learning, testing the waters with different auction formats and branching out into other seller marketplaces.

Do you think others could have similar results starting their own selling business on the side?

I specialize in selling books because I love books and that has made every moment of this fun rather than seeming like extra work, and the fact that I knew a decent amount to begin with has curbed a lot of the beginner mistakes I would have made otherwise. But everything I’ve learned is equally applicable to any item you could think of. If you don’t know anything about selling books I wouldn't recommend following in my footsteps, but if you like sports there’s a huge market out there for sports memorabilia. Ditto for toys, electronics, clothes, etc. But if you just like money there’s no need to specialize at all, enough intelligence and research can turn retail arbitrage of any sort into a very lucrative career or side business.

If you want to visit and support Chris, here is how to find him:

• Pinks Books eBay Store
• Pinks Books on Facebook
• Pinks Books on Bonanza

If you have any questions for Chris about his online business, please leave them in the comments below!

This post was originally published on March 9, 2015 and updated on January 20, 2020.

Without any further ado, take it away George!

I recently got my MBA from NYU Stern's business school. I was inspired to write this because I want to give my opinion on the value of an MBA degree for anyone thinking about attending business school. This is not some fluff piece extolling the virtues of an MBA. This is the cold, hard truth as I see it.

Numerous studies have shown that those with more education typically live longer, are healthier, and perhaps most importantly, earn several times more than their less educated counterparts. After all, education is supposed to help us develop our skills. Now, we can have a debate about what in-demand skills a liberal arts degree or a philosophy degree actually impart on thousands of students every year, but let’s save that for another day.

For now, let’s focus on “harder” skills like programming, business administration, finance, medicine, and law for example. There have been numerous debates about the value of an education these days as millennials are increasingly burdened with crippling student loan debt without feeling as if they are getting a good return on their investment with a degree from fill-in-the-blank university.

This post is not about the merits of a four-year degree. However, a bachelor's degree is a prerequisite for getting into business school, so suffice it to say that I believe that one should get their bachelor's degree. It's a requirement for most good entry-level jobs, and you'll have a much tougher time competing with your bachelor degree-wielding peers for good jobs without one.

Now, for the million-dollar question, should you get your MBA? Well, it depends. Let me explain.

For Whom Is An MBA Best Suited

The Degree Monger 

Maybe you went to law school already but decided that practicing law wasn't for you. Maybe you got a graduate degree in some other field that now bores you to tears so you decided to go back to school and attend business school.

If you want to learn about the fundamentals of business, save your money. Buy a book. Here's a great list. You just saved $100,000. Feel free to tip in the form of cash, check, or credit cards. That's not what B school is for.  

The Ladder Climber

If you have worked for at least a few years, had some real world job experience, and have a (fairly) good idea of what you want to do, and how a degree can help you get there, then you are on the right path.

For example, you aspire to be a Manager, Director, VP at your company and a good portion of upper management in your company have business degrees, having an MBA is probably an unspoken requirement. There may be people who are in higher positions in the company without graduate level degrees, but if you dig a bit deeper, there's a good chance that they either worked at the company longer than their counterparts or had serious connections.

This isn't a be all end-all, but typically you'll need an MBA to advance quickly in the following industries:

• Finance
• Healthcare
• Manufacturing
• Government
• Consulting
• Consumer Products and Goods (CPG).
• IT

(For a complete list, see this article here) 

The Career Switcher

You hate your job. You're stuck in a rut. If you have been working for at least a few years and don't want to start in a new field at the bottom of the pay scale, the easiest way to switch careers is through an MBA.

One huge caveat I should point out is that the other (and much cheaper) way is through networking. Now, if you can successfully switch departments within your company or network your way into a position at another company into your desired field, then by all means pursue that route. However, more often than not, it is difficult to get hired for a position or industry for which you have no skills or experience solely through networking. Few employers will take that risk.

An MBA is a great way to develop marketable skills and gain some experience in your chosen industry. However, you must attend a full time program. This is not optional.

I have friends who attended Columbia Business School, Northwestern's Kellogg, Chicago Booth, University of Maryland, Georgetown…and they are all pretty much in agreement that it is an entirely different experience attending a part time versus full time program.

An MBA gives you access.  That is essentially what you are paying for.

• Fortune 50 companies send their HR recruiters to the top business schools.
• “Day in the Life of…” outings where students get to meet top executives at firms and spend the entire day shadowing, learning from, and speaking with employees at top companies only occur at top business schools.
• Summer internships, while open to everyone on the surface, are fiercely competitive, and are typically won by those who attended top business schools.

At the end of the day, you're paying for access–access to potential angel investors in your startup business, access to a powerful alumni network, access to that summer internship at that prestigious corporation, or access to face time with recruiters at top companies. If you don't attend a top 25 business school, there's a good chance that you may not get the same level of access. By not having the same level of access, you face a greater chance of not getting an immediate role at a great company.

However, it's not enough to have developed skills and attended a good business school. You actually have to gain some experience before someone will hire you. The best way to gain experience is through a summer internship. First year MBA students spend a good amount of time worrying about their summer internship because they understand its importance.

If you do well over the summer for an employer, there's a good chance that you will be hired upon graduation. This is how people not only advance in their current industry, but switch industries altogether.

If you're in a part time program, you still have access, but it's not quite the same.  The summer internships are reserved for full time students. After all, you can't just take three months off your current job, right? Well too bad because this is where jobs are won and lost for career switchers.  I'm not saying it's impossible to switch careers without a summer internship, but it will be much harder.

Paying For School

I remember when I first contemplated the idea of going to business school. I did a ton of research, listened to friends and family, and read tons of blogs. However, I was still undecided until I received one piece of invaluable advice. It came from my boss, the CEO of the company I was working for, and my uncle all within the same week.

They all said: “If you cant get into a top 25 school, or get your employer to pay for it, then don't do it. The ROI is simply not worth it.” These were smart people who attended Michigan, Harvard, and Georgetown respectively.

I had taken the GMAT but I scored below the median the first time around, and definitely didn't have a 4.0 in undergraduate school. Therefore, I was certainly worried. Still, when they explained it to me it made sense and once I ran the numbers.

Scenario 1 – Full Time

• The average business school tuition is at least $100,000
• If you attend a full time program, you have to factor the cost of not earning a salary for at least 2 years (opportunity cost).
• Let's say that you were earning $60,000/year.
• That means that the full cost of attendance is: $100,000 + $60,000 (opportunity cost) = $220,000.

Scenario 2 – Part Time

Let's run the numbers for attending school part time:

• $100,000 tuition.
• Continue to earn $60,000
• Full cost of attendance = $100,000

Scenario 3 – Employer Sponsored

Now what if you can get your employer to pay for school.

• Most likely will have to remain at your job for at least 1 year post graduation
• Full Cost =$0

Congratulations, you hit the lotto. Forget a matching 401K, this is the pinnacle of free money. If you can convince your employer to pay for business school then it truly doesn't matter what school you attend or whether you want to switch careers. It's free! Run, don't walk to the nearest business school before your employer changes their mind.

Calculating ROI

For those who can't get your employer to sponsor their education, the real question is whether or not the increase in earning power you hope to accrue upon graduation is more than ~$220,000.

Now this will vary depending upon the industry in which you work, as well as the seniority of your current and future position. For this reason, I'm not going into some detailed calculation of average 3% salary increases accounting for inflation an whatnot because, again, there is far too much variance in industries and position.  In general, this is how you should view the ROI of a degree:

• If your salary will increase by at least $20,000 upon graduation, then you should attend business school.
• The chances of getting a big bump in salary increase drastically with the quality of your program due to access to a prestigious network.

In a nutshell, if you had spent two years with your head down at your current job, you probably would have been promoted and earned an additional ~10K. However, if you hit a ceiling and most likely will only be promoted to upper management with an MBA degree, then it's worth it to attend. Alternatively, again, if you're a career switcher, then you should attend a FULL TIME program.

With the additional $10,000 per year you will be making, the degree will pay for itself in less than a decade. Moreover, you will most likely be promoted more quickly than your peers who do not possess that degree.

Bootcamps vs MBA

But what if instead of spending an estimated $100,000 on your degree over the course of four years and ending up in debt, you were able to spend only ~$12,000 and three months in school? Bootcamps.

The interest in so-called boot camp programming is on the rise. Multiple reports note the increase in students attending bootcamps. Originally, boot camps were promoted as a way for low-income students to gain access to a quality education at a fraction of the cost of traditional private universities. However, boot camps have increasingly become a source of valuable talent in the eyes of employers.

Generally speaking, most higher education institutions have not really tackled the issue of the growing skills gap between what is being taught in academia versus what many employers in the “real world” are seeking.

Employers are seeking students who have an increasingly rare skill set. Boot camps such as General Assembly, Hack Reactor, and Dev Academy have recently sprung up to meet this demand. Students were spending time on their own brushing up on their skills through books, one-off classes, or one-off coaching. Now these boot camps have given a more focused, collaborative, rigorous, and supportive environment in order to foster a more refined knowledge of the skill looking to be developed.

If you're attending business school because you want to develop your analytical capabilities, then you should attend a bootcamp. Data science, data visualization, marketing analytic, and the like are all hot fields. There's big data, artificial intelligence and machine learning!  People who understand these fields and have the skills to understand and interpret the huge amounts of data being generated are going to be in demand for the next 20 plus years. The fastest way to a role in one of these exciting new fields is through bootcamps.

Ok, now let me step back for a moment here. I attended one of these fancy, expensive MBA programs so why am I talking about bootcamps? Well you think that I would be making 200K at some fancy Wall Street Firm right? It was all worth it? Sadly, the jury is still out (and no I’m not making 200K at some cushy job).

Don’t get me wrong, I loved my MBA experience and I learned an awful lot. However, I now face the reality that I will probably be paying student loans for the next 10 years if I continue to work a 9-5. I have a nagging feeling that I could have gotten my current job working in digital media without my fancy degree. Perhaps I could have even spent the past 2-3 years building experience (rather than education), and making even more money!

So which is it? Should you attend a traditional university, gain a bigger network, and have a more-well rounded education? Or should you attend a three-month boot camp, save a considerable amount of money, but be well versed in only a much more narrowly defined set of skills? Which do employers prefer? Well, as with most things, the answer depends. Let’s do a quick Pro/Con (MBAs and their damn spreadsheets I know, I know)

This is merely an example, but you can use it as a template. You should basically list your goals and assign a score to each item in your table to weigh its importance.

For example, having to relocate and pay for housing in another city to attend school may be huge negative to some, but not a big deal for others. Total up the score for each column and the one with the most points wins.

Look, in my humble opinion, and coming from a clearly biased perspective, it comes down to pure ROI.  I work in digital media and aspire to be a successful entrepreneur with my new website.  It is debatable whether one can go to school to learn how to be an entrepreneur. Moreover, I probably would have acquired digital marketing skills (such as paid search, SEO, HTML) through a much cheaper online course, coupled with real world experience. Not sure if I needed to pay 100K+ for a grad degree.

If there's one thing I can take away from my MBA experience, it's the idea of risk. You'll need to assess the risk of what your degree will cost you. Is the investment worth it?

Call me a fool, wise, ungrateful for my education. I can handle it. It's just my opinion. Would love to hear yours. Let me know your thoughts in the comments section!

George Diaz is a personal finance blogger at Sobre Dinero. Where he helps readers deal with debt, mortgages, and more.

Here's Steve:

My wife and I are challenging the status quo: We are paying off our mortgage early! Most people say “Take out a 30-year mortgage and pay it like a 15”.

We decided to take out a 15-year mortgage and paid it like a 13 instead. That’s a joke, but you get the point.

We did some things to pay ahead and save about $6,000 in interest along the way.

Did we kill ourselves to get it done? No, but we have lived a lifestyle that others have paid dearly for in the way of installment loans and credit card debt. Instead, we chose to pay ahead and get rid of the mortgage early too.

Here are 5 steps we took to pay off our mortgage early:

1) Spend wisely

The first thing my wife and I did was to begin spending wisely. This involved a monthly budget and setting goals.

The budget made it really easy to see where our money was going – and where it was hemorrhaging! We spent a lot of money on groceries, eating out, and entertainment. Who doesn’t?

After looking at our spending habits, we were able to pivot in certain areas and created margin in our budget.

2) Pay off all consumer debt

This seems like a side step or a distraction, but it’s really not. It’s hard to pay extra on a mortgage when you’re still servicing two car payments and a student loan.

We focused on closing credit card accounts, paying off the cars, and getting rid of any other pesky loans that got in our way of shoveling money to our next financial goal.

3) Avoid new debt

This one is HUGE, but nobody thinks it’s important. After paying off our debt we made sure we’d never fall back into it again!

The goal here was to maintain cash flow by saving up for large purchases and expenses that sneak up on us when you aren’t paying attention. You know what I’m talking about 🙂

Once again, we weren’t actually sending money to the bank to pay off the mortgage, but it certainly kept us from going back into debt for a car, vacation, or even the kitchen remodel we did in 2009.

4) Send any extra money by the end of the month

Our improved cash flow from spending wisely and eliminating debt payments allowed us the margin in our budget to send money to pay down the mortgage.

Don’t get me wrong; there were other things that came before paying off our house. Some of our money went towards retirement and my daughter’s college savings first.

This may seem anti-climactic or disappointing since you are reading an article about paying off a mortgage early, but it’s the best way to maintain a stable lifestyle and keep your sanity during this loooooong race.

Finally: Any money left over went to pay down the mortgage principle, including bonuses and those magical months when we received three paychecks instead of just two.

5) Use TV time to create a side hustle

It’s amazing how much brighter the day is when you give up the nightly news and reality TV.

Don’t get me wrong, I still watch some shows but the time spent vegging in front of a tube is done with my spouse (and a few episodes of Steven Universe with my daughter – she loves that show!)

Over the past decade I started spending more time reading, learning, and working towards building up my coaching practice. Instead of consuming television commercials I am generating income by helping people learn what we did: Kill off debt and rebuild net worth.

This goal was so serious that I took a seasonal job at a large department store this winter. Not only was I earning some extra money in my free time but I lost about 15 lbs.

Work is hard, but it’s also good for generating income. All that income went towards paying off the mortgage early.

On December 14^th, 2015 my wife and I are going to the bank to pay off our mortgage. The rest of our day will be spent at one of the local wineries and talking about what we are going to do when we won’t have a mortgage.

There are certainly other ways to pay off a mortgage early. I’d love to hear about them in the comments below. How are you accelerating your mortgage payoff?

Steve Stewart has been teaching and encouraging others how to eliminate debt and build wealth for almost a decade. This year he left his day job, used cash to buy a car and new windows for his house, and is paying off the house as a Christmas gift to his wife. You can find out more about Steve, his blog, and his new podcast “No Debt, No Credit, No Problems.”

This post was originally published on December 10, 2015 and updated on December 2, 2019.