retirement http://www.wisebread.com/taxonomy/term/416/all en-US Should You Pay Your Mortgage Off Early? http://www.wisebread.com/should-you-pay-your-mortgage-off-early <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-pay-your-mortgage-off-early" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/married_couple_home_18525549.jpg" alt="Married couple paying off their mortgage early" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Hate sending that big payment to your mortgage lender each month? You're certainly not alone. But what if you had the ability to pay off that mortgage loan early, either by paying extra dollars toward your loan's principal balance or by paying off the rest of your mortgage in one giant payment?</p> <p>Should you do it? Or are there times when <em>not </em>paying off your mortgage early actually makes sense?</p> <p>Not surprisingly, it depends on a host of factors. Here is what you should look at when determining whether paying off your mortgage early is the best choice.</p> <h2>Tax Benefits</h2> <p>When arguing against paying off your mortgage early, most people point to the mortgage interest deduction. This allows most homeowners to deduct annual mortgage payments.</p> <p>There is a catch here, though: You can only claim the mortgage interest deduction if you itemize your taxes. And you should only itemize if your deductions are higher than the IRS' standard deduction, which as of 2016 stood at $12,600 for married couples filing jointly and $6,300 for singles and married people who file separately.</p> <p>This means that those homeowners most likely to benefit from the deduction are those who have purchased higher-priced homes, have a high interest rate on their mortgage, or are in the very early stages of paying off that mortgage. For other homeowners, the deduction will either be less than or barely more than their standard deduction.</p> <p>This means that you'll need to determine &mdash; perhaps with the help of your accountant or financial adviser &mdash; whether the mortgage interest deduction is really helping you at your current stage of paying off your mortgage. If it is, then factor this benefit in when determining whether you should pay off your mortgage early. But if it's not? Then don't let the promise of a yearly tax deduction influence your choice.</p> <h2>Other Debt</h2> <p>According to Freddie Mac's Primary Mortgage Market Survey, the average interest rate on a 30-year fixed-rate mortgage stood at 3.54% as of Nov. 3. The average rate for a 15-year fixed-rate mortgage was an even lower 2.84%. Those are both extremely low interest rates.</p> <p>At the same time, financial website Bankrate reported that the average variable interest rate for credit cards stood at 16.28% as of Nov. 2.</p> <p>The message here is clear: If you are burdened with high-interest credit card debt, and you have enough money to spend extra on your mortgage loan or pay it off entirely, it makes more sense to put those extra dollars toward your credit cards.</p> <p>It makes financial sense to pay off debt that comes with higher interest rates first. It might feel good to make that big monthly mortgage payment disappear, but it's smarter to whack away at your <a href="http://www.wisebread.com/5-day-debt-reduction-plan-pay-it-off?ref=internal">credit card debt</a>, which, thanks to high interest rates, can grow quickly each month.</p> <p>Before deciding to pay extra on your mortgage or pay it off entirely, look at your other debt first: Use your extra money to eliminate the debt that is costing you the most each month.</p> <h2>Are You Staying Put or Moving?</h2> <p>How long do you plan on staying in your home? Do you plan on living out the rest of your days there? Or are you already planning a move in five to seven years?</p> <p>It makes more sense to pay extra on your mortgage loan if you plan on staying in your home for a longer period of time. By paying extra each month, you can shave thousands of dollars off the amount you'll pay in interest during the life of your mortgage.</p> <p>But if you plan on moving in five years, paying extra doesn't make as much sense. You'll sell your home long before you come close to paying it off. So if you're not going to be a long-term resident of your current home, put that extra money to better use.</p> <h2>Are You an Investor?</h2> <p>Those who argue against spending extra on your mortgage say that most homeowners would be better off taking those extra dollars and investing them. This goes back to the low interest rates attached to mortgages today. If you are only paying an interest rate of 3.5% on your home loan, why wouldn't you keep that debt and instead invest in the stock market, where you could make a return of 7% or more on that money?</p> <p>This assumes, though, that you'll actually invest the money that you won't spend on your mortgage loan. If you're more likely to spend it instead, you're better off paying down your mortgage or even paying it off early.</p> <h2>Retirement</h2> <p>Are you close to retirement? You might want to pay off that mortgage early. It's best to enter retirement with as few monthly payments as possible. If you plan to stay in your home after retiring, paying off that mortgage early makes sense. You are then free to use that money that you would have sent to your lender each month however you choose.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/watch-out-for-these-5-last-minute-home-buying-costs">Watch Out for These 5 Last Minute Home Buying Costs</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide">Rent Your Home or Buy? Here&#039;s How to Decide</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing debt homeownership interest rates mortgages paying off early retirement tax benefits Wed, 16 Nov 2016 10:30:27 +0000 Dan Rafter 1833769 at http://www.wisebread.com 8 Signs an ETF Isn't Right for You http://www.wisebread.com/8-signs-an-etf-isnt-right-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-an-etf-isnt-right-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/little_boy_money_71664445.jpg" alt="Finding signs that an ETF isn&#039;t right for you" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In recent years, exchange traded funds, or ETFs, have become a common part of many retirement portfolios. They work much like mutual funds, but can be traded throughout the day and often have lower costs. But how do you know if an ETF makes sense for you? After all, there are <em>literally thousands </em>of ETFs available, all with unique characteristics and goals.</p> <p>Most financial advisers suggest that investors keep things simple by finding ETFs that track major benchmark indexes, such as the S&amp;P 500. They should generally have low fees and fit in with other investments in your portfolio, too.</p> <p>Here are some key ways to determine if an ETF isn't right for you.</p> <h2>1. It Has High Fees</h2> <p>Anytime you purchase a mutual fund or ETF, it's important to note how much of your money is going to fund managers and other expenses. High fees can take a big cut out of your overall earnings, and there's little evidence that ETFs with higher fees perform better than cheaper ones. It's possible to own very solid ETFs with expense ratios at 0.1% or lower. If your ETF's expense ratio is significantly higher, it may be time to invest in something else.</p> <p>&quot;Anything above 0.3%, and it gets a little excessive,&quot; says Justin Halverson of Great Waters Financial in Minneapolis.</p> <h2>2. You Don't Understand It</h2> <p>As ETFs have grown in popularity, they've also grown in number &mdash; and complexity. That means there are many &quot;boutique&quot; ETFs with very unique philosophies and goals. There are ETFs that zero in on very specific industries or market sectors. There are ETFs that do elaborate things involving leverage, or track obscure indexes. For most investors, these ETFs are complicated and unnecessary.</p> <p>&quot;You can get as fancy as you want with it,&quot; said Charlie Harriman, a financial adviser at Cloud Investments LLC in Huntsville, Alabama. &quot;We usually advise that investors stick with the staples and things they know.&quot;</p> <h2>3. It's Too Risky</h2> <p>Some of the unique ETFs mentioned above are designed to generate big returns in some cases, but there's a huge downside if markets go south. Some ETFs use leverage to potentially amplify returns by two or three times an underlying index &mdash; thus, they can amplify losses during downturns. The average investor who is saving for the long term does not need to take on additional risk with ETFs that are designed for short-term trading.</p> <h2>4. It's Too Conservative</h2> <p>It's important that your investments match up with your financial goals. This means that if you're a young investor, you probably don't need a bonds ETF, or an ETF with low-growth dividend stocks. These types of ETFs may help you avoid a big loss during a market downturn, but you'll never be able to amass the kind of wealth you need in retirement unless you get a bit more aggressive.</p> <h2>5. Its Holdings Overlap With Other Things You Own</h2> <p>Diversification is great, but sometimes you can go overboard. When you invest in an ETF, you are getting exposure to a wide range of stocks, and there may be other ETFs with similar holdings. For instance, an ETF that tracks the overall stock market may own a good chunk of Apple stock, and a tech-focused ETF may own a lot of Apple stock as well. So it may not necessarily make sense to own both. Be sure to check the list of holdings for each ETF you own in order to avoid redundancy in your portfolio.</p> <h2>6. You Can't Trade It for Free</h2> <p>Many discount brokerage firms allow account holders to trade certain ETFs without paying a commission. For example, Fidelity allows fee-free trades for all ETFs offered by iShares. By eliminating this commission, you could save upward of $7 on every stock purchase, which is a lot of money if you make frequent purchases. This is particularly advantageous for younger investors who prefer to invest a little at a time rather than one large sum.</p> <p>If you're looking at an ETF to buy but it's not available without paying a commission, consider switching to a similar ETF that is. If your broker does not offer commission-free trades on ETFs, maybe that's a good excuse to switch brokers.</p> <h2>7. It Doesn't Track an Index Very Well</h2> <p>Many ETFs are designed to track a specific benchmark index, such as the S&amp;P 500 or Russell 2000. If they do what they are supposed to, your returns will be closely aligned with the performance of these indexes. But some ETFs do it better than others. It's easy to find an ETF's &quot;tracking error,&quot; which measures the difference between an ETF's performance and the benchmark it's supposed to be tracking. Most ETFs will have a tracking error of less than a tenth of a percent.</p> <p>&quot;If you see a high tracking error, this could work out to an investor's benefit, but it may also be to their detriment,&quot; Halverson says.</p> <h2>8. It's Not Traded Very Heavily</h2> <p>The only way an ETF is sold is if there is a buyer. Likewise, you can't buy a stock if no one is selling. With most ETFs, it's easy to buy and sell because there is a large trading volume &mdash; meaning that there are plenty of buyers and plenty of sellers. And when there is a high volume, there is rarely a big spread between the &quot;bid&quot; and the &quot;ask&quot; prices. But what happens if an ETF has a low trading volume?</p> <p>Halverson said this could mean that the ask and bid prices are far apart, and it may be hard to complete a sale at the price you want. Most investors, he said, will find it easier and better financially to trade ETFs that are more commonly traded.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-signs-an-etf-isnt-right-for-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-you-shouldnt-invest-like-warren-buffett">7 Reasons You Shouldn&#039;t Invest Like Warren Buffett</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-invest-when-youre-in-debt">6 Ways to Invest When You&#039;re In Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-essentials-for-building-a-profitable-portfolio">5 Essentials for Building a Profitable Portfolio</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-lessons-we-can-learn-from-baseball">8 Money Lessons We Can Learn From Baseball</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment ETFs exchange traded funds fees funds retirement risk trading Thu, 03 Nov 2016 09:30:25 +0000 Tim Lemke 1825852 at http://www.wisebread.com 5 Essentials for Building a Profitable Portfolio http://www.wisebread.com/5-essentials-for-building-a-profitable-portfolio <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-essentials-for-building-a-profitable-portfolio" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/growing_money_trees_84090749.jpg" alt="Finding essentials for building profitable portfolio" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For many people, investing is the most complicated and intimidating aspect of managing money. But it doesn't have to be. Here are some of the essentials for building a successful investment portfolio.</p> <h2>1. Know What You're Investing For</h2> <p>Investing is best done with a purpose in mind. Investing for a child's <a href="http://www.wisebread.com/when-should-you-start-saving-for-your-child-s-education">future college costs</a> is not the same as investing for your retirement. You would use different investment vehicles &mdash; a 529-plan account or Coverdell Education Savings Account for college, and an <a href="http://www.wisebread.com/401k-or-ira-you-need-both">IRA or 401K</a> for retirement.</p> <h2>2. Know Your Time Frame</h2> <p>Investing is for goals you want to accomplish in five or more years. Anything shorter than that and you can't afford to take much, if any, risk, so you would be best served by a savings account.</p> <p>Still, a &quot;five or more years&quot; time horizon contains a wide range of options. Someone planning to retire in 10 years should invest quite differently than someone planning to retire in 30 years. The first person can't afford to take as much risk as the second person. By the same token, the second person can't afford the risk of playing it too safe.</p> <h2>3. Know Your Temperament</h2> <p>This has to do with how well you sleep at night when the stock market is in free fall. Vanguard has a decent <a href="https://personal.vanguard.com/us/FundsInvQuestionnaire">free assessment</a> that combines your investment time frame with your temperament to suggest an optimal asset allocation &mdash; that is, what percentage of your portfolio you should allocate to stocks and what percentage to bonds (or stock, or bond-based mutual funds).</p> <h2>4. Know How to Choose Specific Investments</h2> <p>If investing is the most complicated and intimidating aspect of managing money, choosing specific investments is the most complicated and intimidating aspect of investing. Very few people have the wherewithal to do this on their own. It's helpful to acknowledge that. As Clint Eastwood's Dirty Harry character noted, &quot;A man's got to know his limitations.&quot; Of course, the same is true for women!</p> <p>There's just too much to know. There are thousands of different investments to choose from. And it can be crazy confusing (and dangerous) to make these decisions based on the all-too-common articles about &quot;Last Year's Best-Performing Mutual Funds&quot; or &quot;Where to Invest to Take Advantage of Advances in Wind Power.&quot;</p> <p>The crucial decision you need to make is not so much about which investments to choose; it's about which investment process to use. Here are three options.</p> <h3>Go With a Target-Date Fund</h3> <p>The simplicity of such funds has made them tremendously popular. Most of the big mutual fund companies offer them. You just choose the fund with the year closest to the year of your intended retirement as part of its name (Fidelity Freedom 2050, for example). The fund is designed with what the fund company believes is the ideal asset allocation for someone with that retirement date in mind, and it even changes the allocation as you get closer to that target date, becoming increasingly conservative. It's a very simple process, but <a href="https://www.soundmindinvesting.com/articles/view/target-date-funds-the-devils-in-the-details">all target-date funds are not alike</a>. So, be informed.</p> <h3>Go With an Investment Adviser</h3> <p>He or she will get to know you and your goals and then tailor an investment strategy to you. Along the way, you will typically pay 1% of the amount of money you have the adviser manage for you each year. Also, advisers usually won't work with anyone with less than $100,000 to manage. If you go this route, ask friends for referrals and opt for a fee-based adviser (as opposed to one compensated by commissions) who works as a &quot;<a href="http://www.wisebread.com/who-to-hire-a-financial-planner-or-a-financial-adviser">fiduciary</a>.&quot;</p> <h3>Go With an Investment Newsletter</h3> <p>Whereas an investment adviser works with clients one-on-one, an <a href="https://www.soundmindinvesting.com/articles/view/what-investing-newsletters-do-that-financial-magazines-dont">investment newsletter</a> works with investors on a one-on-several thousand (or however many subscribers they have) basis. There are hundreds of investment newsletters, each with their own investment strategies. Subscribers gain access to the strategies along with the specific investment recommendations needed in order to implement the strategies. Subscription costs range from less than $200 per year to over $1,000 per year.</p> <h2>5. Know Some Market History</h2> <p>One of the biggest threats to your success as an investor can be seen in the mirror. When the market falls, it's easy to give in to fear and sell. When the market is booming, it's easy to give in to greed, and invest too aggressively.</p> <p>Far better to understand that the market cycles between bull markets and bear markets (growing markets and declining markets). Even within a specific year, there will be ups and downs.</p> <p>That's why it's so important to have a trusted investment selection process. With a good process in place, you should have some sense as to how your portfolio is likely to perform under a variety of market situations and you should be content to stay with it in good times and bad.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/5-essentials-for-building-a-profitable-portfolio">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-are-income-stocks">What Are Income Stocks?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-too-much-investment-diversity-can-cost-you">How Too Much Investment Diversity Can Cost You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-costly-mistakes-diy-investors-make">9 Costly Mistakes DIY Investors Make</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-moves-to-make-before-you-start-investing">8 Money Moves to Make Before You Start Investing</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment advice college fund financial advisers money management portfolio retirement risk stock market target date funds Wed, 26 Oct 2016 10:00:11 +0000 Matt Bell 1820715 at http://www.wisebread.com 8 Money Lessons We Can Learn From Baseball http://www.wisebread.com/8-money-lessons-we-can-learn-from-baseball <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-money-lessons-we-can-learn-from-baseball" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/baseball_player_63715703.jpg" alt="Learning money lessons from baseball" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We're deep into baseball's postseason, and we'll soon be left to fend for ourselves in the long, cold winter. But even in the offseason, the National Pastime can teach us many good lessons, like, the value of working as a team, and how even the best people can fail more often than not.</p> <p>Baseball can teach us about money, too. When you examine the game, you can come away with some lessons that will help you manage your spending and your investments.</p> <p>Consider these truths about the game we love.</p> <h2>1. It's a Long Season</h2> <p>Do you get upset when your baseball team loses a game or two? Do you have trouble with the ups and downs of the season? When you're a fan of team, it's easy to forget that there are a <em>lot </em>of games to be played, and the only thing that matters is where you finish.</p> <p>Your investing approach should reflect a similar reality. Don't get emotional about a stock price being down on any individual day. Like a baseball team, the stock market can slump, but often rebounds. Keep your eyes on your long-term financial goals, and eventually you'll be popping Champagne just like a team that won the title.</p> <h2>2. Homers Are Great, But So Are Singles and Doubles</h2> <p>In baseball, you'd love to have a team that hits a lot of home runs. But you might be just as successful if you have a team that just gets on base and knocks in runs one by one. This is true when it comes to investing. While we'd all like to see that single stock that explodes and makes us rich, the reality is that most of your success will come from small, incremental gains that compound over time.</p> <h2>3. Protect Your Lead</h2> <p>Every good baseball team has a &quot;closer,&quot; or a pitcher who comes in late in the game to get the final outs. When investing, it's also smart to have a plan for protecting your investments when you approach retirement age. As you get older, it's wise to move away from growth stocks and other more volatile investments, and move toward bonds, stable dividend stocks, and cash. This way, your retirement fund will be protected even if there is a big downturn in the stock market.</p> <h2>4. It's Okay to Take a Risk</h2> <p>Sometimes in baseball, you need to try and run for home even though you might be tagged out. If you play too conservatively, you may not win. This is also true for investing. A young person who is investing for the long term will never get rich if they have a conservative portfolio. Most financial advisers recommend investing in mostly stocks when you're young, because the risk is usually outweighed by the potential for higher returns. Sure, you'll get burned sometimes. But more often than not, you'll come out ahead.</p> <h2>5. It's Simpler Than You Think</h2> <p>Baseball has a thick rule book, and it's not easy to master. But at it's core, it's pretty easy to understand. Throw the ball. Hit the ball. Catch the ball. And try to score more than your opponent. Money management and investing are simple things, too, even though they can seem intimidating. Spend less than you earn. Invest as much as you can, in things that mirror the overall performance of the stock market. Get the basics right, and you'll do fine.</p> <h2>6. Think Globally</h2> <p>Baseball may be an American sport, but it's an international game. It's played around the world, from the tropical ball fields of the Caribbean to busy cities like Tokyo. And Major League Baseball teams know that they need to look globally to find the very best talent. Your approach to money and investing should also take on an international approach. Consider investing in emerging markets that offer strong potential for growth. Take a look at currency trading, or even international commodities. There is money to be made if you look outside the United States to build your investment portfolio.</p> <h2>7. Limit Your Mistakes</h2> <p>No one's perfect, either in baseball or with their money. But frequent errors can mean the difference between winning and losing. In baseball, fielders want to catch the ball and throw it accurately. Batters want to avoid swinging at bad pitches. Pitchers want to avoid walking in the winning run.</p> <p>Your finances are just as vulnerable to being hurt by mistakes. Don't buy things you can't afford. Don't invest in things you don't understand. Don't raid retirement funds without understanding the consequences. There are many things you can do wrong to send your financial planning off the rails. With baseball and with your money, it's important to play smart.</p> <h2>8. Look for Value</h2> <p>The best-selling book <a href="http://amzn.to/2dxAyjC">Moneyball</a> by Michael Lewis outlined how the Oakland Athletics were able to field competitive teams despite having a lower payroll than most competitors. The book's core message was that the A's had developed ways to find players that were undervalued by the rest of the league. This desire to find &quot;value&quot; is a key part of money management. When looking to buy something, remember that expensive items aren't always the best. Look for a good combination of quality and price. When looking to purchase stocks, seek out companies that may be undervalued by the marketplace.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-money-lessons-we-can-learn-from-baseball">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-times-you-shouldnt-invest-in-stocks">10 Times You Shouldn&#039;t Invest in Stocks</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-an-etf-isnt-right-for-you">8 Signs an ETF Isn&#039;t Right for You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-essentials-for-building-a-profitable-portfolio">5 Essentials for Building a Profitable Portfolio</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-you-shouldnt-invest-like-warren-buffett">7 Reasons You Shouldn&#039;t Invest Like Warren Buffett</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-8-rules-of-investing-you-need-to-know">The Only 8 Rules of Investing You Need to Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment analogies baseball money lessons retirement risk saving sports stocks teamwork Fri, 21 Oct 2016 09:01:03 +0000 Tim Lemke 1816943 at http://www.wisebread.com What Are Income Stocks? http://www.wisebread.com/what-are-income-stocks <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-are-income-stocks" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_investments_71091499.jpg" alt="Learning the basics of income stocks" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You may think that investing in stocks is all about share price increases over time. In reality, you may be surprised to find out that the price of some stocks can vary little over time and still provide an ever-increasing stream of income. These types of securities are known as income stocks.</p> <p>Let's review the seven things you need to know about income stocks and their ability to provide a high payout to investors.</p> <h2>1. They Pay a Dividend</h2> <p>The defining feature of an income stock is that it pays a regular and predictable dividend, which often increases over time. For example, Caterpillar Inc. [NYSE: <a href="https://finance.yahoo.com/quote/cat">CAT</a>], a leading manufacturer of construction, mining, and transportation equipment, has <a href="http://www.caterpillar.com/en/investors/stock-information/dividend-history.html">paid a dividend to its stockholders</a> every quarter since 1933. For the last 22 years, Caterpillar's cash dividend has consistently increased and it stands at $0.77 per share of common stock &mdash; up from $0.35 in 1996, and without adjusting for the two-for-one stock splits of 1997 and 2005.</p> <p>A predictable, steady, and ever-increasing stream of income makes income stocks attractive to those retirement savers who're close to retirement age.</p> <h2>2. They Are Often Large Companies</h2> <p>While income stocks can be found in many industries, they are most often part of the real estate, energy, utility, natural resource, and finance industries. One example of an income stock in the energy sector is Phillips 66 [NYSE: <a href="https://finance.yahoo.com/quote/PSX/">PSX</a>], which has been in the news due to its spinoff from ConocoPhillips back in 2012. It doubled its stock price in the first year after the spinoff, and attracted Warren Buffett's investment (a <a href="http://www.barrons.com/articles/buffet-bets-1-billion-more-on-phillips-66-1472470538">15.2% share of the company</a> as of late August 2016). (See also: <a href="http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett?ref=seealso">The 5 Best Pieces of Financial Wisdom From Warren Buffett</a>)</p> <p>The Houston-based multinational energy company generated $161.2 billion in revenue in 2014, a figure that is bigger than the GDP of some nations around the world. Since its 2012 spinoff, Phillips 66 has been consistently paying a quarterly dividend that started at $0.20 per share of common stock and stands now at $0.63 per share of common stock.</p> <h2>3. They Have Been in Business for a Long Time</h2> <p>Generally speaking, the less established a company, the more likely that company can experience extraordinary growth per quarter. Think of 12-year-old Facebook or 13-year-old Tesla, whose current stock prices are seven and 10 times, respectively, their original prices after going public. Both Facebook and Tesla would be considered growth stocks. On the other hand, income stocks are those of companies with a long history. Caterpillar and Phillips 66 were originally founded back in 1925 and 1917, respectively. (See also: <a href="http://www.wisebread.com/what-are-growth-stocks?Ref=seealso">What Are Growth Stocks?</a>)</p> <h2>4. They Are an Alternative to Fixed-Income Securities</h2> <p>If you have a 401K, chances are that you have a target-date fund. In 2014, 48% of 401K plan holders <a href="https://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&amp;content_id=3347">had target-date funds</a>, which gradually lowers exposure to risk as you get closer to retirement age and helps maintain a steady stream of income during your retirement years. However, dialing back your risk doesn't necessarily mean that you will stick to municipal bonds and money market accounts from now on.</p> <p>Legendary investor Peter Lynch said it best: &quot;Gentlemen who prefer bonds don't know what they're missing.&quot; The appeal of income stocks is that they provide a steady stream of income while providing some exposure to corporate profit growth. Many investors use the yield of a 10-year treasury bond rate as a benchmark to grade the performance of income stocks. As of October 10, 2016, the yield of a <a href="http://data.cnbc.com/quotes/US10Y">10-year treasury bond</a> was 1.77% and those from Phillips 66 and Caterpillar were 3.13% and 3.48%, respectively.</p> <h2>5. They Have Modest Annual Profit Growth</h2> <p>That being said, don't expect companies behind income stocks to have ambitious goals of profit growth. Due to its long business history, some income stocks may have limited future growth options and provide only a moderate annual profit growth. However, this is the main reason why these companies are able to pay a dividend in the first place. Since there may be no need to aggressively reinvest in new infrastructure, research, or development, then the company can afford to issue a dividend every quarter to its shareholders.</p> <h2>6. They Have Low Stock Price Volatility</h2> <p>Among the many statistics that analysts report on stock tables, <em>beta </em>is one of the most relevant ones, besides dividend and yield, to incomes stocks. (See also: <a href="http://www.wisebread.com/beginners-guide-to-reading-a-stock-table?ref=seealso">Beginner's Guide to Reading a Stock Table</a>)</p> <p>Since the beta of the market as a whole is 1.0, a stock with a beta below 1.0 would move less than the market, and a stock with a beta above 1.0 would deviate more than the market. Often, income stocks have betas below 1.0. For example, machinery manufacturer Deere &amp; Company [NYSE: <a href="https://finance.yahoo.com/quote/DE/">DE</a>] has a beta of 0.63, and retailer Wal-Mart Stores Inc. [NYSE: <a href="https://finance.yahoo.com/quote/WMT/">WMT</a>] has one of 0.09.</p> <h2>7. They Are Available in Mutual Funds and Index Funds</h2> <p>Even though throughout this article we have only focused on individual companies, you can still buy a basket of several income stocks at the same time. You can do this through either a mutual fund or a low-cost index fund. One example of the second category is the Vanguard High Dividend Yield Index Fund Investor Shares [Nasdaq: <a href="http://finance.yahoo.com/quote/VHDYX">VHDYX</a>], which holds many income stocks, such as Microsoft, Exxon, Johnson &amp; Johnson, and General Electric.</p> <p>Two advantages of using index funds to include income stocks in your portfolio are diversification (e.g. 420 holdings in the mentioned index fund from Vanguard) and low cost (e.g. 0.16% annual expense ratio for the same index fund).</p> <h2>The Bottom Line</h2> <p>Before buying an income stock, make sure to evaluate it using your current investment strategy. While an income stock can offer you a way to get higher yields than those of treasury securities or certificates of deposit, you may be so far away from retirement age that you could afford a higher exposure to risk through value or growth stocks. Consult with your financial adviser to discuss more about your investment objectives and the appropriate ways to achieve those financial goals.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/what-are-income-stocks">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market">7 Reasons Millennials Should Stop Being Afraid of the Stock Market</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easiest-way-to-invest-in-the-worlds-biggest-companies">The Easiest Way to Invest in the World&#039;s Biggest Companies</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-essentials-for-building-a-profitable-portfolio">5 Essentials for Building a Profitable Portfolio</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/beginners-guide-to-reading-a-stock-table">Beginner&#039;s Guide to Reading a Stock Table</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one">How to Tell if Your 401K Is a Good or a Bad One</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment dividends fixed income securities growth income stocks index funds large companies mutual funds portfolio profits retirement stock market volatility Thu, 20 Oct 2016 09:30:23 +0000 Damian Davila 1815776 at http://www.wisebread.com Rich People Spend $350K+ to Park Their Cars — Here's How We'd Spend it Instead http://www.wisebread.com/rich-people-spend-350k-to-park-their-cars-heres-how-wed-spend-it-instead <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/rich-people-spend-350k-to-park-their-cars-heres-how-wed-spend-it-instead" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/fancy_sports_car_91447401.jpg" alt="Spend $350K on this instead of parking fancy cars" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I came across a news report recently about the construction of a <a href="http://money.cnn.com/2016/09/14/luxury/autohouse-car-condo-miami/index.html">luxury condominium for cars</a>. It will allow people with fancy cars to park their vehicles in a secure environment, at the reasonable cost of just $350,000.</p> <p>Yes, $350,000 for a place to park.</p> <p>Suffice it to say, we can think of smarter things to do with $350,000. If you are lucky enough to have this kind of cash available to you, consider these alternative and sensible ways to spend your money.</p> <h2>1. Bolster That Emergency Fund</h2> <p>Before you shell out thousands of dollars for that custom-made personal watercraft, ask yourself if you'd have enough cash left to pay for a major medical bill if you got hurt. Or a hot water heater if it leaked all over your basement. Ask yourself how long you could get by if you lost your job. It's bad to blow money on unnecessary things. It's even worse to blow that money when you have nothing saved for a rainy day. Make sure you have <em>at least</em> three months of living expenses in liquid savings before you make any crazy purchases.</p> <h2>2. Pay Off High-Interest Debt</h2> <p>If you have money, there's no real excuse for carrying high-interest debt, such as that from credit cards. Interest from debt can erode your net worth, so pay off as much as you can. Focus on paying down the debts with the highest interest rates and go from there.</p> <h2>3. Contribute Maximum Toward Retirement</h2> <p>If you have a high income, there's no reason to hold back on putting as much into your retirement funds as possible. Those with 401K accounts can contribute up to $18,000 per year, and anyone with earned income can contribute $5,500 annually into an individual retirement account. Both of these accounts allow you to invest and see your money grow in a tax advantaged way. Focus on investments that mirror the overall performance of the stock market, and you'll see your money grow without much stress. Maxing out retirement funds may very well be the least frivolous thing to do with your money.</p> <h2>4. Invest Even More</h2> <p>Okay, so you've maxed out the amount you can place in retirement accounts. That doesn't mean you can't continue to invest! If you have the funds, consider buying stocks, mutual funds, and exchange-traded funds in a traditional brokerage account. You will have to pay taxes on any gains, but if you're investing for the long haul, you'll still come out well ahead in most cases.</p> <h2>5. Go to College</h2> <p>The best kind of investment is an investment in yourself. If you have enough money to pay for college, go for it! A typical person with a bachelor's degree <a href="https://trends.collegeboard.org/education-pays/figures-tables/lifetime-earnings-education-level">earns 66% more</a> over the course of their lifetime than someone who does not got to college, according to the College Board. And the earnings get even higher for those with advanced degrees. If you've already been to college, consider opening a college savings account for your children or another relative who's college-bound. Most states offer 529 plans that allow you to invest money without paying tax on the gains, provided that the money is later used for education expenses.</p> <h2>6. Buy a Home (Or a Second One)</h2> <p>If you're sitting on a sizable sum of money, it might make sense to put some toward a down payment on a house or other piece of real estate. It's better than renting, because you're building equity and may be able to even sell the real estate later at a profit. If you already own a home, consider buying a second and renting it out. This way, you not only get the benefits of real estate ownership, but an additional income stream as well. This sure beats cars or other material items that don't accrue in value.</p> <h2>7. Do Some Home Maintenance and Upgrades</h2> <p>Maybe it's time for a new roof, or your furnace has been on the fritz. Maybe you've always wanted to turn the basement into a nice family room. If you invest a little money into your home, you can stave off expensive repairs later, and any upgrades you make could increase your home value.</p> <h2>8. Give Some Away</h2> <p>$350,000 is a fair chunk of change, so why not give some away to a cause that you support? Remember that all charitable donations are tax deductible, so there's a financial benefit to giving away cash rather than spending it on something silly.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/rich-people-spend-350k-to-park-their-cars-heres-how-wed-spend-it-instead">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-times-its-okay-to-delay-retirement-savings">5 Times It&#039;s Okay to Delay Retirement Savings</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-ways-to-increase-your-net-worth-this-year">10 Ways to Increase Your Net Worth This Year</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-6-rules-of-frugal-living-you-need-to-know">The Only 6 Rules of Frugal Living You Need to Know</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Budgeting 401k charity debt emergency funds investing IRA luxury money retirement spending Thu, 13 Oct 2016 09:30:20 +0000 Tim Lemke 1811799 at http://www.wisebread.com 4 Money Lessons We Can Learn From J.K. Rowling http://www.wisebread.com/4-money-lessons-we-can-learn-from-jk-rowling <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-money-lessons-we-can-learn-from-jk-rowling" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/wizards_magic_wands_62514930.jpg" alt="Learning money lessons from JK Rowling" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>While divorced and living on government assistance in a tiny apartment with her infant child, J.K. Rowling wrote the first book in the world-famous <em>Harry Potter</em> series. The rest is history: Rowling became the first female billionaire novelist creating a brand worth an estimated $15 billion.</p> <p>Even though she released the last Harry Potter book back in 2007, she still makes a cool $14 million per year through her proprietary website Pottermore and her other books. When it comes to becoming successful, she is living proof that perseverance and hard work can be just as effective as any spell from the Elder Wand. Here are the four money lessons we could all learn from author J.K. Rowling.</p> <h2>1. Be Prepared for the Worst</h2> <p>Rowling is so talented that her first three Harry Potter books occupied the top spots on numerous best-seller lists in the U.S. and the U.K. With each new book in the series, she went on to set new records in sales. When she published the seventh and final book the Harry Potter series, she set the record for the fastest selling book in the U.K. and U.S. and sales, accumulating more than 375 million book sales around the globe.</p> <p>However, Rowling hasn't taken any of her success for granted. &quot;Talent and intelligence never yet inoculated anyone against the caprice of the fates,&quot; she warned the <a href="http://news.harvard.edu/gazette/story/2008/06/text-of-j-k-rowling-speech/">Harvard Class of 2008</a> when she received her honorary degree at that institution. By citing her short-lived marriage, jobless situation, single-parent status, and dependency on welfare, she stated that some failure in life is inevitable and impossible to avoid. The trick is to have the humility to plan ahead and set yourself up to be able to survive the vicissitudes of life.</p> <p><strong>Money Lesson:</strong> Nobody is invincible, life happens. Sometimes your carburetor goes bust or your kid decides to test the water resistance of your laptop. Don't become part of the 67% to 75% of U.S. households that <a href="http://www.fool.com/investing/general/2016/05/28/a-staggering-number-of-us-households-cant-cover-a.aspx">can't cover a $1,000 emergency expense</a>; build an emergency fund that can help during a cash crunch. Also, if you're the sole or main breadwinner of your household, invest in life insurance to prevent a financial crisis for your dependents in case you're no longer in the picture. Realize that today is the cheapest that your life insurance will ever be.</p> <h2>2. Pay With Cash More Often</h2> <p>Being completely skint left a heavy mark on Rowling. In an <a href="https://www.theguardian.com/books/2015/nov/28/conversation-lauren-laverne-jk-rowling-interview">2015 interview</a> she confessed, &quot;I hate not having cash on me, and that's definitely a connection to having been on benefits and, you know, just watching my cash dwindle through the week and praying it will last.&quot;</p> <p>The empirical evidence suggests that Rowling is doing the smart thing by sticking to cold hard cash as often as possible to make her purchases:</p> <ul> <li>Credit card users spend 12% to 18% more than those using cash;<br /> &nbsp;</li> <li>Diners at McDonald's using plastic spend an average of $7 while those using cash spend an average $4.50;<br /> &nbsp;</li> <li>States with highway tolls realize that they can get away with charging more to credit card users than cash users; and<br /> &nbsp;</li> <li>Credit card users were willing to pay more than twice as much on average as cash users for basketball tickets in a study.</li> </ul> <p><strong>Money Lesson:</strong> While a credit card can help you build your credit score, cash can help you to stick to your budget and hold you back from spending more than you have to. Start paying with cash more often. (See also: <a href="http://www.wisebread.com/top-6-reasons-why-using-cash-only-rocks?ref=seealso">Top 6 Reasons Why Using Cash-Only Rocks</a>)</p> <h2>3. Seek Professional Advice</h2> <p>In a world of memorable characters, Hogwarts Headmaster Albus Dumbledore is sure to stand out. Whether it's due to being the founder of the Order of the Phoenix or having a fondness for sherbet lemon and knitting patterns, Dumbledore just can't be ignored. In <a href="http://amzn.to/2dPCGBZ">Harry Potter and the Sorcerer's Stone</a>, he explains to Harry, &quot;Humans do have a knack for choosing precisely the things that are worst for them.&quot;</p> <p>From the many bad choices that Fred and George make throughout the entire series, you can clearly see that both muggles and wizards have a tendency to make poor decisions, particularly when it comes to making money. Remember the bet with Ludo Bagman? Throughout the Potter series, Rowling clearly suggests the importance of seeking out others for advice and help. (See also: <a href="http://www.wisebread.com/21-personal-finance-lessons-from-harry-potter?ref=seealso">21 Personal Finance Lessons From Harry Potter</a>)</p> <p><strong>Money Lesson:</strong> From executing an estate to pulling out a tree from your backyard, there are many <a href="http://www.wisebread.com/4-times-you-should-splurge-and-hire-a-pro">times you should splurge and hire a pro</a>. Hiring a professional doesn't just help you minimize the potential to cause physical or financial damage, but also prevents you from making bad decisions due to a lack of information. When it comes to finances, you'll often find it's a good idea to seek out the help of a financial adviser as your unique financial situation becomes more complex due to many instances, including a large inheritance, closeness to retirement age, or setup of a trust with relatives. (See also: <a href="http://www.wisebread.com/who-to-hire-a-financial-planner-or-a-financial-adviser?ref=seealso">Who to Hire: A Financial Planner or a Financial Adviser?</a>)</p> <h2>4. Save for Retirement</h2> <p>In the same 2015 interview, Rowling shared the following anecdote:</p> <p>&quot;I met a man a couple of years ago who had grown up with a huge amount of money. And he said to me in passing, 'You know, money is not the most important thing.' Which is both true, and profoundly ignorant. Because when you have no money, it is absolutely the most important thing. Only someone who has never had to worry can make a statement like that.&quot;</p> <p>This is a strong call as to why you need to start saving for retirement or strengthen your nest egg even more. In 2016, 26% of U.S. workers have <a href="https://www.ebri.org/pdf/briefspdf/EBRI_IB_422.Mar16.RCS.pdf">less than $1,000</a> saved for retirement. This trend is particularly troubling among Millennials: 40% of Millennials say they <a href="http://money.usnews.com/money/personal-finance/articles/2016-05-27/who-needs-a-retirement-plan-apparently-not-millennials">don't have a retirement income strategy</a> in place and 57% of them report they haven't even begun saving yet. As Rowling indicates, money isn't everything &mdash; but it'll surely become the most important thing when you don't have enough during your retirement years.</p> <p><strong>Money Lesson:</strong> In 2016 and 2017, you can contribute each year up to $18,000 ($24,000 if age 50 and over) to your 401K and up to $5,500 ($6,500 if age 50 and over) to your IRA. Make your very best effort to take advantage of those high limits by increasing your monthly contributions, taking advantage of windfalls, and maximizing employer matches. Remember that contributing to retirement accounts effectively reduces your tax liability every year and defers applicable income taxes until retirement when you're more likely to be in a lower tax bracket. It's never too late to start saving for retirement, and it ain't over till it's over! (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso">7 Retirement Planning Steps Late Starters Must Make</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/4-money-lessons-we-can-learn-from-jk-rowling">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-best-money-management-tips-from-john-oliver">7 Best Money Management Tips From John Oliver</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-money-lessons-we-can-learn-from-gilmore-girls">6 Money Lessons We Can Learn From &quot;Gilmore Girls&quot;</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-money-lessons-we-could-all-learn-from-dwayne-the-rock-johnson">6 Money Lessons We Could All Learn From Dwayne &quot;The Rock&quot; Johnson</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-essentials-for-building-a-profitable-portfolio">5 Essentials for Building a Profitable Portfolio</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ow-do-you-deal-with-family-members-who-are-bad-at-managing-money">How Do You Deal With Family Members Who Are Bad At Managing Money?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Entertainment advice harry potter jk rowling lessons money management rags to riches retirement success stories Thu, 13 Oct 2016 09:00:08 +0000 Damian Davila 1811797 at http://www.wisebread.com 7 Reasons You Shouldn't Invest Like Warren Buffett http://www.wisebread.com/7-reasons-you-shouldnt-invest-like-warren-buffett <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-reasons-you-shouldnt-invest-like-warren-buffett" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_scared_chart_99635575.jpg" alt="Learning reasons you shouldn&#039;t invest like warren buffett" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Warren Buffett is, by most accounts, one of the most successful investors in history. The CEO of Berkshire Hathaway has amassed billions of dollars (more than $65 billion, at last count) through his savvy understanding of corporations' performance and the stock market.</p> <p>But investing like Warren Buffett isn't easy, and an examination of Berkshire's holdings indicates that average investors might not necessarily benefit by following his every move.</p> <p>Here's a look at some reasons to avoid investing like Warren Buffett.</p> <h2>1. Because You Can't</h2> <p>We can all try to invest like Warren Buffett, but at a certain point it will be clear that he can do things that us mere mortals can't. Buffett has access to information that most people wish they had. He's super wealthy, so he can buy shares in much larger quantities and take risks that we simply can't. He has mountains of cash, and the reputation to cut deals that we can't make. He has access to different types of investments (preferred stock, venture capital) that are often unavailable to non-wealthy people. It's possible to follow his general approach to investing, but at a certain point it's nearly impossible to do what he does.</p> <h2>2. His Goals Aren't the Same as Yours</h2> <p>The average person should be investing with long-term growth in mind, focused primarily on building a large retirement fund. An older investor might invest for income through dividend stocks and bonds. Berkshire Hathaway's investment motives, however, are far more complex. While it is focused on building wealth over the long-term, it also makes decisions to please its shareholders in the short-term. It makes acquisitions that don't make sense immediately, but have a broader strategic value.</p> <h2>3. He's Not Very Diversified</h2> <p>Berkshire Hathaway is a large and sprawling company with investments in a wide range of industries. But most of the company's holdings are still comprised of a handful of companies. More than half of the company's value is tied up in its stakes of Kraft, Coca-Cola, Wells Fargo, and IBM. Nearly 40% of Berkshire's portfolio stems from the consumer staples sector, while another 30% is tied up in financials. Meanwhile, the company has relatively small investments in major sectors including health care, energy, or telecommunications.</p> <h2>4. He Sometimes Invests With His Heart, Not His Head</h2> <p>Yes, even Warren Buffett is known to invest with his heart rather than his head. Not all of his investments are unemotional and purely driven by cold facts. Consider his affection for Coca-Cola. (He's known to drink several Cokes a day.) While it's true that Coca-Cola is one of the stock market's great success stories, it's actually underperformed the broader stock market over the last five years. Despite this, Buffett's Berkshire Hathaway has about 400 million shares of Coca-Cola, or 9% of the company.</p> <h2>5. He's Missed Out on Technology</h2> <p>When tech took off in the 1990s, Warren Buffett was not on board. No big investments in Microsoft, Apple, or Cisco. And he's also declined to invest in recent tech success stories including Alphabet (neé Google), Amazon, Netflix, or Facebook. He is a big investor in IBM, but bought shares late in the game and the company has had several years in a row of declining revenues.</p> <p>Buffett has said he hasn't invested in tech because he doesn't understand it. While it's wise to avoid investing in something you don't understand, it also means he's missed out on some big gains over the years.</p> <h2>6. You're Better Off With Mutual Funds and ETFs</h2> <p>Warren Buffett is a great stock picker. His Berkshire Hathaway is a sprawling firm with investments in a wide range of companies in various industries. But for most people, it's foolish to try to invest in individual companies and expect to beat the broader stock market. It takes a lot of work to assemble a well-balanced portfolio if you're buying individual stocks. Mutual funds and exchange-traded funds offer the ability to invest in the broader stock market without worrying about share prices of individual companies.</p> <h2>7. He's Too U.S.-Centric</h2> <p>There's nothing wrong with betting on America and its companies. But a well-diversified portfolio should also have a good amount of international exposure, and Warren Buffett has tended to invest heavily in U.S.-based companies while ignoring the potential growth from overseas firms.</p> <p>The suggested amount of exposure to international and emerging market stocks varies depending on the investor's age and goals. But Morningstar's Lifetime Allocation Indexes are one possible guide. These indexes, which offer a mix of investments appropriately balanced for a person's retirement age, have between 10% and 40% invested in non-U. S. stocks. Morningstar suggests holding more international stocks the further you are from retirement.</p> <p>Warren Buffett hasn't eschewed international investing entirely, as Berkshire Hathaway does have holdings in European insurance companies and recently bought a German motorcycle accessory manufacturer. And some Berkshire holdings, including Coca-Cola and IBM, do have a significant overseas presence. But many of Berkshire's top holdings, including U.S. Bancorp, Wells Fargo, and Charter Communications, offer very little international exposure.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/7-reasons-you-shouldnt-invest-like-warren-buffett">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-an-etf-isnt-right-for-you">8 Signs an ETF Isn&#039;t Right for You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-lessons-we-can-learn-from-baseball">8 Money Lessons We Can Learn From Baseball</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-to-make-as-soon-as-you-conquer-debt">7 Money Moves to Make as Soon as You Conquer Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-online-sites-for-building-wealth">Best Online Sites for Building Wealth</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-8-rules-of-investing-you-need-to-know">The Only 8 Rules of Investing You Need to Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Berkshire Hathaway ETFs funds Oracle of Omaha retirement stocks strategy venture capital Warren Buffett wealthy Thu, 22 Sep 2016 09:00:05 +0000 Tim Lemke 1796994 at http://www.wisebread.com 7 Reasons Millennials Should Stop Being Afraid of the Stock Market http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_texting_newspaper_79438675_0.jpg" alt="Millennial man not being afraid of the stock market" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you a Millennial who's interested in investing? Then stop being afraid of the market. Sure, the Great Recession wiped out market fortunes during your early adulthood, but in the years since, it's roared back. Those who held steady during the market tumult made their money back &mdash; and then some. And those who were smart enough to invest when the market was at its bottom? Well let's just say we should all be a little jealous of their foresight (and earnings).</p> <p>So, don't be a slave to your stock market fears. Here are seven reasons why you should be investing in equities, too.</p> <h2>1. You Have Options When Deciding to Invest</h2> <p>There are different investment options available that match your goals and time horizon. For instance, you can invest more conservatively if you're trying to save for a down payment on a house in a few years, versus investing for retirement 30 years down the road. And with increased diversification, you can maximize your investment returns while taking smaller risks.</p> <p>&quot;The more risk you take, the longer you should be willing to wait before it pays off, but you can match your investment objectives with your time horizon,&quot; says Ryan McGuiness, founder of the wealth management firm CTR Financial. &quot;I invest my clients in a diverse portfolio of 12 different index funds to provide maximum diversification at the lowest cost, and match their risks to their goals, time horizon, and risk tolerance. You can try to learn what to do on your own or work with an adviser, but there are plenty of options out there.&quot;</p> <h2>2. Market Volatility Is Normal</h2> <p>Hands down, everyone's biggest fear in investing in the stock market is that it's going to crash and you'll lose your life savings. While that scenario <em>can</em> happen, a crash is not as likely as you think. In fact, it's uncommon. And even when markets crash, they inevitably come back. So, if you invest for the long term, this volatility should be much less of a concern.</p> <p>Of course, Millennials are more on edge about this particular setback than other generations, because they may have experienced the financial crisis firsthand in the late 2000s with parents losing their jobs or &mdash; even worse &mdash; their homes due to the global meltdown. As a result, you probably equate the stock market with extremely high risk, but that isn't usually the case.</p> <p>Lori Pinkowski, co-founder of the Pinkowski-Allen Financial Group, explains.</p> <p>&quot;A 2008-type crash occurs very infrequently; however, a 10% market correction happens on average once a year, so stock volatility is normal,&quot; she says. &quot;Market volatility also creates opportunity to purchase good companies at a lower price. With an active management strategy, their investment portfolios shouldn't simply rise and fall with the market like they do with a buy and hold management style. It's important to raise cash and get defensive at times but then be ready to deploy that cash once risk levels improve.&quot;</p> <h2>3. Investing Has Never Been Less Expensive</h2> <p>You don't have to be rich to invest &mdash; all you need is a little bit of disposable income. Many online brokers offer low-cost or even free trades, a prospect that was unimaginable just a few years ago. You also don't have to go broke by hiring a financial adviser to navigate you through the process, which is recommended. While the cost prospect of the latter is a deterrent for some Millennials, investment adviser Jeremy Torgerson details an inexpensive &mdash; and automated &mdash; solution:</p> <p>&quot;While many investors still want the assistance of a human financial adviser to help them figure out what to invest in and when to hold their hand during market corrections, it's no longer necessary to use and pay for a human adviser,&quot; he explains. &quot;The technology is incredible, and the robo-adviser is on duty, 24 hours a day. Or if you want a human adviser, the ability to shop for exactly the right one, in terms of service, expertise, and cost, has never been easier.&quot;</p> <h2>4. Investing Protects Your Money From Inflation</h2> <p>Think about this sobering fact for a second: The money you're earning and saving today will be worth less in the future if you keep it in a bank &mdash; guaranteed. The amount may not change, but over time, thanks to inflation, the value of your money will go down if it's left sitting in a bank account. As Pinkowski puts its, &quot;Inflation is approximately 2% and your bank savings account generates less than inflation, which means you have actually negative real growth. If you want healthy growth above inflation over time, stocks are the best choice.&quot;</p> <h2>5. Relying on Yourself Is a Better Bet Than Relying on the Government</h2> <p>The simple reality of our current fiscal situation includes underfunded promises to Medicare, Medicaid, Social Security, and prescription drug benefits to the tune of $121 trillion and counting.</p> <p>&quot;Millennials will, in many ways, be 'stuck with the check' in later years for all the spending that's already happened, which will mean a later retirement age for Social Security, higher tax rates and inflation in the future, and, likely, reduced benefits from these entitlement programs,&quot; Torgerson says.</p> <p>Considering this potential, you owe it to yourself to prepare for a government that's less able to provide for you in retirement. Of course you should be contributing to a 401K, and taking advantage of matching contributions from your employer if they offer it. But investing separately in the stock market also can fortify your ability to retire at a decent age, if not sooner.</p> <h2>6. Reinvested Growth Can Pay Off in the Long Run</h2> <p>Many stocks pay dividends, and reinvesting those dividends as well as any capital gains will benefit you over the long run. For example, if you're 25 today and invest $10,000, earning on average 6% annually, you will see your investment grow to just over $100,000 by the time you reach 65 &mdash; and that's only with a $10,000 investment today. Consider that the S&amp;P 500 has averaged 9.6% annual returns over the last 25 years, which includes the tech bubble and 2008 credit crisis, and the growth you could enjoy might be even higher.</p> <h2>7. Time Is on Your Side</h2> <p>Of course, let's not forget that you're young, Millennials, and you have a several decades of saving and investing ahead of you &mdash; and that's a benefit that older investors don't have which can be used to your advantage.</p> <p>&quot;If Millennials are saving for retirement, their time horizon is much greater than someone older,&quot; says Pinkowski. &quot;They have time to wait out blips in the stock market and can focus on the long term. They also won't need to withdraw any income, thus allowing the investments to grow over many years. The power of compounding can be astonishing. Albert Einstein once said, 'Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it.' Give your money a job and make it work for you!&quot;</p> <p><em>Are you afraid of the stock market?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/7-reasons-millennials-should-stop-being-afraid-of-the-stock-market">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-are-income-stocks">What Are Income Stocks?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-stocks-that-are-actually-having-a-good-year">10 Stocks That Are Actually Having a Good Year</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-you-making-the-biggest-investment-risk-of-all">Are You Making the Biggest Investment Risk of All?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/with-micro-investing-your-smartphone-pays-you">With Micro-Investing, Your Smartphone Pays YOU</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Should You Pay Down Debt First or Invest?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment compound interest fear growth inflation millennials retirement returns stock market volatility young investors Thu, 08 Sep 2016 09:00:10 +0000 Mikey Rox 1787551 at http://www.wisebread.com Millennial Millionaires: How the Brokest Generation Can Also Become the Richest http://www.wisebread.com/millennial-millionaires-how-the-brokest-generation-can-also-become-the-richest <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/millennial-millionaires-how-the-brokest-generation-can-also-become-the-richest" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_holding_cash_73068135.jpg" alt="Man part of brokest generation becoming the richest" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Recently, Wells Fargo and GfK surveyed 1,005 employed Millennials. The majority (64%) of Millennials polled said that they don't believe they will ever accumulate $1 million during their lifetimes. Furthermore, many also said they had not started saving for retirement and were feeling overwhelmed with student debt.</p> <p>Getting your finances on track in your 20s and after college is hard, but any Millennial can become a millionaire in their lifetime with the right steps.</p> <h2>Start Saving for Retirement</h2> <p>The number one way to become a millionaire in your lifetime is to invest in your retirement early and often. Don't keep putting it off, because youth means you have the power of compound interest on your side. It will take you less effort to save money now than it will take you when you try to play catch up 10 or more years later.</p> <p>Don't even worry if you aren't at your dream position quite yet. Take advantage of your company's 401K contribution match. If your company doesn't offer a retirement fund or you are self-employed, there are still many options for you.</p> <p>See also: <a href="http://www.wisebread.com/which-retirement-account-is-right-for-you?ref=seealso">Which Retirement Account Is Right for You?</a></p> <p>If you are currently saving 0% toward your retirement, then start with 3 percent. Saving 3 percent of your income is quite painless. Increase this percentage frequently until you are contributing 15% of your income to retirement.</p> <p>While this might seem like a daunting task when you are living paycheck to paycheck, it <em>can</em> be done. Having your retirement investments taken out before payday forces you to adjust to living with a smaller budget, and you also get the bonus of a nice tax break.</p> <h2>Shift Your Way of Thinking</h2> <p>If you spend trying to impress others, you will never have a bank account that actually impresses others. Live below your means and be realistic with what you really need.</p> <p>Remember that the way you live right after college is not a forever thing if you are frugal. When you are unmarried and without children, it is easier to share a living space or live on a bare-bones budget to optimize your savings. Live as frugally as possible now so that you can enjoy living when you are in your next season of life.</p> <p>See also: <a href="http://www.wisebread.com/the-frugal-living-commencement-speech-id-give-to-my-younger-self?ref=seealso">The Frugal Living Commencement Speech I'd Give to My Younger Self</a></p> <h2>Tackle Debt From All Angles</h2> <p>In the survey, 34% of Millennials reported an average of $19,978 of debt. Of those with student loan debt, 75% described their debt load as unmanageable. Don't carry your debt with you, allowing it to drag along like a burdensome weight.</p> <p>Instead, find ways to tackle your debt from many different angles. Here are just a few solutions:</p> <ul> <li>Enroll in programs that <a href="http://www.wisebread.com/5-careers-that-offer-student-loan-forgiveness">forgive student loan debt</a>.</li> <li>Start aside business and <a href="http://www.wisebread.com/this-recent-grad-paid-off-34k-in-sudent-loans-and-launched-a-business-in-just-4-years">funnel earnings to debt</a>.</li> <li>Use a&nbsp;<a href="http://www.wisebread.com/8-surprising-ways-to-pay-off-your-student-loans">0% credit card</a> for a part of the debt.</li> <li>Look into<a href="http://www.wisebread.com/what-s-the-difference-between-student-loan-refinancing-and-consolidation">consolidation and refinancing</a>.</li> <li>Earmark every extra dollar to your debt, including birthday money and tax refunds.</li> </ul> <p>The faster you can pay off your debt, the freer you will feel financially.</p> <h2>Earn Experience &mdash; Not Degrees</h2> <p>Degrees are certainly valuable and necessary in many fields, but in some, the pay difference is not that drastic. Instead, focus on growing your experience and career path each year. Take advantage of company-paid training and develop your skills. Then, start planning for more senior, better-compensated roles by asking people in your dream job how they got there. The road to success may not be paved with gold, but there may be a pot of gold at the end of it for those who plan carefully and work intelligently.</p> <p><em>Do you think you will reach a million dollars in your lifetime?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/millennial-millionaires-how-the-brokest-generation-can-also-become-the-richest">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/reach-your-money-goals-faster-with-a-simple-naming-trick">Reach Your Money Goals Faster With a Simple Naming Trick</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-the-21st-century-why-is-your-money-stuck-in-the-20th">It&#039;s the 21st Century — Why Is Your Money Stuck in the 20th?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rich-people-spend-350k-to-park-their-cars-heres-how-wed-spend-it-instead">Rich People Spend $350K+ to Park Their Cars — Here&#039;s How We&#039;d Spend it Instead</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-ways-to-increase-your-net-worth-this-year">10 Ways to Increase Your Net Worth This Year</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-smart-ways-young-millionaires-manage-their-money">3 Smart Ways Young Millionaires Manage Their Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance debt degrees education jobs millennials millionaires retirement saving money Tue, 06 Sep 2016 10:30:07 +0000 Ashley Eneriz 1785280 at http://www.wisebread.com This Simple Mistake on a Credit Application May Cost You http://www.wisebread.com/this-simple-mistake-on-a-credit-application-may-cost-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-simple-mistake-on-a-credit-application-may-cost-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_credit_card_17698096.jpg" alt="Woman making simple mistake on credit application" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Besides your credit score, your income may play an important factor in whether you get approved for a credit card, and the amount of credit you will be approved for. But for those with freelance jobs or other variable sources of cash, determining an exact income to report can be difficult.</p> <p>See also: <a href="http://www.wisebread.com/7-credit-card-application-tips-for-the-best-chance-of-approval?utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=cc_article">7 Tips for Filling Out Credit Card Applications for the Best Chance of Approval</a></p> <p>Obviously, you want to be as accurate as possible, but you also want to report the highest amount of income applicable so that you can qualify for your card. Your income is how credit card companies can determine if you are able to pay back your debt. Even if you do not plan on accumulating credit card debt, credit card companies still look at you as a debt risk. If you only say that you make $20,000 a year, then why would a credit card company want to take a chance on you with a $12,000 credit line?</p> <h2>Types of Income You Can Report on a Credit Card Application</h2> <p>Applicants over the age of 21 can list a wide range of types of income that they have reasonable expectation of access to. Here are some of the following types of income considered:</p> <h3>Personal Income</h3> <p>Put simply, this is your gross income figure. If you are a freelancer or self-employed, base this number off your total income the year before or your average monthly income multiplied by 12. For example, if you regularly make $2,500 to 3,000 per month, then reporting an income of $33,000 should be fairly accurate.</p> <h3>Spousal Income</h3> <p>As of 2013, you can count income from your spouse or partner on your application.</p> <h3>Allowances and Gifts</h3> <p>Do you regularly get a few hundred dollars for your birthday from family members and friends? You can add it to your income list.</p> <h3>Scholarships and Grants</h3> <p>This is a benefit for college students who have received scholarships and grants for the school year. If you are not accepted for a credit card, call the reconsideration line and talk about your scholarships and other redeeming qualities (i.e. leadership programs you run at school, GPA, and other accomplishments that can boost your credit worthiness).</p> <h3>Trust Fund Distributions</h3> <p>If you're fortunate enough to have a trust fund, report the average amount you expect to receive in a typical year.</p> <h3>Retirement Fund Distributions</h3> <p>Retired? Great! Don't forget to list distributions from 401Ks, IRAs, or other retirement funds.</p> <h3>Social Security Income</h3> <p>Ditto for Social Security income. List your yearly benefit amount as income.</p> <p>For borrowers between 18 and 21, only independent income can be reported. This includes personal income (including any regular allowances from relatives) and scholarships and grants. Borrowers between 18 and 21 might have better luck being added as an authorized user on a parent's account. This can help build up credit history without having to turn to high interest fee cards.</p> <h2>Types of Income You Should Not Report</h2> <p>Note that student loans do not count as income. Once you graduate, student loans become debt you must repay, and it is best not to pile on credit card debt on top of that.</p> <p>Your mortgage or equity in your home should also not be considered income.</p> <h2>Consequences of Lying About Income on Credit Card Applications</h2> <p>While you might want to gain access to a credit card, it is never a good idea to lie about your actual income. Stretching the truth on your application and getting approved can mean that you are more likely to get into debt without the income to get you out.</p> <p>On a more serious note, lying on credit card applications is considered credit card fraud, which is punishable by up to $1 million in fines and up to 30 years of prison. While these punishments are on the extreme side, individuals caught falsifying income to gain loans or credit cards have been hit with hefty fines.</p> <p>In 2012, 52-year-old New York resident David P. Gaylord faced charges for reporting an inflated income of $90,000 to $122,000 on three credit card applications in 2006. However, the IRS reported his income as $12,488 that year. Gaylord was sentenced to five years of supervised release and ordered to pay $46,914.73 in restitution.</p> <p>See also: <a href="http://www.wisebread.com/11-reasons-your-credit-card-application-was-denied-and-what-you-can-do-about-it?utm_source=wisebread&amp;utm_medium=seealso2&amp;utm_campaign=cc_article">Why Your Credit Card Application Was Denied and What to Do About It</a></p> <p>If you are still unsure about how to fill out your application, consider calling the credit card company to talk with a person who can guide you through the application process.</p> <p><em>Do you have multiple sources of non-wage income? How do you report it on credit apps or elsewhere?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/this-simple-mistake-on-a-credit-application-may-cost-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/prepaid-cards-about-to-get-safer-and-better">Prepaid Cards About to Get Safer and Better</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stupid-credit-card-tricks-how-your-credit-card-company-lies-to-you">Stupid Credit Card Tricks: How Your Credit Card Company Lies to You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-immediately-after-a-credit-card-breach">Here&#039;s What to Do Immediately After a Credit Card Breach</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-debit-cards-as-safe-as-credit-cards">Debit Cards vs. Credit Cards: Fees and Fraud Protection</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-credit-monitoring-ever-worth-it">Is Credit Monitoring Ever Worth It?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards allowances applications credit approval fraud honesty income reporting retirement scholarships trust funds Thu, 01 Sep 2016 10:30:07 +0000 Ashley Eneriz 1783711 at http://www.wisebread.com How Every Woman Can Take Control of Her Finances http://www.wisebread.com/how-every-woman-can-take-control-of-her-finances <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-every-woman-can-take-control-of-her-finances" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_office_organized_67054401.jpg" alt="Learning how women can take control of their finances" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It may seem patronizing or silly to offer specific retirement planning advice for women. After all, money is money, and compound interest works the same way whether the name on the account is John or Joan. And it's not as if we are living in an era where most women stay home instead of earning an income; today women make up nearly half of the workforce.</p> <p>But even if I feel like my husband's equal in earning power and investing know-how, the fact is that I am more likely than he is to be among the ranks of the elderly poor. In fact, a recent analysis by the National Institute on Retirement Security found that women are 80% more likely to be in poverty at age 65, and the disparities just get larger as women get older.</p> <p>There are many reasons why we women may not do as well as men in retirement preparation.</p> <p>&quot;Women statistically make less than men, so they have a smaller base to work with. And women tend to want to take care of others before themselves,&quot; said Sally Brandon, vice president of client services at investment adviser Rebalance IRA.</p> <p>Then there is the fact that more women take long breaks from full time work to care for children, and are more likely to work part time -&mdash; conditions that diminish our likelihood of socking away retirement funds.</p> <p>So what should women do to avoid having to subsist on Friskies in our latter years? Keep these things in mind.</p> <h2>Find an Adviser Who Listens to You</h2> <p>In my household, I handle our taxes and other finances. It's just not my husband's forte. So imagine my chagrin when I decided to hire an accountant, and he switched my husband's name to &quot;taxpayer&quot; and mine to &quot;spouse&quot; on our IRS forms. He said he did it because the IRS likes consistency &mdash; nevermind that we had consistently filed the other way for 15 years at that point!</p> <p>Other couples I know have met with <a href="http://www.wisebread.com/who-to-hire-a-financial-planner-or-a-financial-adviser" target="_blank">financial planners</a> who address all their questions to the husband only. That's why it's important to interview a potential adviser before committing. If you visit with your spouse, make sure the adviser addresses both of your concerns. Pay attention to how women working in the adviser's office are treated. And of course, if it makes you feel more comfortable, you can always hire a female adviser or one who specializes in helping women.</p> <p>Just as important as selecting an adviser you're comfortable with, Brandon says, is signaling to that adviser that &quot;you're a part of that process as much as the person next to you&quot; with your active participation. For instance, Brandon and her husband recently met with an estate planner together.</p> <p>&quot;I started asking a lot of questions, and by the end, everything was being addressed to both us, and not to just him,&quot; she says.</p> <h2>Make Your Retirement a Priority</h2> <p>A survey by financial services organization TIAA-CREF revealed that nearly half of women say they <a href="https://www.tiaa.org/public/about-tiaa/news-press/press-releases/pressrelease480.html">can't afford financial advice</a>, and one in three say they don't have time to seek it. That's another example of women putting the needs of others before their own.</p> <p>&quot;You get pulled and tugged in so many directions,&quot; said Brandon, herself the mom of three.</p> <p>Because starting early is key to amassing adequate retirement savings, it's important for everyone, including busy mothers, to take the time as soon as possible to set up a retirement savings plan and check up on it regularly.</p> <h2>Save Even If You're Not Working Full-Time</h2> <p>Women are <a href="https://www.dol.gov/_sec/media/reports/femalelaborforce/">twice as likely to work part time</a> as men, and we are also more likely to take extended <a href="https://hbr.org/2010/06/off-ramps-and-on-ramps-revisited/ar/1">breaks from the workplace</a> and have nonlinear career trajectories. If your career has taken this kind of path, it should be incorporated into your planning. Better yet &mdash; and I get that this can be tough &mdash; evaluate the effect that such a break or shift would have on your retirement before you decide to do it.</p> <p>One way to keep saving during a break, Brandon suggests, is by contributing to a spousal IRA, which is simply a regular IRA that a nonworking spouse can contribute to in order to keep retirement savings going even during a career break.</p> <h2>Don't Let Divorce Derail Your Future</h2> <p>No one plans for their marriage to end in divorce. Yet, after seeing too many friends and relatives have their finances shredded by divorce, I've come to the conclusion that all married people should be prepared to weather a divorce if necessary.</p> <p>Statistically, women are more likely to be financially hurt by divorce. We're more likely to have custody of the kids, and many single mothers receive no child support. Anecdotally, I know women who had no credit in their own names until they got divorced and found themselves applying for a credit card with no credit history, or even worse, a credit history that was shredded by the ex's actions.</p> <p>The first thing women can do to prepare for divorce is the same thing she can do to prepare for successful retirement if she stays married: Understand the family finances. Pay attention and ask questions. Don't leave it all to your spouse.</p> <p>The next part happens during the divorce: Fight for what you deserve. Divorce attorneys report seeing many women settle too soon in divorces and accept too small a share of the couple's net worth, just to get it over with. Some men bully and harass their wives into giving in, and even use the children against them.</p> <p>In divorce, as in marriage, remember that as important as the pressing issues of today may seem &mdash; the kids' needs, the stress &mdash; retirement can last a long time, and it will seem even longer if you have to spend it eating cat food.</p> <p><em>What are you doing to take control of your finances?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/how-every-woman-can-take-control-of-her-finances">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-money-moves-to-make-the-moment-you-graduate">5 Money Moves to Make the Moment You Graduate</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-6-biggest-financial-decisions-in-your-20s">The 6 Biggest Financial Decisions in Your 20s</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-money-moves-to-make-the-moment-you-win-the-lotto">4 Money Moves to Make the Moment You Win the Lotto</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-do-money-like-a-grown-up">How to Do Money Like a Grown-Up</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">12 Surprising Things Women Should Know About Retirement Planning</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance caretakers divorce financial advisers mothers poverty retirement savings sexism women Tue, 09 Aug 2016 10:30:17 +0000 Carrie Kirby 1766935 at http://www.wisebread.com 7 Best Money Management Tips From John Oliver http://www.wisebread.com/7-best-money-management-tips-from-john-oliver <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-best-money-management-tips-from-john-oliver" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/john_oliver_12450865504_98a7a40631_z.jpg" alt="Learning money lessons from John Oliver" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I don't often admit to it, but I have a little crush on comedian and <em>Last Week Tonight</em> host, John Oliver. I mean, what's not to like? There's his adorable British accent, his hilarious takes on the modern world, his dimples, his sound money advice&hellip;</p> <p>No, really. John Oliver is actually a pretty solid source for financial tips. Over the past few years, he has cemented his place in my heart by using his comedic platform to educate his audience on everything from credit scores to debt management and retirement savings</p> <p>If you haven't had a chance to watch all of John Oliver's money-related episodes, here are my favorite financial funnyman's seven best money management tips:</p> <h2>1. Before Taking a Payday Loan, Be Absolutely Sure There Are NO Other Options</h2> <p><iframe src="https://www.youtube.com/embed/PDylgzybWAw" width="560" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe></p> <p>As seen on:&nbsp;<a href="https://www.youtube.com/watch?annotation_id=annotation_959988635&amp;feature=iv&amp;src_vid=aRrDsbUdY_k&amp;v=PDylgzybWAw" target="_blank">Last Week Tonight: Predatory Lending</a></p> <p>Wise Bread readers are likely very well aware of the predatory nature of payday loans. Taking a short-term loan can kick off a terrible cycle of debt with annual interest rates as high as 700%. But, as John Oliver points out in his rant, a Pew survey found that &quot;a majority of borrowers say payday loans take advantage of them, [but] a majority also say they provide relief.&quot;</p> <p>The point is that there will be times when people need money in a hurry and feel that their choices are limited. However, most borrowers have more choices than they think they do. Prospective payday loan customers could always borrow from a family member or friend, pawn or sell an item, or even sell blood or plasma. In other words, it's a better idea to do almost <em>anything </em>else to generate some quick cash than visit a payday loan store. (Although some of the ideas suggested by Sarah Silverman, the official spokesperson for <em>doing anything else</em>, are clearly meant to be tongue-in-cheek.)</p> <p>Many payday loan borrowers end up turning to these anything else options in order to get out of the cycle of payday loan debt, so it would be better to just start there.</p> <h2>2. Start Saving for Retirement Now &mdash; And Build a Time Machine and Start Saving 10 Years Ago If Possible</h2> <p><iframe src="https://www.youtube.com/embed/gvZSpET11ZY" width="560" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe></p> <p>As seen on:&nbsp;<a href="https://www.youtube.com/watch?time_continue=1249&amp;v=gvZSpET11ZY" target="_blank">Last Week Tonight: Retirement Plans</a></p> <p>We all need to be saving more money for retirement, and the earlier you start, the more time compound interest has to work its magic. According to a 2014 study from the Center for Retirement Research at Boston College, a 25-year-old would only need to set aside <a href="http://crr.bc.edu/wp-content/uploads/2014/07/IB_14-111.pdf">15% of her income</a> each year to adequately replace her income as of retirement at age 62 &mdash; but if she started at age 35 she would need to save 24%, and 44% if she waited until age 45.</p> <p>While I have no issue with encouraging people to save more (really &mdash; save more!), I do have a quibble with the slight whiff of shame clinging to the build-a-time-machine portion of this advice. We can't change our past financial behavior, but we can feel bad about it and let it affect our present behavior &mdash; which too many people tend to do. There's no point in offering coulda-shoulda-woulda advice when time machine technology is still a couple of thousand decades away from reality.</p> <p>However, the basis of this advice is more than sound. Don't waste your money on Elf School in Reykjavik. Put it in your retirement account where it can do you some real good.</p> <h2>3. Check Your Credit Report Every Year</h2> <p><iframe src="https://www.youtube.com/embed/aRrDsbUdY_k" width="560" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe></p> <p>As seen on:&nbsp;<a href="https://www.youtube.com/watch?v=aRrDsbUdY_k" target="_blank">Last Week Tonight: Credit Reports</a></p> <p>Your credit history can affect everything from whether you qualify to make large purchases, to your ability to land a job or rent an apartment. Unfortunately, credit reports are not always accurate, even if you have been a boy scout when it comes to your responsible credit usage.</p> <p>As John Oliver reports, the credit reporting bureaus make major mistakes in one out of every 20 credit histories. That may be a 95% accuracy rate, but it does leave 10 million consumers to deal with critical mistakes on their credit reports.</p> <p>The only thing we can do to fight mistakes (and identity theft, which <em>Last Week Tonight</em> did not even get into) is to regularly check our credit reports. We are legally allowed free access to a credit report from each of the major reporting agencies &mdash; TransUnion, Experian, and Equifax &mdash; once per year. You can access that information at annualcreditreport.com.</p> <p>If you're particularly organized, you can keep an eye on your credit on a rolling basis by checking one of the three agencies every four months.</p> <h2>4. Invest in Low Cost Index Funds</h2> <p>As seen on: <a href="https://www.youtube.com/watch?v=gvZSpET11ZY" target="_blank">Last Week Tonight: Retirement Plans</a></p> <p>Seeing this particular piece of advice had me standing up and cheering in front of my laptop. The financial industry likes to tout the superiority of actively managed funds since there is an individual making decisions for your investments &mdash; which has got to be better than doing nothing.</p> <p>Except the active managers who are tinkering with investments have a couple of big detractions. First, they are human, which means they are subject to emotional reactions to market volatility. It is very hard to stick to a plan when ego, panic, or greed is driving the train. According to research by Nobel laureate William Sharpe, you would have to be correct about timing the market (that is consistently buying low and selling high) 82% of the time in order to match the returns you will get with a buy-and-hold strategy. To put that in perspective, Warren Buffett aims for accurate market timing about 2/3 of the time.</p> <p>In addition to the difficulty of market timing, an actively managed fund will have higher transaction costs because of all the active buying and selling (each of which generates a fee) going on. Even if you have the world's most accurate active manager, a great deal of your returns will be eaten up by your transaction costs.</p> <p>Low cost index funds, on other hand, keep their costs low by having fewer managers to pay, and they tend to outperform actively managed funds because they are simply set to mimic a certain index. The majority of consumers will not beat low cost index funds for satisfactory retirement investment growth.</p> <h2>5. If You Have a Financial Adviser, Ask if They're a Fiduciary</h2> <p>As seen on: <a href="https://www.youtube.com/watch?v=gvZSpET11ZY" target="_blank">Last Week Tonight: Retirement Plans</a></p> <p>A financial adviser is a fiduciary if he or she is legally required to put your economic interests ahead of their own. This is an important distinction because the terms financial adviser, financial planner, financial analyst, financial consultant, wealth manager, and investment consultant are unregulated &mdash; which means someone introducing himself by any of these titles might not have the expertise to back it up.</p> <p>But even if your financial adviser does have the credentials necessary to help you manage your money, she might be paid via commission, which could mean she recommends products to you that help her bottom line more than your retirement.</p> <p>Since a fiduciary is legally obligated to put your interests above their own, you are more likely to get objective advice from them.</p> <p>While John Oliver recommends running the other direction if you find that your financial adviser is not a fiduciary, that may not be necessary as long as you understand how your adviser is paid and you are willing to commit to due diligence in double-checking your adviser's recommendations.</p> <h2>6. Gradually Shift From Stocks to Bonds As You Get Older</h2> <p><iframe src="https://www.youtube.com/embed/gvZSpET11ZY" width="560" height="315" frameborder="0" allowfullscreen="allowfullscreen"></iframe></p> <p>As seen on <a href="https://www.youtube.com/watch?v=gvZSpET11ZY">Last Week Tonight: Retirement Plans</a></p> <p>This advice is part of target-date retirement planning. The thinking behind it is that you need to be invested in riskier (and therefore higher-earning) investments like stocks when you are young, because you have the time to ride out the volatility and reap the returns. But as you age, you need to be sure your principal is protected, which means gradually shifting more of your investments into bonds, which are more stable but have lower returns.</p> <p>This is pretty good general advice, and I love the show's take on when to remind yourself to shift more to bonds &mdash; whenever a new James Bond actor is chosen. (I'm team Gillian Anderson!)</p> <p>The only nuance I would like to add to this piece of advice is to remind investors that retirement does not mark the end of your investing days &mdash; and you should not be entirely invested in bonds by then. Theoretically, you still have 25 to 40 years ahead of you as of the day you retire, and you will still need to be partially invested in aggressive assets like stocks in order to make sure your money keeps growing.</p> <h2>7. Keep Your Fees, Like Your Milk, Under 1%</h2> <p>As seen on <a href="https://www.youtube.com/watch?v=gvZSpET11ZY" target="_blank">Last Week Tonight: Retirement Plans</a></p> <p>Except for the fact that skim milk is a watery horror I would not wish on my worst enemy's morning Wheaties, this is probably my favorite of John Oliver's money tips.</p> <p>Fees on your investments work a lot like interest &mdash; in that they compound quickly. <em>Last Week Tonight</em> showed a clip from the 2013 PBS documentary The<a href="http://www.pbs.org/wgbh/frontline/film/retirement-gamble/"> Retirement Gamble</a>, which illustrated how compounding interest would eat up 2/3 of your investment growth over 50 years, assuming a 7% annual return and a 2% annual fee.</p> <p>The only way to combat such termite-like destruction of your investment growth is to keep your fees low &mdash; under 1%. And the lower you can get your fees under 1%, the better you are. As John Oliver's segment points out, &quot;Even 1/10 of 1% can really [bleep] you.&quot;</p> <h2>Money With a Side of Funny</h2> <p>The majority of financial information is not exactly fun to read through. That's why it's so important for a satirist and comedian to take on these vitally important issues and make them entertaining. I'm thankful that John Oliver has decided to make money one of the issues he illuminates for his audience.</p> <p><em>Are you a regular watcher of Last Week Tonight? What valuable advice have you gleaned?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/7-best-money-management-tips-from-john-oliver">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/could-trump-bring-higher-interest-rates-and-inflation-consider-these-money-moves">Could Trump Bring Higher Interest Rates and Inflation? Consider These Money Moves</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-moves-to-make-the-moment-you-get-a-promotion">8 Money Moves to Make the Moment You Get a Promotion</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-frugal-colonizers-guide-to-getting-to-mars">The Frugal Colonizer&#039;s Guide to Getting to Mars</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-are-income-stocks">What Are Income Stocks?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-money-lessons-we-can-learn-from-jk-rowling">4 Money Lessons We Can Learn From J.K. Rowling</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Entertainment bonds credit reports fees index funds investing john oliver money advice payday loans retirement stock market Mon, 08 Aug 2016 10:30:07 +0000 Emily Guy Birken 1766934 at http://www.wisebread.com How to Tell if Your 401K Is a Good or a Bad One http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-tell-if-your-401k-is-a-good-or-a-bad-one" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_thinking_laptop_88870639.jpg" alt="Woman learning how to tell if her 401K is good or bad" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you work for a company, there's a good chance that your employer offers a 401K plan. (Some organizations offer 403b plans, which operate similarly.) These funds give you the chance to invest in a series of mutual funds and other investments, with the added benefit that any money you contribute is deducted from your taxable income.</p> <p>Not all 401K plans are the same, however, and there is a wide range in the amount of expenses and the quality of investments offered.</p> <p>It's not easy to immediately know if your 401K plan is a good one, and whether it's worth putting money into. But here are some things to examine.</p> <h2>Do You Get a Company Match?</h2> <p>Arguably the most positive aspect of a 401K plan is the ability of companies to match a certain percentage of employee contributions. Typically, a company might agree to contribute up to 5% of a worker's earnings, if the worker does the same. This match is essentially free money, so it usually makes participating in the 401K plan a no-brainer, even when the plan is otherwise subpar.</p> <p>If your company does not <a href="http://www.wisebread.com/401k-or-ira-you-need-both" target="_blank">contribute to your 401K plan</a> or offer a match, you'll want to examine other characteristics of the plan to determine whether it's worth it to contribute. You may find that contributing to a traditional or Roth IRA is a better alternative.</p> <h2>Examine the Investment Options</h2> <p>A 401K plan is only as good as the investment options in them. There's no perfect menu, but a strong plan is anchored by one or two mutual funds that mirror the broader stock market. These are called &quot;index&quot; funds, because they are designed to mirror the performance of a specific index, such as the S&amp;P 500. A good plan will also have some large-cap, mid-cap, and small-cap funds, and the ability to access international and real estate investments. Older investors will want to see a selection of quality bond funds.</p> <p>You'll want to look for a diverse array of investments, but there is a point at which more options aren't necessarily better.</p> <p>&quot;More funds can just confuse you,&quot; said Ralph Grauso, founder of ASC Financial. &quot;You don't need three different types of large-cap growth funds.&quot;</p> <h2>Check the Fees</h2> <p>One of the most common criticisms of 401K plans is that they often contain funds with high expenses. The best 401K plans should offer access to the lowest cost funds available.</p> <p>Management fees, plan operating expenses, and other costs can take a chunk out of your returns without you even being aware. Over time, that can lead to tens of thousands of dollars in lost earnings. A survey by AARP noted that 80% of 401K plan participants don't know what they are paying in fees. Most information on fees is available by reading plan and fund documents, but you may still have to do some digging.</p> <p>&quot;If you're investing for 30 years or more, those fees are going to take a huge chunk of your money,&quot; Grauso said.</p> <p>Grauso said it's best to find funds with expense ratios of less than 1%. Index funds are particularly low in cost because they are not actively managed, and often perform better than managed funds anyway, he said. Look for low-cost index funds from a broker such as Vanguard, and stay away from niche funds with high costs.</p> <h2>Study the Fund Performance</h2> <p>Ultimately, you want to put your money in funds that will generate a nice return and help you develop a sizable nest egg. Predicting future performance is not possible, but you can get a good sense of the quality of a fund by examining its long-term performance.</p> <p>Look at five-year and 10-year returns, and compare them to a comparable benchmark. (For example, a large-cap fund should be compared to a large-cap index.) It's also worth comparing funds to the overall performance of the stock market and the S&amp;P 500. If the fund has historically generated returns that are in line with or better than the overall stock market &mdash; especially after fees are taken into account &mdash; that's a good sign. Stay away from funds that appear to underperform the market and their respective benchmarks.</p> <h2>Who Is the Custodian?</h2> <p>When employers set up 401K plans, they partner with a company that actually manages the plans and many of the investments. Usually, it's with a brokerage firm such as Fidelity, Vanguard, or Charles Schwab.</p> <p>The best 401K plans will be managed by companies who have the expertise and ability to offer quality investment options with low fees, easy online account access, and research. It is worth noting that these custodians manage not only the plans, but many of the mutual funds in them, and that is often viewed as a conflict of interest. If it seems like the custodian is favoring their own underperforming plan in favor of a better plan from another company, that's a bad sign.</p> <h2>Look for Institutional Class Shares</h2> <p>There are many high-quality mutual funds that are unavailable to average investors unless they can meet very high account minimums. But, investors can often access these funds through their 401K plans, because companies can guarantee a sizable combined investment from their employees. Mutual fund companies will often waive fees and other expenses if certain investment levels are met. These funds are often advertised as &quot;institutional class,&quot; or &quot;premium class,&quot; and usually it translates into very low-cost funds for the investor. Fidelity's 500 Index Fund Premium class, for instance, has an expense ratio of just .045%.</p> <h2>Is There a Self-Directed Option?</h2> <p>A typical 401K plan will allow investors to put their money in any of about a dozen mutual funds. But some will offer the ability for account holders to take a more active role, through self-directed brokerage accounts. This is a good option for those wishing to have more direct control over their investing, though evidence is mixed on whether this actually results in higher returns for the investor.</p> <h2>Is It Wrapped in an Annuity?</h2> <p>Many 401K plans have an annuity option, in which earnings are disbursed in the form of monthly payments. This is a nice option to have, as it ensures a steady stream of income in retirement. However, some plans are &quot;wrapped&quot; in an annuity contract that is often expensive and with minimal benefit to the investor.</p> <p><em>How good is your 401K?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-are-income-stocks">What Are Income Stocks?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-paying-off-your-mortgage-early-costing-you-money">Is Paying Off Your Mortgage Early Costing You Money?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-only-8-rules-of-investing-you-need-to-know">The Only 8 Rules of Investing You Need to Know</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-occasions-when-you-should-definitely-hire-a-financial-advisor">7 Occasions When You Should Definitely Hire a Financial Advisor</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement index funds investing portfolio retirement stocks Fri, 05 Aug 2016 09:00:12 +0000 Tim Lemke 1764992 at http://www.wisebread.com How to Avoid Getting Scammed With a Reverse Mortgage http://www.wisebread.com/how-to-avoid-getting-scammed-with-a-reverse-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-avoid-getting-scammed-with-a-reverse-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/upside_down_house_22048959.jpg" alt="Learning how to avoid being scammed by reverse mortgage" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Reverse mortgages have been negatively cast as a last-ditch option for seniors short on cash. However, reverse mortgages can also provide many helpful benefits, including the ability to replenish or boost your retirement account or help you stave off foreclosure. Find out what a reverse mortgage is and the best ways to make it work for your financial situation.</p> <h2>What Is a Reverse Mortgage?</h2> <p>A reverse mortgage, also known as a home equity conversion mortgage (HECM), is a specialized loan available to individuals who are over 62 years old. This loan allows borrowers to convert a portion of home equity into cash. Interest on the loan is deferred until the home is sold or the last borrower dies.</p> <p>To qualify for a reverse mortgage, homeowners will need to own their home outright or have a low mortgage balance that can be paid off easily with the proceeds of the loan. Homeowners must also live in the home to remain qualified. Homeowners will still be required to pay for property taxes and insurance premiums.</p> <h2>What Are the Best Ways to Use a Reverse Mortgage?</h2> <p>If you have a lot of home equity but are still struggling to pay the monthly payments, a reverse mortgage can then pay you the equity, which can then in turn be used to pay off your mortgage. You will need to have a reverse mortgage with a lump-sum disbursement and show that you can afford taxes and insurance costs.</p> <p>Another great way to use a reverse mortgage is to give your retirement fund the boost it needs. If you didn't save enough for retirement, know that you aren't alone &mdash; the majority of Americans don't. Receiving some of your reverse mortgage as a lump-sum allows you to invest the money if market conditions are favorable.</p> <h2>What Are Other Ways to Use a Reverse Mortgage?</h2> <p>Technically, the money you receive from a reverse mortgage is your money, and you can use it however you like. You don't even need good credit or a lot of income to qualify for an HECM. Investing your HECM into your retirement is one of the best things you can do with the money. Here are a few other wise financial moves you can make with the money you earn from a reverse mortgage.</p> <h3>Purchase Investment Property</h3> <p>You can purchase property in cash from your HECM and not worry about being approved for a mortgage. Of course, buying property is not always a good investment, so be sure the property you purchase is worth it. Don't just throw your money into any property purchase and hope to live off rental income.</p> <h3>Buy a Second Home</h3> <p>If you love to split your time in a vacation home, then a HECM with enough equity can help you afford to buy a second home without having to worry about mortgage payments. Don't just buy a second home just because you can. A second home purchase should be considered if it can save you money and also earn you money. A second home can help you avoid vacation or hotel rental fees, and you can rent out your home when you are not living there. Remember you must keep your current home, the home you wish to get a HECM loan with, as your primary residence.</p> <h3>Pay Off Debt</h3> <p>If debt is weighing you down each month, then consider using your HECM to pay it off and save money on interest payments. However, don't be tempted to get back into debt. Using your HECM to pay off debt should be the start of a debt-free lifestyle, not a bandage to place on a shopping or gambling addiction.</p> <h2>What Are the Downsides of a Reverse Mortgage?</h2> <p>If you're currently using other government programs, such as Medicaid or SSI, having your HECM disbursed to you as monthly payments will be counted as income. You will face foreclosure if you cannot afford the property taxes or insurance premiums. Another thing to consider before proceeding with a reverse mortgage is that the upfront fees to do so can be quite high. Also, the amount of money you get upfront from your mortgage is dependent on several factors, such as your age and the value of your home. You might not get as much money as you need. (See also: <a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage?ref=seealso">5 Downsides of a Reverse Mortgage</a>)</p> <p>Before tapping into your equity, take time to consider if this is really the best option for your financial situation. If you truly have that much equity in your house, you could even sell your home and downsize to a smaller home, mortgage-free.</p> <p><em>Are you considering a reverse mortgage? How do you plan to use the funds?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/how-to-avoid-getting-scammed-with-a-reverse-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-times-a-refinance-is-the-wrong-move">3 Times a Refinance Is the Wrong Move</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage">5 Downsides of a Reverse Mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-your-mortgage-off-early">Should You Pay Your Mortgage Off Early?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing equity HECM home equity conversion mortgage investment properties loans retirement reverse mortgages second homes Wed, 03 Aug 2016 09:00:06 +0000 Ashley Eneriz 1763994 at http://www.wisebread.com