real estate

How to Profit From China's Growing Upper Class — Even If You Don't Speak Chinese

Carrie Kirby — Mon, 14 May 2018 08:31:13 +0000

When I lived in Beijing in the late 1990s, most Chinese people were poor compared to their American counterparts. I remember visiting bars that catered to foreigners with local friends in tow, and having them marvel that the price of one drink could feed them for a week. People were considered well off if they owned a car or had an apartment with hot water on demand.

Things have changed. While poverty is still common in China, the wealthy class has ballooned. China is now in second place, after the U.S., for the most ultra high net worth individuals. And the wealthy class there is expected to keep on growing, with the number of Chinese millionaires expected to surge 41 percent to 2.7 million by 2022, according to Credit Suisse.

This means that there are lots of Chinese people in the market for goods and services their parents couldn't afford. Here are some ways you could cash in.

Teach English online

Teaching English for a low salary or as a volunteer has long been a way for new college grads to see the world. But the combination of global broadband and growing Chinese wealth has created an opportunity for Americans to make decent money teaching English from the comfort of their homes. VIPKID connects English-speaking teachers with children in China for one-on-one video lessons that pay $14 to $22 per hour. (See also: How to Earn $1,000 a Month or More as an Online Tutor)

Be a butler

In 2016, the Netherlands-based International Butler Academy opened a training program in Shanghai to serve the growing demand for butlers among high net worth households in China. English or English-appearing butlers who are willing to travel to China can start at $60,000 — nearly 50 percent more than beginner butlers earn in the West. Staffing agencies report that the premium is driven by the status boost that comes with employing a bona fide Downton Abbey-style butler. (See also: 14 Jobs that Capitalize on the Growth in Rich Households)

Rent your vacation property to Chinese tourists

Airbnb has been pushing hard into the Chinese market, adding 24/7 Chinese-language customer support and locally used payment options. At the same time, the number of Chinese visitors to the United States has been exploding, with more Chinese visitors than any other country except Mexico.

If you own a vacation property in a popular Chinese destination, such as Los Angeles, or near a national park, you can make your listing more attractive to Chinese travelers by providing a high level of service, since Chinese travelers are more used to hotels than home sharing. Discounts for longer stays help, too. If you have Chinese visitors coming in, thoughtful touches such as having a hot water kettle and house slippers available can help them feel more at home. (See also: 5 Easy Ways to Make Good Money From Airbnb)

Teach skiing

Skiing didn't really take off in China until the recent wealth boom, with the number of domestic ski areas rocketing to 568 from just six between 1996 and 2016. The run up to the 2022 Beijing Winter Olympics is further ratcheting up interest.

The combination of booming popularity and a limited history means that ski instructors are in short supply in China. A Club Med recruiting page promises ski instructors who travel to China perks such as accommodations, meals, and free flights in addition to an "attractive wage." How attractive? While ski instructors in the United States earn $15 to $20 an hour, in China you can make $20 to $30. Although speaking Chinese would increase your chances of getting hired, resorts are increasingly accepting that most available ski instructors don't.

Host a high school student

The number of international students earning high school diplomas in the United States has skyrocketed over the past decade, and the trend is led by China, whose students make up 46 percent of all international high school students here. Some of these kids are in U.S. boarding schools, but others are in private day schools and even public schools. These students need host families, who can earn $500 to $600 monthly per student for providing room and board.

Sell your property to a Chinese investor

To the chagrin of many would-be homeowners in certain markets, U.S. real estate has become attractive to Chinese investors making all-cash purchases. In fact, Chinese are now the top foreign buyers of U.S. real estate.

If you are looking to get top dollar, cash, for a property, it may be worthwhile to enlist an agent who knows the Chinese investor market well. Just don't expect this tactic to win you any friends among neighbors who might not like to see neighborhood properties turn into investor-owned ones.

Be a private schoolteacher or administrator

As I mentioned in the first item on this list, teaching in China used to be a low-earning opportunity for young people who wanted an adventure. With the growth of wealth in China, however, comes many domestic private schools who want English-speaking teachers and administrators, and are willing to pay for them.

Experienced teachers can earn $3,000 or more per month, and while that might not sound like big bucks, if it comes with a furnished apartment, airfare, and halftime pay over holiday breaks, some estimate you could sock away at least half your salary.

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This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Last-Minute Ways to Cut Your 2016 Tax Bill

Mikey Rox — Mon, 26 Dec 2016 10:30:23 +0000

Before you know it another tax season will be upon us. Do your wallet a favor and score all the deductions you can with these last-minute ways to reduce your bill in 2016.

1. Investment Account Balancing

Year-end investment account balancing is a no-brainer. If you have a taxable investment account, you should review your transactions for the year to see if you're in a net capital gain situation. If you are — says Jacob Dayan, co-founder of tax-relief service Community Tax — find some losing positions that will offset the gains and liquidate them by the last business day of December.

"If you wish to remain invested in these assets long-term, you can buy them back after 30 days," he adds. "Note that this strategy also works in reverse, with one difference. If you sell a net-gain position, you don't have to wait 30 days to buy it back. In either case, if you have positions involving multiple purchases over time, identify the specific assets you want to liquidate by purchase transaction to give you the greatest tax benefit."

2. Charitable Donations

'Tis the season to give unto others — if only for the tax breaks. You have until the end of the year to make charitable donations that will count toward your 2016 contributions for tax purposes.

"All charitable donations made to qualifying organizations before December 31 will count toward your 2016 deduction, as long as you itemize your deductions," says Pennsylvania-based certified public accountant William Ray. "Deductions are generally limited to 50% of your adjusted gross income, although additional restrictions may apply for those in higher income brackets. You may also deduct the current fair market value — not your original cost — of noncash contributions made to qualifying organizations. Certain noncash contributions may require additional support or an appraisal, so you should review IRS Publication 526 before claiming noncash contributions."

It's also important to track your volunteer time.

Ray adds, "Although you cannot make a deduction for your time, you may claim a deduction for any mileage driven using your personal vehicle ($0.14 per mile) and any out of pocket expenses that are not reimbursed. As is the case with any deduction, documentation and support should always be maintained for all contributions."

Financial planner Andy Yadro details another option for end-of-year giving.

"Consider contributing to a donor-advised fund," he suggests. "You get an immediate tax benefit and your money can be invested with potential to grow. This is a great last minute option for someone who wants to make a donation, but hasn't decided which charity it should go to."

3. Max Out Retirement Contributions

Were you fortunate enough to get a holiday bonus? Use it to top of your tax-deferred retirement accounts such as an IRA. Even better, kick in a few extra dollars from your regular paycheck. You'll boost your savings while reducing your taxable income. However, be aware of the contribution limits for both types of retirement account.

"If you or your spouse are not covered by a retirement plan through your employer, you're both eligible to contribute up to $5,500 each to an IRA ($6,500 if you are over age 50)," Ray says. "You may be eligible to make a contribution, even if you are covered by a retirement plan through your employer, depending on your income."

You also have until April 15, 2017, to make this contribution and still have it count toward your 2016 taxes. However, it's highly recommended that you do not file your tax return until you make the contribution. If you claim the deduction but cannot pay, you'll need to file an amended tax return by April 15, 2017, or pay penalties and interest.

4. Pay Your State or Local Income Tax Bill Early

If you itemize deductions, you can claim a deduction for state income taxes paid during the calendar year. This includes any amounts paid for your 2015 tax liability that were paid in calendar year 2016.

"If you consistently owe taxes on your state or local tax returns, paying them early can result in immediate federal tax savings," Ray explains. "States and localities allow you to make estimated tax payments or prepayments at any time during the year. If you make a payment before December 31, 2016, that payment can be deducted on your 2016 federal tax return. But be careful of overpaying. If you overpay and receive a state or local income tax refund, you will need to claim that as income on your 2017 federal tax return."

5. Make January's Mortgage Payment in December

One of the joys of homeownership is taking advantage of the various tax breaks the government provides. The biggest of these is the mortgage interest deduction. If you can spare the extra cash, consider making your January 2017 mortgage payment before the end of the year. You'll be able to deduct the mortgage interest on your 2016 tax form. Don't get greedy here, though. Tax law generally prohibits taking annual deductions on "prepaid interest," so you won't be able to pay February's mortgage bill and claim that for 2016, too. For more on the tax advantages of homeownership, see the Tax Policy Center's analysis. (See also: 4 Tax Deductions New Home Owners Shouldn't Skip)

6. Review Your Health Coverage

If you're covered by a high-deductible health plan, you may qualify for a Health Savings Account (HSA) and contribute $3,350 ($6,750 for a family) to the plan — all of it tax-deductible.

"Many employers now offer high-deductible health plans, meaning employees often have to pay thousands toward a deductible before their health coverage kicks in," Ray says.

To offset this cost, you may qualify for an HSA.

"An HSA is basically a 'retirement account for health care' and is becoming more common each year," Ray continues. "The HSA allows you to contribute to an investment account that can grow tax free over time, while receiving a deduction on your tax return. You even receive a deduction if you don't itemize. The account can then be used to cover qualifying medical costs. Unlike a Flexible Spending Account (FSA), an HSA is 'your money' and can grow over time, rather than being forfeited at the end of the year."

Check with your employer to see if your plan qualifies for an HSA. (See also: 11 Surprising Things Your HSA Will Cover)

7. Prepay Real Estate Tax

If you foresee a changing income situation, supplement next year's loss with a right-now gain. Yadro suggests prepaying your real estate taxes and taking the deduction now.

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

35 Bizarre Things You Can Be Taxed On

Carrie Kirby — Mon, 19 Dec 2016 10:00:08 +0000

Once the Yuletide log burns out and the New Year's ball drops, it's soon time for a less-joyful annual tradition: Calculating how much money you owe the Internal Revenue Service.

We all know that Uncle Sam takes a share of our earnings, but have you considered other events in the past year that you may owe taxes on? You might be surprised at all the ways Uncle Sam can lighten your wallet.

Note: I'm not an accountant. Consult a tax professional for advice on your personal situation.

1. You Caught a Baseball

You are the lucky fan who catches a historic home run ball from the outfield bleachers. The not-so-lucky part? The IRS could hold you responsible for the resale value of the ball as soon as it hits your glove — even if you weren't planning to sell it.

2. You Found a Pot of Gold

You finally found the cache at the end of the rainbow. Or maybe you found a stash of rare baseball cards hidden in the wall of your home during a remodel, or a treasure chest while scuba diving in a shipwreck. Under the same regulation that applies to the baseball, the treasure trove rule, that windfall is taxable to you the first year that you find it. Sadly, this means that you may be forced to sell all or part of your find even if you wanted to keep it.

3. You Held Up a Liquor Store

It doesn't matter if you got it illegally: Stolen money or property should be reported, lest a tax evasion charge be added to your legal woes when you get caught. Says the IRS, "If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner."

4. You Accepted Hush Money

The IRS is blunt on this one: "If you receive a bribe, include it in your income."

5. You Dealt in Illegal Goods

If you made money dealing drugs or by any other illegal form of self employment, the IRS requires you to report it on Schedule C.

6. You Hit the Jackpot

Yes, you have to pay taxes on your lottery prize. Yes, if you have been buying lottery tickets all year, you can also deduct the expenses. But you have to keep a diary of wins and losses, and the IRS has specific instructions on how to do that.

7. You Stuck the Landing and Won Gold

It's estimated that Michael Phelps will owe $55,000 to the IRS on his Rio winnings — the medals and the cash prizes that come with each are taxable. Many other Rio champions will get off scot free, however. That's because Congress recently passed a law to exempt Olympians from "victory taxes" — but only for athletes who earn a million dollars a year or less. Phelps earned an estimated $12 million in endorsements alone in 2016, so he doesn't get that break.

8. You Got a McArthur Genius Grant

It would feel great to win this $625,000 no-strings stipend, or the approximately $1 million that comes with the Nobel Prize. That good feeling won't protect you from the tax bite, though. You're required to pay taxes on all such awards — unless you have them directly transferred to a recognized charity. That's what President Obama did with his 2009 Nobel Peace Prize winnings.

9. You Are Gifted

Usually, the presents you unwrap over the holidays come to you tax-free, but there are some exceptions. Cash or a gift card from your boss is taxable as a fringe benefit. A hostess gift you receive as a thank-you for having a sales party in your home is taxed as miscellaneous income. Personal gifts, though, are generally safe from the tax man.

10. You Airbnb'd Your Pad

Just like regular rent payments, money you earn by hosting Airbnb guests is counted as part of your gross income. The exception: You don't have to pay if you live in the home and rent it out for two weeks or less per year.

11. You Got Your Social Security Check

It may seem nonsensical that the government pays people and then collects tax money on those payments, but that's how it goes. However, SSI, or disability benefits, are not taxable.

12. You Divorced Well

Alimony you receive from your ex is taxable income, but child support payments are not. For this reason, it's important to know how payments are categorized in your divorce settlement.

13. You Won a Scholarship

If you win a grant that covers your tuition and books, that's tax-free. But if it pays for room and board or travel, pay up.

14. Your Fantasy Football Team Won the Super Bowl

If you win at least $600 worth of cash and prizes from a business operating a fantasy sports league, they'll file a 1099-MISC with the IRS. But even if you win less or your league is informal, you are still supposed to pay on your winnings.

15. Triple 7s Came Up

Just like with the lottery, the IRS gets a cut of your casino winnings once they surpass the amount you document losing. Usually it's a flat 25%.

16. You Spun the Wheel of Fortune

It's simple enough to pay the tax if you win a cash prize, but if you win a car or vacation, you still owe tax on its value — which can be tough to pay if you didn't also win cash. Because of this, it's often wise to take the cash equivalent of a prize if offered.

17. Your Debt Was Forgiven

The IRS is very specific about this: If a debt is cancelled as a gift to you — for example, if Grandpa says, "Merry Christmas, you no longer owe me for that time I bailed you out!" — you don't have to pay taxes. Otherwise, you do.

18. You Traded a Haircut for Cigarettes

This may surprise you, but if you receive goods or services in exchange for services you render, the IRS expects you to include the value of those in your gross taxable income.

19. The Boss Lets You Take the Ice Cream Truck Camping

If you drive your company car to work and home, or use it on weekends, this is a taxable fringe benefit and you should be tracking and reporting your personal miles.

20. Your Bitcoins Doubled in Value

Bitcoin is a virtual currency that is represented by computer code, but it can be used to buy real goods and services. So of course, the IRS considers gains in this or any other virtual currency taxable. It's considered a capital asset like stocks and bonds, so if you buy Bitcoins low and sell them high, the difference is your profit. But it can be even more complicated than that: If you create new Bitcoins by mining, you have to count those as income, too.

21. You Got a Blogger Freebie

If a widget maker sends you their SuperWidget 2000 to review and you get to keep it, you just received a taxable payment. However, you don't owe taxes on the market value of the product — just what the company agrees it's worth. Make sure to put an agreed-upon value in your contract.

22. You Sold Stuff on eBay

If you occasionally sell your kids' outgrown clothes on eBay, you won't owe taxes because you most likely took a loss on the items. But if you create a resale business on eBay, you better believe you have to report your profits.

23. You Had a Yard Sale

Like eBay, most yard sale transactions are not income producers, but if you're one of those people who holds a sale every weekend and resells stuff at a profit, do the right thing.

24. You're a Child Entrepreneur

Starting a small business, whether it's dog walking or selling handmade items, can be a great activity for a tween or teen. But don't expect them to be IRS-exempt just because they're kids. If the business earns more than $400, file a tax return.

25. You Set Up a GoFundMe Campaign

This is one of those tricky gray areas. If you start a crowdfunding benefit for someone in need, the donations should be considered personal gifts. But if the gifts run into the large numbers, the crowdfunding site may file a 1099, reporting the transaction to the IRS. A word to the wise: If you are setting up a crowdfunding campaign for a needy friend, make sure it's in their name so you don't end up wondering if you need to pay taxes on money you handed over to them. And consult an accountant before going down this route.

26. You Asked for Spare Change

There are differing opinions out there over whether quarters dropped in a panhandler's cup are considered earned income or a gift. Since panhandlers tend to live below the poverty line, they probably wouldn't owe any income taxes, either way. A more pressing issue for many would be whether the panhandling counts as earned income, qualifying recipients for the earned income tax credit, which could lead to a cash payment from the IRS even if the panhandler pays no taxes.

27. You Received Punitive Damages

Court settlements vary in their tax treatment. If you get a settlement in court to compensate you for a physical injury or emotional distress stemming from an injury, the money isn't taxable. But if you get paid for emotional distress not tied to an injury, or you receive punitive damages, you have to pay.

28. You Cashed in Your Life Insurance Policy

If you die, your beneficiaries probably won't be taxed on your life insurance payout. But if you cash it in while you're alive? Any profit you made on the policy — that is, the value in excess of premiums paid — is taxable.

29. Your Champion Pug Had a Litter

Whether you breed your dog as a business or a hobby, money made selling puppies is taxable income. However, it's also not cheap to breed and raise puppies, so once you deduct stud fees and all those vet bills, you may not actually show a taxable profit for your prize pups.

30. You Put on the Red Light

Just like dealing drugs, if you sell your body in a jurisdiction where that's illegal, you still have to report the income on Schedule C. In fact, smart high-earning prostitutes declare their income to put themselves into the position to buy a house or get credit.

31. You Couldn't Get Out of Jury Duty

If you got $15 for sitting on a jury, that's taxable income, even if you turn it over to your employer. However, if you did turn it over to your employer, you also put in a deduction for the same amount on your tax form so your gross income will remain the same.

32. You Got a Tax Refund

Last year's state and federal refunds are taxable in some situations.

33. You Exercised Stock Options

This is one that has gotten a lot of tech workers into financial hot water. If your company gives you stock options, that's not a taxable event. But when you exercise the option by purchasing stock in your employer at a discount, that is a taxable event even if you don't sell the stock right away. This can go bad if the stock declines in value after you exercise the option, because now you may owe the IRS more money than you can raise by selling the stock.

34. Your Landlord Is Paying You to Get Out

In rent-controlled areas with high demand, such as San Francisco, it's common for landlords to buy tenants out. This is often referred to as a relocation assistance. This is taxable, but whether to treat it as regular income or a capital gain is dicey, so you may need professional help with that one.

35. You Are an Undocumented Worker

Despite a common belief that undocumented immigrants don't contribute to society with tax dollars, anyone working in the U.S. is legally required to pay taxes, papers or not. And they do pay. Studies show about half of people working illegally are paying income tax, resulting in about $12 billion per year in state and local revenue.

This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Money-Smart Things I Wish I'd Asked Santa For

Mikey Rox — Fri, 16 Dec 2016 11:00:09 +0000

I spent a couple of decades asking Santa Claus for toys, clothes, and gadgets galore, but I don't have a single thing to show for it — I mean, besides a basement full of outdated stuff. Instead, I should've begged Ol' Saint Nick for these eight things that would have paid for themselves over and over again — so I could afford an even bigger basement full of outdated stuff. Take a look:

1. An Impenetrable Credit Score

When I turned 18 and the friendly lady at Discover Card called to ask if I'd like my very own credit card, I enthusiastically said yes. I generally consider that my very first adult mistake. Not that credit cards are bad, but they're the devil in the hands of a financially irresponsible college freshman. Because not only did I max the card out in less than six months, I was unaware that not paying the bill for five years thereafter would result in a disaster of a credit score when I entered the "real world." If only Santa could have done me a solid by fortifying my credit score — against myself.

2. Everything Gold

In 2006, I asked Santa Claus for things like seat covers for my vehicle and a new digital camera because that's what materialistic 25-year-olds in major credit card debt ask for. Instead, I should've asked for straight-up gold bars. Heck, I would've been happy with a few flakes — like this guy who got away with 86 pounds of jeweler's "bench sweeps" worth $1.6 million. Because 10 years ago, on Dec. 11, gold was valued at $625.81 per troy ounce. Flash forward a decade and the price has nearly doubled to between $1,100 and $1,200, depending on the day, and that's really just midrange. On Sept. 12, 2011, gold hit its 10-year high of $1,861.49 per troy ounce, which — if you were feeling lucky that day — raked in three times its original amount if you unloaded a few bricks.

3. EE Savings Bonds

Hardly anybody gives savings bonds as gifts anymore (well, except maybe your grandma) because what fun is a certificate that you have to hold on to for, like, ever to reap its benefits? But just because they're not as popular as they once were doesn't mean they're not still valuable — if you got in on them in the 1980s and '90s, that is. EE bonds issued in the 1980s had rates of return of 6% to 9% a year, compared to today's 0.1% annual fixed rate. Mathematically, if you have a $500 bond from June 1983, for instance, it reached full maturity in June 2013, with a value of $1,014.40. Santa, can you hear me?

4. Real Estate in Depressed Markets

Throughout my years living in major cities like Baltimore and NYC, I've heard legendary tales of beautiful row houses and brownstones in economically and socially depressed areas, like Federal Hill in Baltimore and Harlem in New York City, that sold for crazy-low prices like $1. The $1 price is probably a myth, but dilapidated properties have in fact gone for very affordable prices with agreements that buyers reside in their neighborhoods for a specified period of time. I personally know a few people who purchased homes in blighted areas for around $30,000 20 years ago and are now sitting pretty on $2+ million lots.

5. College Tuition

All I needed was a cool $100K, Santa. I would've paid my college tuition and room and board outright so I didn't have to make up for half that amount myself over the next 20 years after graduating. Alas, I'm halfway there, and I've paid two of three notes off, but if you could cut a check for the rest this year, I'd appreciate it.

6. A Trust Fund

My financial woes would be nonexistent if I had asked Santa for a generous trust fund at an early age. Then I'd be just like the rest of my friends who were lucky enough to be related to someone filthy rich — free of debt with plenty of time to take selfies on a beach and dedicate my life's work to my own liver replacement.

7. Guaranteed Employment

There's nothing more stressful than job hunting, and I'm thankful that I haven't had to do that in a while since I'm self-employed. But self-employment isn't easy, either. I'm responsible for my own income instead of enjoying that twice monthly direct deposit for just showing up at my desk five days a week. Still, even that's on shaky ground if you don't mind your Ps and Qs — a friend of mine was recently laid off two weeks before Christmas — so this year I'd like to ask the big guy to make sure everybody can get (or keep) the job they really love for a happy and prosperous 2017.

8. Winning Lottery Numbers

I rarely play the lottery, but I do spend a few bucks when Mega Millions is, like $300 million, because, hey, somebody has to win. If that ever happens, my friends, you'll never hear from me again. Ev-er. Send me those winning numbers, Santa!

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Much Are Pricey Home Upgrades Really Worth?

Damian Davila — Mon, 03 Oct 2016 10:30:06 +0000

"Real estate investing, even on a very small scale, remains a tried and true means of building an individual's cash flow and wealth," writes Robert Kiyosaki author of Rich Dad, Poor Dad. (See also: The 8 Classic Personal Finance Books You Must Read)

But like with any other type of investment, you need to know what you're doing, or you'll end up eating your shirt. For example, you may think that some high-end projects, such as adding a deck that offers a majestic view or doing an upscale bathroom remodel, may provide you a great return on your real estate investment. However, the evidence from the 2016 Remodeling Cost vs. Value report from the National Association of Realtors (NAR) shows the contrary.

By taking a look at the project costs in 102 U.S. real estate markets, the NAR report provides a comprehensive review of what features provide you the best bang for your real estate buck. Let's round up a handful of "features" that can really boost the cost of a home, but may not actually deliver a lot of value. And we'll look at the projects you should take on, instead.

1. Bathroom Addition

The idea of having an extra bathroom so that your family members don't have to sit around for others to get ready for the day may sound like a great idea. But adding a full 6-by-8-foot midrange bathroom to your home only recoups just under 60% of your total cost, on average. In 2016, the national average cost for a midrange bathroom addition was $42,333, but offers only $23,727 in actual value — in other words, a net loss. Even worse, the NAR reported that only one out of the 102 U.S. markets provided a 100% return on this project on that year.

Going "upscale" on a bathroom addition doesn't fare well either. In 2016, the national average resale value for an upscale bathroom addition was only 0.5% better than that for a midrange bathroom addition.

What to Do Instead: Keep it simple and midrange. A bathroom remodel provides a better resale value than an addition. A midrange bathroom addition and a midrange bathroom remodel recoup 56.2% and 65.7%, respectively. Doing an upscale bathroom remodel only improves the resale value by 1% over the one offered by an upscale bathroom addition. Also, the cost advantage of midrange bathroom remodel ($24,000) over an addition allows you to pay back any financing more quickly.

2. Composite Deck Addition

Enjoying a hot cup of coffee by a bonfire during the fall, or reading an intriguing novel while getting a tan during the summer out on your deck sounds like it's worth every penny. But, the financial math doesn't add up.

Adding a 16-by-20-foot deck using pressure-treated joists supported by 4x4 posts anchored to concrete piers would run you a national average between $16,798 to $37,943, depending on the scope of your project. The resale value of a composite deck addition would only recoup $10,819 to $21,877, according to national averages.

What to Do Instead: If you really want to have that deck, go with wood instead of composite. Adding a midrange deck made out of wood provides a resale value over 10% higher than that of composite.

3. Backup Power Generator

We all want to be prepared for disaster, but the addition of backup power generator runs at $12,712, according to national averages. Worse, this project only recouped an average of 59.4% of its cost in 2016.

What to Do Instead: Forget about backing up your power and focus on replacing your entry door. Replacing the entry door to your home is a good idea because it can improve the security and ability to withstand the elements (and zombies!) from your home. Additionally, the right door can enhance the look of your home. While the in 2016, the cost of a midrange entry door replacement recouped 91.1% of its cost, in past years this project has recouped up to 128.9% of its cost! In the 2015 edition of the NAR report, entry door replacement received the top rank nationally in terms of cost recouped (101.8%). That year' survey revealed that a new steel door was the least expensive project and provided the best payback out of all projects across the nation.

Additionally, eligible ENERGY STAR doors can qualify you for up to $500 in energy efficiency tax credits.

The Bottom Line: The Simpler the Project, the Bigger the Return

Currently in its tenth year, the 2016 NAR report indicates that "the simpler and lower-cost the project, the bigger its cost-value ratio."

In 2016, four out of the top five projects that ranked best for cost recouped had a total cost under $5,000. These costs estimates were made assuming that you hired a professional contractor to complete the projects. Regardless of your budget, you'd be better off tackling two or more affordable projects that recoup at least 90% of their value, than just one high-end one with a recoup value under 60%. If you have great DIY handyman or negotiation skills, you could improve your investment return even further. (See also: 4 Times You Should Splurge and Hire a Pro)

As you can see from these sample projects, replacements cost less than alternative home renovation projects, such as a kitchen or bathroom renovation, and provide the best bang for your buck. Another home renovation project that can be completed within three days and that provides a high return on investment is garage door replacement. In 2016, a midrange garage door replacement would recoup about 91.5% of its cost.

How are you improving the market value of your property?

This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Foolproof Ways to Protect Your Money From Inflation

Damian Davila — Fri, 02 Sep 2016 09:00:14 +0000

Back in January 1980, when Jimmy Carter was President and Michael Jackson led the music charts with "Rock with You," Americans were experiencing one of the periods of highest inflation in modern history. In January 1980, inflation was over 13.9% per year and peaked in April 1980 at 14.76%.

With the consumer price index (CPI) at 0.8% in July 2016, many Americans have never experienced the dramatic increase in prices that other generations have. But even though inflation is low these days, it still eats away at your savings and investments. Let's review four (nearly) foolproof strategies and investments that will reduce the hit.

1. Invest in an S&P 500 Index Fund

The average annual inflation rate since the U.S. government began tracking it in 1913 is about 3%. To combat inflation's effect on your money, you need investments that provide greater average returns than the inflation rate.

Since its inception in 1928, the S&P 500 has provided an average annual return of 11.25% until 2015, making this stock market index a leading choice to protect yourself from inflation. For the greatest ease and cost-efficiency, invest in a mutual fund or exchange-traded fund that mirrors the S&P 500's performance.

Not only are the average returns of passively-managed S&P 500 index funds higher than those of actively managed funds, but also the expense ratios of S&P 500 index funds are lower than those of actively managed funds. For example, the Vanguard 500 Index Investor Shares fund [Nasdaq: VFINX] has an annual expense ratio of 0.16%, which is 84% lower than the average expense ratio of funds with similar holdings.

Of course, this approach isn't actually foolproof, since both the rate of inflation and market returns vary from year to year. But when considering long-term averages, it's a fairly safe bet.

2. Increase Annual Contributions to Saving Accounts

Even when you leverage high-yield online savings accounts, you'll only make between 0.75% and 1.05% per year, according to data from August 2016. With a July 2016 CPI of 0.8%, you're actually losing 0.05% and gaining only 0.25% per year. (See also: Capital One 360: A Competitive Banking Option)

Setting up automatic transfers from your paycheck or main checking account to your investment and saving accounts is a smart idea, but adjusting those contributions for inflation is an even better one. A good practice is to make an adjustment for inflation once a year. Check with your financial institution to find out if it offers the option of automatic adjustments for inflation to your contributions.

3. Seek Real Estate Income

While gold has a great reputation as an investment hedge against inflation, real estate income has proved to be a better hedge tool. A study from financial company Fidelity back-tested the performance of several assets against inflation on an annual basis during a 40-year period and found that gold and real estate income beat inflation 54% and 71% of the time, respectively. "Real estate is regarded consistently as a good inflation hedge, and it is", asserts Susan Wachter, professor at the University of Pennsylvania Wharton School of Business. (See also: 4 Reasons Millennials Should Invest in a Home)

While most individual investors can only afford to buy their own home, all individual investors can gain exposure to real estate income from a wide variety of properties through real estate investment trusts (REITS). Some advantages of REITs are their requirement to maintain a dividend payout ratio of at least 90% and their liquidity because they trade on major stock exchanges.

For example, the 10-year annual average return of the Vanguard REIT Index Fund Investor Shares [Nasdaq: VGSIX] is 7.46%, as of June 30, 2016. In comparison, the 10-year annual average return of the S&P 500 was 7.42% for the same period.

Adding REITs provides you access to assets with inflation resistance and helps you protect against the negative of higher inflation. Still, REITs should only be a part of a well-diversified portfolio. Depending on your tolerance to risk, financial advisers suggest allocating from 5% up to 20% of your investment in portfolio in REITs. And of course, past performance is no guarantee of future success.

4. Negotiate Your Salary

If your salary were to consistently go up every year, you would not to worry about inflation to begin with! However, less than half of working Americans ever even ask for a raise, and about 30% of them are uncomfortable negotiating salary.

Start your career on the right foot by successfully negotiating the salary offer of your very first job. Three out of four U.S. employers typically have room to increase their first salary offers by 5% to 10% during negotiations, but only 38% of applicants negotiate those first salary offers. Let's imagine that your first salary offer was $38,000, that would mean that you have the potential of increasing that offer from $39,900 to $41,800. Given the historical inflation average of 3% per year, you have the potential of covering inflation for 40 months just by negotiating your first salary offer.

And things only get better after that.

By bumping up your salary from the start, you're increasing your chances of future raises. As your salary grows over time, so does your probability of getting a raise. For example, people making $40,000 to $50,000 have about a 40% chance of receiving that raise they requested and people making $60,000 to $70,000 have about a 50% chance.

While there are other factors that may influence pay raises, the main one is the decision to request better compensation. From U.S. workers asking for a raise, 75% of them get something: 44% of them get what they asked for and 31% of them receive a smaller amount. Getting at least a small raise is a very smart strategy to protect yourself from inflation because inflation erodes the value of your dollars year after year.

What are other ways to protect yourself from inflation?

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This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Investments That Usually Soar During the Summer

Tim Lemke — Thu, 02 Jun 2016 10:00:08 +0000

It's often said that investors should "sell in May and go away," but that doesn't mean you can't make money in summertime. There are plenty of sectors and industries that do well in the warm months and can generate solid returns.

Let's take a look at the investments that will keep your portfolio growing even while you're basking on the beach.

1. Theme Park Stocks

Gas prices are still low, so that means people will drive places this summer. And they'll head to parks owned by companies like Cedar Fair [NYSE: FUN], Six Flags [NYSE: SIX], and Disney [NYSE: DIS]. All three of these companies hit their 52-week highs between May and August last year, and shares have been creeping up again in recent weeks. A strong summer for these properties could mean good growth for their share prices.

2. Airlines

People travel during the summer, so it's make or break time for most airlines. And there's some evidence suggesting that airline stocks do well between June and September. The Dow Jones U.S. Airlines Index rose 5% last summer, 2% in 2014, and 15% in 2013. The airline industry has gotten through much of the turbulence of years past, and the low cost of fuel now means there are some solid stocks including Southwest [NYSE: LUV] and Delta Airlines [NYSE: DAL].

3. Athletic Apparel

If people are getting outside, they're spending money on workout clothes and shoes. Last year, shares of Under Armour [NYSE: UA] rose nearly 8% during the summer months, while Nike shares rose 20%. Other sportswear companies including Columbia, VF, and Foot Locker had very good summers.

4. Food and Beverage Stocks

The S&P 500 Food and Beverage Select Industry Index has seen gains in three of the last four years. Consider Coca-Cola, which saw shares rise more than 20% between June and September last year. Monster Beverage has had consistent gains during the summer, including a 24% increase in share value during the summer of 2014.

5. Biotechnology

It's one of the market's more volatile sectors, but it has historically done quite well in the summer. The NASDAQ Biotechnology Index rose about 8% between June and September in 2014, a whopping 25% in 2013, and more than 12% in 2012. The index did drop during the summer of 2015, but that was just the third summer decline since 2005. You can invest in a broad array of biotech firms by investing in the SPDR Biotech Select Index ETF [NYSE: XBI] or a healthcare fund such as Vanguard's Health Care Index Fund [NYSE: VHCIX]. Individual stocks worth a look include Gilead Sciences [NASDAQ: GILD] and Amgen [NASDAQ: AMGN].

6. Technology

Plain old technology stocks don't take a break in summer. Facebook [NASDAQ: FB] went up 11% last summer and 15% during the same period in 2014. Amazon [NASDAQ: AMZN] saw shares go up 24% in the summer of 2015. Online auction company eBay has also been a solid summer performer, once outperforming the S&P 500 for five straight years.

7. Real Estate

No one goes house hunting when it's cold outside. But when the weather's nice, the buyers come out. And that's when home prices increase due to increased competition. A chart of median home prices by month almost always looks like a roller coaster, with prices rising in June and then falling back down in the fall and winter. So if you own property now, the summertime is a good time to sell.

Any summer month stock winners we've missed? Let us know in comments!

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Housing Values in Relationship to Proximity to Certain Stores

Kyle James — Thu, 17 Mar 2016 10:30:11 +0000

Finding a home in the right neighborhood can be a daunting task, especially if you're on a strict housing budget. But according to recent studies, you should also add the proximity to specific stores into consideration when looking for your next home. Having these stores in your neighborhood can actually boost your home's value.

Starbucks

According to Zillow Talk: The New Rules of Real Estate, ever since 1997, homes located within a quarter-mile of a Starbucks appreciated in value at an average rate of 21%, while homes within a half to quarter-mile rose in value by 17%. In contrast, homes located within the same distance of a Dunkin' Donuts, and not a Starbucks, only appreciated in value by 15%.

Zillow makes the argument that a Starbucks in the neighborhood isn't the result of higher home prices, but in fact, is the cause. Whether home buyers see a Starbucks as a sign of an up-and-coming neighborhood, or a testament to a sense of community where people meet and interact with each other, there's no arguing the data that shows a nearby Starbucks to be something to look for when house hunting.

Whole Foods

The proximity to a Whole Foods grocery store is another excellent thing to look for when shopping for a new home. Zillow discovered that between 1997 and 2014, a strange phenomenon occurred when a Whole Foods announced they were coming into a new neighborhood.

At first, median home values within one mile of the future Whole Foods grew slower than other homes in the same city. But as the grand opening grew nearer, that trend started to reverse dramatically. Once the store opened, homes within one mile appreciated much faster than other homes in the area. While Zillow can't fully explain this phenomena, they point to an overall increase in a neighborhood's desirability as the root cause.

Trader Joe's

Similar to Whole Foods, the proximity to a Trader Joe's is an indicator of a neighborhood with growing home values. Whether it be the perception of a healthy lifestyle or a safer neighborhood, Zillow also found that homes within a mile of a Trader Joe's had appreciated by 10% more than other homes in the area during the two years after a location's grand opening.

According to Zillow CEO, Spencer Rascoff, "the grocery store phenomenon is about more than groceries, it says something about the way people want to live — in the type of neighborhood favored by the generations buying homes now. Today's homebuyers seek things in neighborhoods that weren't even in real estate agents' vocabularies a generation ago: walkability, community, new urbanism — and maybe we should add words like 'sustainable seafood' and 'organic pears.'"

When comparing homes near a Trader Joe's to those near a Whole Foods, TJ's appears to be the clear winner. According to a recent RealtyTrac study, which analyzed the values for 2.3 million homes, they found that houses near a Trader Joe's location "have a higher value on average: $592,339, 5% more than the $561,840 average value for homes near a Whole Foods." Also, homes near a Trader Joe's have appreciated by a whopping 40% on average, while similar homes near a Whole Foods have only appreciated by 34%.

While it should be pointed out that causation does not always imply correlation, I think it's safe to assume that looking for these stores in a neighborhood is worth adding to your arsenal of factors when shopping for a new home. This is especially true when you consider the amount of money and effort that these corporations put into scouting new neighborhoods for potential store locations that will be profitable.

Have you ever used the proximity to these stores as a way to determine the desirability of a neighborhood?

This article is from Kyle James of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Ways the 50% Rule Can Save You Money

Andrea Cannon — Fri, 29 Jan 2016 12:00:04 +0000

The 50% rule is a simple guideline that can help you determine whether it's time to replace an appliance, adjust your budget, and lots more. Here's how it can help you save real money.

1. Appliances

When a household appliance has an issue, it may be difficult to determine whether you should schedule a repair or replace the machine altogether.

To easily determine if it's worth keeping, use the 50% rule. If the appliance has used up more than 50% of its useful life and the cost of the repair is more than 50% of the cost of a new appliance, then you should replace it.

If you have a warranty on your appliance, find out if any of the repairs are still covered. Most appliance warranties cover labor and parts for one to two years. Some small repairs can also be completed as DIY projects.

On the other hand, Consumer Reports recommends that if an item has already broken down once before, it might make sense just to replace it. Keep in mind that if you decide to keep your original appliance, there will be extra costs like additional maintenance and possibly a "trip charge" from the service contractors you hire.

What You'll Need

You can easily compare the costs of repair versus replacement to determine what's a better value. In order to get the most accurate estimate possible, there are several pieces of information you will need:

The appliance's expected useful life: Knowing how long your appliance is expected to last will help you determine if it's worth keeping. (See also: This Is How Long These 6 Appliances Should Last)
The original purchase price of the appliance.
The average cost to repair your type of appliance: If your service contractor will offer a free estimate, this will help you make a more informed decision.
The cost of a new appliance.

Benefits of Replacing

You may also want to consider the benefits of replacing the appliance to a newer, more updated version. These benefits could include:

Improved energy efficiency, which may mean lower electricity bills, lower insurance, or tax deductions.
More features that will improve your life.
Less chance of repairs in the near future.

2. Real Estate

In real estate, the 50% rule states that operating expenses and vacancy account for about 50% of the rent. This means that if a property rents for $1,000 per month, about $500 will be spent on expenses and vacancies. The remaining 50% would be devoted towards mortgage principal and interest, with the leftovers serving as cash flow.

This can serve as a general guideline to help you determine if a particular real estate investment will be worth it in the long run. If you are considering a long term buy and hold, then the 50% rule can help save you money by preventing any purchases that won't pay off.

3. Insurance Claims and Disaster Recovery

After a natural disaster, if the damages do not exceed 50% of the cost of replacing the building, then it will be deemed repairable. The Federal Emergency Management Agency uses a 50% rule to determine if something is considered to have heavy damage or needs substantial improvement. The rule states that if the repair costs are 50% or more of the building's value, then the building must be elevated and brought into compliance.

Another application of the 50% rule states that when a building is to be renovated, if the total costs of improvement are 50% or more of the building's value, it will have to be brought into compliance. This is a hidden cost that most don't know about. Being aware of what's to come can help save you time, money, and frustration.

4. Budget

If you've heard of the 50/20/30 budget, it relies on the 50% rule. It specifies that 50% of your budget should be dedicated to essential expenses (like housing, food, and transportation), 20% to financial obligations (like debt repayment, retirement, and emergency savings), and 30% to personal expenses (like entertainment, dining out, and phone, cable, and Internet expenses). By following this guideline, you can create a workable budget that alerts you when you are spending too much, saving you money over time.

Keep in mind that the 50% rule is a guideline and won't always work perfectly. It's best to make adjustments to the numbers so that you can get a better estimate and make a more informed decision.

Have you ever applied the 50% rule to your life? Please share your thoughts in the comments!

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This article is from Andrea Cannon of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

11 Finance Tips You Wish You Could Tell Your Younger Self

Mikey Rox — Tue, 08 Dec 2015 18:00:02 +0000

If you could impart some of your current financial wisdom on your younger self, what would you say? Take more risks? Concentrate more on saving? Choose a less expensive education? All of us would do something differently. Perhaps one of these tips would have paved an easier financial path from then to now.

1. Start Contributing to Your 401K as Soon as You Can

When you landed your first job straight out of college, the last thing on your mind was retirement. But even a couple years' delay can defer your retirement to later than expected, or force you to tighten the purse strings mid-career to make up the difference. You're not alone. According to new research from Fidelity Investments in collaboration with the Stanford Center for Longevity, 36% of retirees wished they had saved more during their working years, and 33% wished they had started saving earlier — a statistic that isn't exactly comforting in hindsight.

To make the most of your 401K right now, max out your employer-match contribution — don't let that free cash go to waste — and negotiate to be vested sooner and/or receive a higher match opposed to $1K to $2k more annually. This is a strategy that will pay off more in the long run.

2. Never Say "I'll Pay Myself Back Later" Because You Won't

There are times when we're younger that we need to dip into our personal savings or 401K (which should always be a last resort) for emergencies or something recreational (like a bad-idea road trip with your buddies to Fort Lauderdale — not that I'm speaking from personal experience, of course). We convince ourselves that we'll pay ourselves back for the deduction so that we feel less guilty about it, but nine times out of 10, that never happens. That was then. Hopefully you've put those costly impulse decisions behind you — like you have the cargo shorts and keg stands.

3. Credit Cards Aren't Free Money

This tip is very personal to me because I was targeted by credit card companies as soon as I turned 18, and I fell right into their trap. I took whatever they were willing to throw at me — because, hahaha, I was going to beat the system! — but the joke was on me. I maxed out those cards in less than two months, and because I was a student without a job, I was unable to pay the bills. I missed payments for years until the debt was in such dire straits that I was offered payoff deals. The debt, and the indelible mark it left on my credit score, followed me for years, making it difficult to buy a car, purchase a home, or even build my savings. In this case, I'd tell my younger self to run for the hills — and keep your nose out of the J.Crew catalog.

4. You Don't Need to Impress Your Friends

As soon as you get that first high-paying job, you want to do two things — buy shiny stuff and take your friends out for dinner and drinks. Why? Because you made it, and now it's time to show it off! But guess what? Your friends don't give a lick. These are the people who enjoyed your company when you were poor; there's no need to impress them now. And if that's not the case, they're not really your friends. Instead, save your money and pretentiousness for more important things.

5. Pay Your Bills First, Yourself Second, and Everything Else After That

Cash your check and divide it into three parts every time you get paid. The largest part should pay all your bills for the month — I mean everything. Second, pay yourself. Funnel money into savings and set aside cash for budget items like groceries, gas, and rent. Lastly, if you have any left over, you can use a little for the extra things you'd like to do, like eat out, see a movie, or other non-essentials. It's not the most exciting way to live, but it is the smartest.

6. If You Don't Have the Cash for it, You Can't Afford It

This sort of goes hand-in-hand with steering clear of credit cards if at all possible. And it's as simple as the strategy suggests. If you can't pay for whatever it is you want in cash, you don't need it. Obviously that exempts major life purchases — a new car, home, etc. — but it applies to almost everything else, including fancy flat-screen TVs, expensive makeup, the hottest sneakers, or whatever your vice is that you can totally live without.

7. Stop Eating and Drinking Yourself Poor

Fifty-cent wing nights and dollar shots will not get your bills paid, but they will get you fat and house poor. Print out that motivational speech and keep it in your wallet, young buck. In general, eat healthier — and at home more often. Your 30-year-old body (and bank account) will thank you.

8. Carefully Consider the Debt-to-Income Ratio of Student Loans

Personally I don't regret my costly private college education, despite that I still have eight more years of loan to pay off. Still, I do have plenty of friends who wish they had chosen a less expensive school. Thus, carefully consider how much college will cost, the debt you'll rack up as a result, and the income earning potential of a career in your chosen field. If there's an imbalance between those variables that you don't think you can live with, choosing a cheaper school may be the right move for you.

9. Master the Money-Saving Art of Negotiation

If you can buy it, chances are you can negotiate the price down. From clearance clothing and your first new car to insurance premiums and bank fees (yep, you can even negotiate those, too), you can save a bundle if you learn how to drive a hard bargain.

10. Invest in Real Estate as Soon as You Can

If you search hard enough, you can find anything on the Internet. But I don't believe that, and my younger self didn't either — which is why I bought property as soon as I could. I'm not alone in this thinking either. Many of my friends who bought early stand by their decisions, even though it set them back financially at first. That sacrifice by way of real estate investment has paid off over the years, because instead of paying someone else a fee to live under a roof, we've paid ourselves in the form of equity that we can now use to continue to purchase real estate as a means of earning passive income. This is probably one of the most lucrative tips on this list, and one everybody should research more in depth.

11. If You Want to Be Reckless, Now's the Time to Do It

While you should have been smarter with your money when you were younger, all is not lost. Truth is, it's better to be a dummy about your finances in your 20s when you don't have much to lose than to make stupid money moves in your 30s and 40s when mismanagement can be costly. So save, spend smartly, but also have some fun — you may not have the financial freedom later in life, especially if you want nice things.

Now it's your turn. What financial tips would you tell your younger self? I'd love to hear some of the things you would change about your money management skills from 10 years ago to today.

This article is from Mikey Rox of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Tax-Friendly Ways to Save Beyond Your Retirement Fund

Tim Lemke — Tue, 03 Nov 2015 13:15:45 +0000

So you've been taking advantage of your company's 401K plan and have also been placing money in an individual retirement account (IRA). In fact, you've been such a great saver that you've now hit the limit on what you can contribute annually to these tax-advantaged accounts. What to do now?

Well, first off, give yourself a huge pat on the back. You've been saving a ton, and have managed to avoid paying too much tax along the way.

If you still have money you'd like to stash away, but don't want to give too much to the tax man, there are other investment opportunities for you. Take a look at these nine options for super savers like yourself.

1. 529 Plans

If you have children who may one day attend college, it's a great idea to save for their education using a 529 college savings plans. These plans, which are offered by individual states, have a variety of tax benefits. In most cases, you can place money in an investment account and allow it to grow tax free as long as you use the funds to pay for college. You can also often get a tax deduction on contributions.

2. ESA Coverdell Accounts

These work in similar fashion to 529 plans and Roth IRAs, in that money can be invested and then withdrawn tax free. Coverdell accounts have lower account maximums than 529 plans, but often have more investment options and the money can be used for any education expense, including grade school and high school. The maximum annual contribution per beneficiary is $2,000.

3. Municipal Bonds

It's good to have some bonds in your investment portfolio, and here's a way to help out your state, city, or county raise money for its capital expenditures. "Muni" bonds are usually exempt from taxes, so you get to keep more of your investment. These days, you can buy bonds directly, or get a mix of bonds through a bond mutual fund or ETF.

4. Real Estate

When you buy a house or other piece of property, mortgage interest is often tax deductible. If you sell a home, there is often an exclusion on capital gains up to $500,000 if you're a married couple filing jointly.To take advantage of these breaks, the property must be used as a first or second home in most cases. Also, be sure to itemize your deductions when filing your taxes.

5. Annuities

The idea behind an annuity is that you make investments, and then the annuity makes payments to you at a later date, or a series of dates. The investments grow tax-deferred, and earnings are taxed at your regular income rate. So if you think you'll be in a lower tax bracket upon retirement, you'll save money. Unlike 401K and IRA plans, there are no contribution limits to annuities.

6. Master Limited Partnerships

More experienced investors may find some great tax savings and solid income from MLPs. An individual can buy shares of an MLP just like a stock. Most MLPs are related to energy production, and allow investors to essentially buy "units" of a gas pipeline, or something similar. Income from MLPs are taxed as "return of capital," so taxes can be deferred. (In essence, you only pay tax when you sell your units.) The taxes on MLPs are complex, but if you are okay with the mountain of paperwork, you may save some money. It's wise to talk to an accountant to get a full understanding of the tax implications before investing in an MLP.

7. Whole Life Insurance

I am not a big fan of whole life insurance as an investment, but there can be some tax advantages to having a policy. It's also an okay option for high earners who have maxed out other accounts. Whole life policies pay a death benefit, which is not usually taxed. Many policies also offer tax-free dividends. If you're interested in whole life insurance, make sure you're capable of paying the annual premiums. And do your homework to make sure that the dividends and growth potential outweigh many common downsides, such as high fees and commissions.

8. Index Funds

If you maxed out the contributions to your retirement plans, any additional investments you want to make will probably have to go into a taxable brokerage account. But that doesn't mean you can't find ways to keep your tax burden relatively low. Index funds are mutual funds that track a specific index, such as the S&P 500. Generally speaking, index fund managers don't have to do a lot of buying and selling, so they aren't passing on a lot of capital gains to you. You'll still have to pay tax when you cash out, so they aren't really "tax advantaged" in the classic sense. But you'll be saving money along the way.

9. ETFs

Exchange-traded funds are like mutual funds, in that they usually track a specific index or market sector. But they are more tax efficient than mutual funds, because investors only pay capital gains when they sell the ETF. You won't avoid tax altogether unless the ETF is part of a retirement plan, but your liability will be as low as possible. (See also: 8 Ways ETFs Are a Smart Investment)

Where are you stashing your savings?

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Big Purchases You Should Make by 30, 40, and 50

Amanda Meadows — Thu, 07 May 2015 13:00:08 +0000

It used to be that major purchases such as a house or a car were rites of passage into adulthood. Sure, times are changing, and the new generation isn't buying all the things their parents did. But there are some things you probably can't avoid buying. Here are the big purchases most of us should make by ages 30, 40, or 50.

By Age 30

By the time we reach 30 we've turned the corner from the youth to adulthood, and our possessions show it.

A Car

As more people choose to live in cities, and use mass transit or ride-sharing apps, it's become less necessary to own a car. That said, many of us still have a lifestyle that requires owning a set of wheels. If this is the case for you, by the age of 30, you probably should have purchased a car by yourself for yourself. (See also: The Joy of Buying a New Car: 9 Car Buying Tips)

A Real Bed

This is something everyone avoids for years. Millenials have bought and sold cars well before buying a new bed for themselves. Once you are old enough to live on your own, an ugly used frame propping up a decades-old (and filthy) mattress just won't do. A more comfortable bed will help you sleep better, and sleeping better will improve your overall health, which will cost you less in the long run. It's one of the best investments you can make in your 20s. Now that one can buy affordable and comfortable mattresses online, there's no excuse anymore!

By Age 40

What lies around the corner from age 30? A nest and a family of one's own.

A Home

This can be the most emotional purchase you'll ever make, especially in areas of the country where it's virtually impossible for the average person to afford a home. For those of us who want to own our own home, working toward buying before age 40 is a worthy goal. It's wise to start making sound decisions in your 20s and 30s that will keep your financial state healthy, such as building your credit, in anticipation of a home loan.

Home Appliances

Not every home, whether bought or rented, will come equipped with everything you need. As you get older, you'll probably grow tired of washing your dishes in the sink, or going to the laundromat like you did in your 20s. Eventually, you'll break down and buy a refrigerator, dishwasher, a washer/dryer set, or woodworking tools for the garage. Make sure you do your comparison homework in order to get the best appliance deals.

By Age 50

By now the roots are set deep and the big purchases are behind us, but there are a few big buys that mark time's passage.

Life Insurance

As you get older and have children, you'll want to be covered for whatever may happen. By age 50, you'll almost definitely want to consider life insurance — well before you develop any chronic health issues or are old enough for premiums to skyrocket. Think about what you need from your life insurance and start planning your beneficiaries' financial future. (See also: Universal Life Insurance and Whole Life Insurance: A Comparison)

Contractor Work

At this point in your life, making renovations on your bathroom or kitchen, adding on to your home, or re-landscaping your backyard is common. In fact, some renovations nearly pay for themselves over time. If you've never hired a contractor, you'll need to create a budget and detailed timeline, along with a cash buffer for incidentals, accidents, and hotels if you cannot stay in the home at a certain point. Extra frugal? It's also worth considering DIY renovations.

Which major purchases do you think signify life milestones?

This article is from Amanda Meadows of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Ways It Pays to Be Friendly With Your Neighbors

Nicholas Pell — Fri, 24 Oct 2014 17:00:05 +0000

Our communities just don't have the same bonds they used to. Think about it: Of all the people you've lived next door to, how many of their names do you know? (See also: How to Deal With a Rude Neighbor)

This is a problem, given the tangible, material benefits of having neighbors you know better than, say, the receptionist at your dentist's office. Don't believe it? Then check out these six ways it pays to be friendly with your neighbors.

1. Splitting Chores

Some chores impact more than just one house in a neighborhood. For example, if you share a common driveway, you can all pitch in when it comes to repaving it. It's not just about communal chores, though. Doing small favors can encourage a mini sharing economy. Help your neighbor plant a garden, he helps you change the transmission on your car. Start saving a mint based on the things that you couldn't do yourself, but can do with a spare set of hands.

2. Sharing the Cost of Big Equipment

Just like there are some chores that are impossible alone, so are there pieces of big equipment one person might not want to buy, but a neighborhood can go in on together. Think of things like wood chippers, cherry pickers, or power washers. Particularly if you're not going to be using them a lot, the price can be cost prohibitive. However, once you start splitting the cost three or four ways, the investment starts making a lot more sense.

3. Splitting Entertainment Costs

Especially for the sports fan, the ability to split entertainment costs can be a big deal. Maybe you don't want to shell out for the next UFC fight, WWE pay-per-view, or a season of NFL game day on your own. However, with the help of a neighbor or two you can make the cost of an expensive paid cable event no more than a couple of lattes. What's more, you might also be able to get package deals on vacations if you all coordinate your time away from home. Once you get there you don't have to be joined at the hip, though hey — if you guys are close, why not?

4. Learning New Skills

Chances are good that you have skills your neighbor wants and vice versa. So why not go about trading those talents? Not only can you learn them without paying any money, you can also save money over the long run by applying the skills you learn. Maybe it's auto repair. Maybe it's bread baking. Maybe it's interior painting. Whatever it is, when you learn how to do things for yourself, you don't have to pay someone else to do it for you.

5. Tolerating Your Big Bash

Having a party? Making any amount of racket? Get ready for a noise complaint and the charges that come along with it. Making friends with your neighbors not only makes them a little more tolerant of things like watering your garden on the day that you're not supposed to, but it also makes them more likely to talk to you directly about the problem rather than going straight through more official channels. No one wants angry neighbors, but if you're going to have them they can be angry in the neighborly way or the expensive way.

6. Networking

Networking is more important than ever. Looking for the best plumber in town? Your neighbor might be a friend. Trying to find a marriage counselor? Maybe your neighbors recently got through a rough patch with the help of a family therapist. Is your nephew looking for his first job in publishing? Talk to your neighbors and see if they know anyone who can help. Knowing more people is always helpful, starting with the people who live just down the street.

Are you neighborly with your neighbors? How has it paid off for you?

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This article is from Nicholas Pell of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Best Money Tips: Steps to Make Sure You Buy the Right House

Ashley Jacobs — Wed, 27 Aug 2014 19:00:04 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found some amazing articles on making sure you are buying the right house, maximizing your dollar at Subway, and creating work/life balance when your kids return to school.

Think the Housing Bubble Was Bad? Check Out These Other Crazy Investment Bubbles

Alaina Tweddale — Wed, 11 Jun 2014 21:06:39 +0000

A couple of months ago, an in-law gifted my five-year-old twins a five foot tall box filled entirely with beanie babies. My daughters were thrilled as they sorted through a hundred or so miniature toys. My husband grabbed a pair of scissors and started to cut the tell-tale Ty tags from beanie ears and for a moment I silently screamed "No! They'll be worthless if you cut the tags!"

Of course, beanie babies today are already next to worthless, tags or not. Back in the late 1990s, though, beanie baby collectibles resold for hundreds, even thousands of dollars. There were collector manuals, trade publications, and a proliferation of specialty stores that resold the plush toys in plastic preservation boxes. Parents hoarded the toys, keeping them safe from the grimy hands of their kids. There were more than a few parents who thought their beanie collections would pay for their kids' college tuition. I even owned a few, most notably Peace the Bear who, at one point, was selling for a lofty $200. Sadly, I never cashed in on the capital gain. (See also: How to Create a Speculative Market Bubble and Profit)

Beanie babies are far from the only unpredictable market. Collectible toys, internet stocks, and homes have all fairly recently seen unexpectedly high gains, only to dramatically crash later. Experts overwhelmingly recommend an investment strategy that focuses primarily on a broad-based investment portfolio of diversified assets because history has shown that even the most learned experts can't regularly predict market ups and downs. (See also: 6 Basics You Must Know Before You Start Investing)

Market crashes seem to happen when just about everyone has hopped on a bandwagon and is excited about a particular offering. Let's take a walk through history to see some of the worst timed investments of all time.

Tulips in 1636

The newly imported tulip in 16th century Holland was a popular-yet-expensive addition to many upscale home gardens. It became even more popular after a tulip virus caused the flower's petals to develop beautifully colored stripes in contrasting patterns. A second virus hit the plant, this one lethal, and tulip supply dwindled. The price of bulbs spiked, and soon after, the cost of a single bulb rose to the staggering equivalent of $1,250 (price adjusted for time and currency).

Tulip bulb prices rose steadily from there and soon people stopped planting bulbs and started investing in them instead. At the height of the frenzy, nearly everyone — nobles, farmers, and chimney sweeps alike — were trading in bulbs. People sold off their land, jewels, and furniture to buy more flowers. A good tulip trader could once make the equivalent of $61,710 USD per month, just from trading bulbs. Thanks (or no thanks) to leveraging, tulip options were bought at 15%–20% of actual cost, leading many investors to buy more than they could afford to lose.

How the Tulip Bubble Ended

One day, a merchant didn't show up at market to pay for the bulbs he'd bought. The history books point to this one deal gone sour as the impetus for what became one of the greatest market crashes in history. Tulip owners rushed to sell, prices spiraled down, and widespread panic ensued. Dealers went bankrupt, and soon no one honored their buying commitments. Eventually the Dutch government stepped in and offered to bail contract holders out at 10% of contract value. Even so, prices continued to fall, and eventually everyone in the nation was affected as the market crashed and a long economic depression settled in.

Pretty Much Any British Stock in 1720

In early 18th century England, stock investing for the middle class was a new phenomenon, and many Englishmen were excited to get in the game. There were countless offerings that promised ridiculous business ventures such as trading in human hair, extracting silver from lead, or removing sunlight from a cucumber. Many investors didn't believe in the feasibility of the absurd ventures they funded. They simply thought that stock prices would rise, they'd sell their shares, and they'd profit handsomely from the sale.

Around this time, an unknown man started a company "for carrying on an undertaking of great advantage, but nobody to know what it is." Stock prices were rising to great heights across the country and investors were so excited to get in on the action that when the offering opened, it took just five short hours for a thousand people to invest in the mysterious investment.

The largest investment opportunity gone awry during this time was the South Sea Company, which was founded to conduct trade throughout the South Seas. The company's stock rose from an initial offering price of 130 to more than 1,000 pounds per share, even though none of the company's directors had any experience in South American trade.

How the South Sea Bubble Burst

The directors and officers of the South Sea Company realized that the company's share price was heavily inflated and so sold their holdings. The general investing public heard of the sale, panicked, and sold their shares at increasingly lower prices. The British public credit system almost collapsed, and as a result, it was more than 100 years before it was again legal for a company to issue public stock. Oh, and the man with that mysterious stock offering? He closed the issue at the end of that first day and promptly sailed off for America. No one ever heard from him again.

Internet Stocks in Early 2000

Personal computer growth exploded in the early 1990s, followed by multiple web browser developments, bringing the mass public online for the first time ever. Internet upstarts proliferated as companies rushed to profit off nascent Internet traffic. The only hitch was that many tech companies had yet to figure out how to make a profit in the online world.

This technicality didn't matter to investors, though, who regularly overlooked traditional metrics and invested at staggering price-to-earnings ratios on the assumption that technological advances would far outpace the growth of a company's stock price. One such profit-less company, TheGlobe.com, ended a five-day IPO at a 249% gain over its initial target price.

Excitement heightened as established companies and upstarts alike rushed to cash in on the tech boom. Some created new and exciting online businesses while others did little more than change their corporate name by adding a .com suffix or an e- prefix. Internet giants Amazon.com, eBay, and Google were founded during this time, but so were the now defunct and long-forgotten Pets.com, e-Stamp.com, e1040.com (notice the tell-tale prefixes and suffixes). The NASDAQ rose by more than 700% on a cumulative basis in the 10 year decade before the bubble eventually burst. (Note: the NASDAQ has yet to return to its year 2000 peak.)

How the Internet Boom Ended

By the end of the decade, there was a new IPO issued almost every day, and day trading seemingly became a new national pastime. Tech companies were unable to keep up with market expectations and some, like WorldCom, were later found to be cooking their books in an effort to keep the party going. A majority of tech companies didn't survive the crash, but even those that did saw significant drops in stock price (e.g., Amazon saw its stock price fall from $107 to $7 per share). In the end, over $5 trillion in market value was lost in the crash between 2000–2002. The following years from 2000–2009 became known as "the lost decade" as stock market returns were unprecedentedly low.

U.S. Real Estate in 2007

Housing prices skyrocketed in the early part of this century and it seemed that prices would never level off. Around this time I had a marketing professor ask his class of graduate students to raise their hands if they owned a home. "If your hand isn't raised," he told us, "you'll never own one. Prices are going up too quickly and they aren't coming down." This was pretty much what everyone thought about homeownership at the time.

The overinflation of the housing market became even more evident in 2005 when then-Fed chairman Alan Greenspan said that "at a minimum, there's a little 'froth' (in the U.S. housing market)… it's hard not to see that there are a lot of local bubbles."

How the Housing Boom Ended

Housing prices peaked in 2006 before a dramatic drop in the market left many homeowners owning homes that were worth far more than they had paid. In 2008, the Case-Shiller home price index reported its largest price drop in history. Many experts believe the burst housing bubble was the primary cause of the 2007–2009 U.S. recession. By the end of 2010, 23.1% of all U.S. homeowners held negative equity in their homes. (See also: 6 Options if You're Underwater On Your Mortgage)

Avoiding the Bubble

It might be tempting to try to cash-in on an inflating bubble, but it's impossible to predict how any one investment will perform over time. Those who try inevitably lose. Don't risk losing all your assets in the next best thing. Take the advice of the overwhelming majority of wealth managers and create a diversified portfolio strategy, and rebalance your mix of stocks and bonds often. Check out The Basics of Asset Allocation for a primer.

Have you ever lost money on tech stocks, beanie babies, your home, or another market bubble? How did that loss affect your investment strategy? Tell us about it in the comments below.

This article is from Alaina Tweddale of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: