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One of the most exciting parts of becoming an adult is moving out of your old place and starting your own life. However, as is the case with most major life events, moving out comes with a lot of added responsibility. Part of this duty is knowing and understanding your budget when shopping for the perfect apartment, condo, duplex, or rental house. So how much should you really spend on rent?
The 30 Percent Threshold
The first step in deciding how much you should spend on rent is calculating how much rent you can afford. This is done by finding your fixed income-to-rent ratio. Simply put, this is the percentage of your income that is budgeted towards rent.
As a general rule of thumb, allocating 30 percent of your net income towards rent is a good place to start. Government studies consider people who spend more than 30 percent on living expenses to be âcost-burdened,â and those who spend 50 percent or more to be âseverely cost-burdened.â
When calculating your income-to-rent ratio, keep in mind that you should be using your total household income. If you live with a roommate or partner, be sure to factor in their income as well to ensure youâre finding a rent range thatâs appropriate for your income level.
If youâre still unsure as to how much rent you can afford, consider an affordability calculator. Remember to consult a financial advisor before entering into a lease if youâre unsure if youâll be able to make rent.
Consider the 50/30/20 Rule
After youâve set a fixed income-to-rent ratio, consider the 50/20/30 rule to round out your budget. This rule suggests that 50 percent of your income goes to essentials, 20 percent goes to savings, and the remaining 30 percent goes to non-essential, personal expenses. In this case, rent falls under âessentials.â Also included in this category are any expenses that are absolutely necessary, such as utilities, food, and transportation.
Letâs consider a hypothetical situation in which you make $4,000 per month. Under the 50/20/30 rule with a fixed income-to-rent ratio of 30 percent, you have $2,000 (50 percent) per month to spend on essential living expenses. $1,200 (30 percent) goes to rent, leaving you with $800 per month for other necessary expenses such as utilities and food.
Remember to Budget for Additional Expenses
Now that youâve budgeted for rent and essential utilities, itâs time to make a plan for how youâre going to furnish your apartment. One of the biggest shocks of moving out on your own is how expensive filling a home can be. From kitchen utensils to lightbulbs and everything in between, it can be pricey to make your space perfect.
For the most part, furniture falls under the 30 percent of personal, non-essential expenses. Consider planning ahead before a move and saving for home goods so that you donât go into major debt when it comes time to move out.
Be on the Lookout for Savings
If your budget is slightly out of reach for your dream apartment, try to nix unnecessary costs to see if you can make it work. Look for ways to cut down on utilities, insurance, groceries, and rent.
Utilities: Water, heat, and electricity are all necessities, but your TV service isnât. Cut the cord on TV and mobile services that may not serve you and your budget anymore. Consider swapping out your light bulbs for eco-friendly and energy-efficient light bulbs to cut down your electric bill.
Insurance: Instead of paying monthly renters insurance rates, save a fraction of the cost by paying your yearly cost in full. If you have a roommate, ask to share a policy together at a premium rate.
Groceries: Swap your nights out for a homemade meal. You can save up to $832 a year with this simple habit change. When grocery shopping, add up costs as you shop to ensure your budget stays on track.
Rent: One of the best ways to save on rent is to split the bill. Consider getting roommates to save 50 percent or more on your monthly rent.
A lease is not something to be entered into lightly. Biting off more rent than you can chew can lead to unpaid rent, which can damage your credit score and make it harder to find an apartment or buy a home in the future. By implementing these best practices, youâll hopefully find a balance between finding a place you love and still having room in your budget for a little bit of fun.
Sources: US Census Bureau
The post How Much Should You Spend on Rent? appeared first on MintLife Blog.
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Your grocery bill can add up fast. From dinner entrÃ©es to snacks, the amount you spend directly affects your other financial goals. Luckily, there are some guidelines to ensure youâre not overspending.Â
Use the grocery calculator below to estimate your monthly and weekly food budget based on guidelines from the USDAâs monthly food plan. Input your family size and details below to calculate how much a nutritious grocery budget should cost you. Of course, every family is different. Some love coupons and leftovers, while others prefer fresh fish and aged cheese. Once youâve established your budget, use the slider to adjust your estimate to your spending habits.Â
Getting your food budget on point takes practice. With this grocery calculator and the right spending habits, youâll have enough for your living expenses and exciting financial goals like paying off loans or buying a house.
Grocery Budget Calculator
A moderate grocery budget will run you:
Weekly Grocery Cost Food costs per individual are based on USDA research regarding Dietary Reference Intakes and Dietary Guidelines for Americans, and follow MyPyramid nutrition guidelines.
Monthly Grocery Cost Food costs per individual are based on USDA research regarding Dietary Reference Intakes and Dietary Guidelines for Americans, and follow MyPyramid nutrition guidelines.
What kind of spender are you?
Does your estimate look right? If your spending habits don’t add up, explore these other budget options and choose what’s best for your lifestyle.
Thrifty This is the USDAâs estimated food budget for families that receive food assistance like WIC or SNAP.
Cost-Conscious This is an ideal budget for nutritious meals if youâre looking to save a little extra cash with leftovers and coupons.
Moderate This is the standard for affordable, nutritious, and balanced portions for most families.
Generous This budget gives you some spending wiggle room for finer foods or extra portions.
See where the rest of your budget is going Sign up for Mint
Monthly Grocery Budget
Ever wonder how much you should spend on groceries?Â The average cost of food per month for one person ranges from $150 to $300, depending on age. However, these national averages vary based on where you live and the quality of your food purchases.
Hereâs a monthly grocery budget for the average family. This is based on the national average and likely varies by location and shop. For instance, New York City grocers are going to be far more expensive than Kansas City shops. Additionally, organic grocery stores like Whole Foods are pricier than places like Walmart or Aldi.
Youâll also want to consider dietary choices, like gluten-free or vegan diets. These can significantly affect your budget, so consider planning your grocery list online to compare prices and find your preferred alternatives.
Finding a reasonable monthly grocery budget ensures you and your family have what you need, while not overspending. Look back at previous months using a budgeting app or credit card statements to see what youâve spent at the grocery store. Decide if you want to maintain your current budget or cut back.
Purchasing Groceries vs. Dining Out
Donât forget what you spend at restaurants when you consider your food budget. According to the U.S. Department of Agriculture, Americans spend 11 percent of their take-home income on food. It doesnât all go towards groceries, though. Approximately six percent is spent on groceries, while five percent is spent dining out â including dates, lunches with coworkers, and Sunday brunch.
With this framework in mind, you can calculate your total food budget based on your take-home income. For example, Rita makes $3,500 per month after taxes. She would budget six percent for groceries ($210) and five percent for restaurants ($175). So sheâll need a total of $385 for food each month. With a little practice, sheâll better learn her habits and be able to accurately adjust her budget.
Tips for Reducing Your Budget
There are several ways to cut back on what you spend without sacrificing the quality and taste of your food. Trimming your food budget can help you stow away more for your financial goals, such as building an emergency fund or saving for a dream vacation.
Coupons are easy to find in the mail, in store, in your inbox, and even in a Google search. Many popular grocery stores are rolling out apps that track your coupons and savings. Be sure to download and register your email for new updates and sales. These usually work in person or online, so you can shop when and how you like.Â
While a single coupon might not give you a large discount, you can save a lot with multiple coupons. Itâs also important you make sure you actually need the item youâre purchasing instead of buying it for the sale. This can quickly get out of hand and push you over budget.Â
Freeze Your Food
Freezing your fresh food before it goes bad helps your wallet and the environment. You can plan ahead and freeze prepared produce to save time on weekday cooking, or chop and freeze last weekâs produce before shopping for more. Frozen vegetables are great in soups and stews, and you can use frozen fruits for healthy breakfast smoothies.Â
Plan a Weekly Menu Ahead of Time
Plan your meals ahead of time to determine the food items and quantities you need before you head to the grocery store. This way youâre more likely to buy the exact items you need and can plan for breakfast, lunch, and dinner. Try to plan for recipes that use the same ingredients so thereâs less to purchase. You can also make larger meals and plan leftovers for lunch so you have less to plan and purchase.
Bring Lunches to WorkÂ
A $13 lunch out might not seem like much, but it can blow your food budget fast if it becomes a habit. Push your monthly food budget further with delicious lunches from home. Salads, sandwiches, and leftovers are all easy, inexpensive, and nutritious.Â
Buy Store BrandsÂ
Many packaged products have a huge price disparity between brand name and generic items, and store brand items tend to be cheaper without sacrificing much quality. You can easily save 10 cents to a dollar per item, which adds up quickly over many trips.Â
Shop at a More Affordable Store
Your local farmers market, chain grocery, and organic store will all offer different specialties and sales. Check out the different shops in your area to find the best combination of quality and price. Some stores might even offer bulk items â great for your favorite products and those with a long shelf-life. Choosing cheaper staple items like milk and yogurt can also make a huge difference over time.Â
An accurate food budget that works for you helps you feel more confident and in control of your finances. Build a budget, learn your spending habits, and keep a grocery list to keep you on track and responsible so you can reach bigger goals, like a new vehicle or a down payment on a house.Â
Sources:Â USA Today |Â EurekAlert | Persistent Economic Burden of the Gluten-Free Diet
The post How Much Your Monthly Food Budget Should Be + Grocery Calculator appeared first on MintLife Blog.
In March I offered some financial advice to Michelle, a Mint user who was struggling with debt, a lack of retirement savings and a bit of family financial drama amongst her siblings.
Michelle was anticipating a cash bonus from her company and wasnât sure if she should save the money or use it to relieve her debt.
I recommended a two-prong approach where she uses the cash to play savings catch-up in her retirement account and knock down some of her debt, which, at the time, included a $3,000 credit card balance and $52,000 in student loans.
Six months later, Iâve checked in with the 38-year-old real estate developer, to see if any of my advice was helpful and if sheâs experienced any shifts in her financial life.
We spoke via email:
Farnoosh: Have your finances have improved over the last 6 months since we last spoke? If so, what has been the biggest improvement?
Michelle: Yes. I’veÂ aggressively been contributing to my 401(k) â about 50% of my pay – and had hoped to reach the annual maximum of $18,000 by June, but looks like it will be more like October. I also received a $40,000 distribution from a project that I closed.
F: What aspects of your financial life still challenge you?
M: Investing for sure. I never know if I’m hoarding too much cash. I am truly traumatized from the financial downturn.Â I just joined an online investment platform, but it wasÂ also overwhelming. Currently I have $45,000 in a regular savings account that earns 1.5%.
Another challenge is not knowing whether to just bite the bullet and pay off my student loans or to continue to pay them monthly. Â I hate that I’m still paying loans 16 years after I graduated and it’s a source of frustration [andÂ embarrassment] for me. Â I owe $36,000. Often times I have an inner monologue about the pros and cons of just paying them off but then my trauma from 2008 kicks inâ¦and IÂ decide to keep my $45,000 nest egg safely where I can check the balance daily.
F: I recommended allocating $45,000 towards retirement. Was that helpful? What are some ways you’ve managed to save?
M: Yes, I recall you saying you recommended having a total of $100,000 towards retirement for a person my age. Currently, I have $51,000 in my 401(k), $35,000 in a traditional IRA and $17,000 in my Ellevest brokerageÂ account, so I’ve broken the $100,000 goal.
I did add a car note to my balance sheet. My old car suffered a total loss (major electrical failure due to a sunroof leak!) and the insurance gave me a check for $9,000.Â I used it all towards the new vehicle (aÂ certified used 2014 Acura) and I’m financing $18,000.
F: Your dad’s home was a source of financial stress, it seemed. Were you able to talk with your siblings and arrive at a better place with that?
M: My dad actually has passed since we last spoke. He passed in February and so his will went to probate. My siblings and I have decided not to make any decisions about the house for at least one year. Yes, this is kicking the can further down the street however, they recognize that I maintain the house and pay the real estate taxes and so they are not pressuring me to move or to sell.
The new deed has been recorded and the property is under all our names and so everyone seems ok with knowing that I can’t do anything regarding a sale or refinance unilaterally.
So, for now, I live rent free other than payingÂ utilities, miscellaneous maintenance on the houseÂ and real estate taxes quarterly. This, too, is helping me saveÂ aggressively.
Also, the new car note has replaced the hospice nurse contribution so I’m not feeling that my budget is overburdened with the new car.
I think ultimately I will buy out at least two of my siblings and stay in the house. Verbally they have expressed being okay with this.
Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at firstname.lastname@example.org (please note âMint Blogâ in the subject line).
Farnoosh Torabi is Americaâs leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, sheâs become our favorite go-to money expert and friend.
The post Mint Money Audit 6-Month Check-In: How Did Michelle Allocate Her Windfall? appeared first on MintLife Blog.
If you’re one of those investors with very little time to research and invest in individual stocks, it might be a good idea to look into investing in mutual funds.
Whether your goal is to save money for retirement, or for a down payment to buy a house, mutual funds are low-cost and effective way to invest your money.
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What is a mutual fund?
A mutual fund is an investment vehicle in which investors, like you ad me, pool their money together. They use the money to invest in securities such as stocks and bonds. A professional manages the funds.
In addition, mutual funds are cost efficient. They offer diversification to your portfolio. They have low minimum investment requirements.
These factors make mutual funds among the best investment vehicles to use. If you’re a beginner investor, you should consider investing in mutual funds or index funds.
Investing in the stock market in general, can be intimidating. If you are just starting out and don’t feel confident in your investing knowledge, you may value the advice of a financial advisor.
Types of mutual funds
There are different types of mutual funds. They are stock funds, bond funds, and money market funds.
Which funds you choose depends on your risk tolerance. While mutual funds in general are less risky than investing in individual stocks, some funds are riskier than others.
However, you can choose a combination of these three types of funds to diversify your portfolio.
- Stock funds: a stock fund is a fund that invests heavily in stocks. However, that does not mean stock funds do not have other securities, i.e., bonds. It’s just that the majority of the money invested is in stocks.
- Bond funds: if you don’t want your portfolio to fluctuate in value as stocks do, then you should consider bond funds.
- Money market funds: money market funds are funds that you invest in if you tend to tap into your investment in the short term.
- Sector funds. As the name suggests, sector funds are funds that invests in one particular sector or industry. For example, a fund that invests only in the health care industry is a sector fund. These mutual funds lack diversification. Therefore, you should avoid them or use them in conjunction to another mutual fund.
- Index funds. Index funds seek to track the performance of a particular index, such as the Standard & Poorâs 500 index of 500 large U.S. company stocks or the CRSP US Small Cap Index. When you invest in the Vanguard S&P 500 Index fund, youâre essentially buying a piece of the 500 largest publicly traded US companies. Index funds donât jump around. They stay invested in the market.
- Income funds: These funds focus invest primarily in corporate bonds. They also invest in some high-dividend stocks.
- Balance funds: The portfolio of these funds have a mixed of stocks and bonds. Those funds enjoy capital growth and income dividend.
Related Article: 3 Ways to Protect Your Portfolio from the Volatile Stock Market
The advantages of mutual funds
Diversification. You’ve probably heard the popular saying “don’t put all of your eggs in one basket.” Well, it applies to mutual funds. Mutual funds invest in stocks or bonds from dozens of companies in several industries.
Thus, your risk is spread. If a stock of a company is not doing well, a stock from another company can balance it out. While most funds are diversified, some are not.
For example, sector funds which invest in a specific industry such as real estate can be risky if that industry is not doing well.
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Mutual funds are professionally managed. These fund managers are well educated and experienced. Their job is to analyze data, research companies and find the best investments for the fund.
Thus, investing in mutual funds can be a huge time saver for those who have very little time and those who lack expertise in the matter.
Cost Efficiency. The operating expenses and the cost that you pay to sell or buy a fund are cheaper than trading in individual securities on your own. For example, the best Vanguard mutual funds have operating expenses as low as 0.04%. So by keeping expenses low, these funds can help boost your returns.
Low or Reasonable Minimum Investment. The majority of mutual funds, Vanguard mutual funds, for example, have a reasonable minimum requirement. Some funds even have a minimum of $1,000 and provide a monthly investment plan where you can start with as little as $50 a month.
Related Article: 7 Secrets Smart Professionals Use to Choose Financial Advisors
The disadvantage of mutual funds.
While there are several benefits to investing in mutual funds, there are some disadvantages as well.
Active Fund Management. Mutual funds are actively managed. That means fund mangers are always on the look out for the best securities to purchase. That also means they can easily make mistakes.
Cost/expenses. While cost and expenses of investing in individual stocks are significantly higher than mutual funds, cost of a mutual fund can nonetheless be significant.
High cost can have a negative effect on your investment return. These fees are deducted from your mutual fundâs balance every year. Other fees can apply as well. So always find a company with a low cost.
How you make money with mutual funds.
You make money with mutual funds the same way you would with individual stocks: dividend, capital gain and appreciation.
Dividend: Dividends are cash distributions from a company to its shareholders. Some companies offer dividends; others do not. And those who do pay out dividends are not obligated to do so. And the amount of dividends can vary from year to year.
As a mutual fund investor, you may receive dividend income on a regular basis.
Mutual funds offer dividend reinvestment plans. This means that instead of receiving a cash payment, you can reinvest your dividend income into buying more shares in the fund.
Capital gain distribution: in addition to receiving dividend income from the fund, you make money with mutual funds when you make a profit by selling a stock. This is called “capital gain.”
Capital gain occurs when the fund manager sells stocks for more he bought them for. The resulting profits can be paid out to the fund’s shareholders. Just as dividend income, you have the choice to reinvest your gains in the fund.
Appreciation: If stocks in your fund have appreciated in value, the price per share of the fund will increase as well. So whether you hold your shares for a short term or long term, you stand to make a profit when the shares rise.
Best mutual funds.
Now that you know mutual funds make excellent investments, finding the best mutual funds can be overwhelming.
Vanguard mutual funds.
Vanguard mutual funds are the best out there, because they are relatively cheaper; they are of high quality; a professional manage them; and their operating expenses are relative low.
Here is a list of the best Vanguard mutual funds that you should invest in:
- Vanguard Total Stock Market Index Funds
- Vanguard 500 Index (VFIAX)
- Total International Stock index Fund
- Vanguard Health Care Investor
Vanguard Total Stock Market Fund
If you’re looking for a diversified mutual fund, this Vanguard mutual fund is for you. The Vanguard’s VTSAX provides exposure to the entire U.S. stock market which includes stocks from large, medium and small U.S companies.
The top companies include Microsoft, Apple, Amazon. In addition, the expenses are relatively (0.04%). It has a minimum initial investment of $3,000, making it one of the best vanguard stock funds out there.
Vanguard S&P 500 (VFIAX)
The Vanguard 500 Index fund may be appropriate for you if you prefer a mutual fund that focuses on U.S. equities. This fund tracks the performance of the S&P 500, which means it holds about 500 of the largest U.S. stocks.
The largest U.S. companies included in this fund are Facebook, Alphabet/Google, Apple, and Amazon. This index fund has an expense ration of 0.04% and a reasonable minimum initial investment of $3,000.
Vanguard Total International Stock Market
You should consider the Vanguard International Stock Market fund of you prefer a mutual fund that invests in foreign stocks.
This international stock fund exposes its shareholders to over 6,000 non-U.S. stocks from several countries in both developed markets and emerging markets. The minimum investment is also $3,000 with an expense ratio of 0.11%.
Vanguard Health Care Investor
Sector funds are not usually a good idea, because the lack diversification. Sector funds are funds that invest in a specific industry like real estate or health care. However, if you want a fund to complement your portfolio, the Vanguard Health Care Investor is a good choice.
This Vanguard mutual fund offers investors exposure to U.S. and foreign equities focusing in the health care industry. The expense ration is a little bit higher, 0.34%. However, the minimum initial investment is $3,000, making it one of the cheapest Vanguard mutual funds.
Mutual funds are great options for beginner investors or investors who have little time to research and invest in individual stocks. When you buy into these low cost investments, you’re essentially buying shares from companies.
Your money are pooled together with those of other investors. If you intend to invest in low cost investment funds, you must know which ones are the best. When it comes to saving money on fees and getting a good return on your investment, Vanguard mutual funds are among the best funds out there.
They provide professional management, diversity, low cost, income and price appreciation.
What’s Next: 5 Mistakes People Make When Hiring A Financial Advisor
Speak with the Right Financial Advisor
- If you have questions beyond knowing which of the best Vanguard mutual funds to invest, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
- Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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The post What Are Mutual Funds? Understanding The Basics appeared first on GrowthRapidly.
Whereas Dave Ramseyâs Baby Steps have often been dissected one at a time, my goal in this post is to give an overview of the steps as a unit and explain why the order is essential.
Hopefully, these steps can help you create a focused life plan for your finances, regardless of your age or financial well being.
First, the Baby Steps:
- Step 1: $1,000 in an emergency fund.
- Step 2: Pay off all debt except the house utilizing the debt snowball.
- Step 3: Three to six months of savings in a fully funded emergency fund.
- Step 4: Invest 15% of your household income into Roth IRAs and pre-tax retirement plans.
- Step 5: College Funding
- Step 6: Pay off your home early.
- Step 7: Build wealth and give.
The Power of Focus
Daveâs premise with the Baby Steps is that people can accomplish great things IF they can just be focused. When you read over these seven steps, you think, âYes. I need to be saving. But I also need to be investing for retirement. I should get my house paid off early. But I also need to be getting out of debt and saving for my kidâs college.”
You would readily agree that all of these goals are important for successful financial planning. The problem is that your stress level kicks into overdrive with the prospect of doing them all. You clench your jaw and do what you are capable of doing while feeling anxious about the goals you place on the back burner.
The Baby Steps plan works because when you stay focused on one step at a time, you can knowingly put some important goals on hold without the nagging feeling that you are leaving something undone.
You can also check out my YouTube video where I break down each of Dave’s Baby Steps here:
Because accomplishing each step puts you in a great position to accomplish the next one.
You begin to feel an empowerment and a sense of control as you get one step behind you and start the next one. You are making progress instead of treading water.
Why Are the Baby Steps in the Order They Are In?
Steps 1 and 2: $1,000 Emergency Fund and Debt Snowball
Notice that Steps 3 through 7 are all about using your money to do something positive for you and your family. Of course this money comes from your income, but the problem with most of America is that we are using our income on debt payments.
Because we are paying others instead of ourselves, we need to get rid of our debt (Step 2) in order to free up our income for Steps 3-7.
âWhat if I could use all the money I am currently paying to creditors to start âpaying myselfâ?
For many people this is $1,000 to $3,000 a month.
Baby Step 2 debt snowball is designed to do just that. Step 1 is necessary before Step 2 because you donât want to start paying off debt without having a small cushion to absorb the little unplanned expenses that will occur during Step 2.
Step 3: 3 to 6 months of Savings
After completing the first two steps, you are out of debt (except for your house) and now have that cash flow you dreamed about: all of the money you used to pay others is at your disposal. The temptation is to start investing for retirement or saving for your kid’s college or pay off your house early.
NOT SO FAST! You will get to those, but doing so prematurely is way too risky.
Stop, take a deep breath and use that cash flow to build up your emergency fund so you will indeed be ready for emergencies. This fund needs to be liquid (in a top savings account or money market account).
If you skipped the step and started any of the ensuing steps, how would you handle emergencies? Pull money from your retirement account? Rob the kidâs college savings? Borrow money against your house? All bad ideas.
Step 3 is therefore always ahead of the following steps
Steps 4, 5, and 6: Saving for Retirement, College Funding, Pay Off Home
You may be asking,
âWhy is retirement ahead of college funding? Wouldnât a good parent put his children ahead of himself?â
Good question. But what if you end up without sufficient retirement income because you made college funding a higher priority? Who will you be depending on in your later years? Your kids!
The thing about retirement planning is that you only get one shot at it. The years go by and you will someday be retirement age. You donât have a choice. On the other hand, college funding is full of choices: kids can get scholarship, they can work, they can attend community colleges, they can find work/co-op programs, etc, etc.
Step 4 is therefore ahead of step 5. But notice that Step 4 is 15% of your income. If you have cash flow greater than 15% you can apply that to college funding immediately, and if you have more than enough cash flow to accomplish both steps 4 and 5, you can use all of the extra to pay off your house early (step 6).
Note that Step 6 comes behind retirement and college funding because reversing the order could possibly give you a paid for house at the expense of a dignified retirement or helping your kids through college. Most of us wouldnât want that.
Not sure where to start investing for retirement? Here are some tips:
- Best Places to Open a Roth IRA – Figuring out where to start investing your 15% of income can be confusing. A great place to start is a Roth IRA, but deciding a broker is confusing. This list will help you pick the best broker for your Roth IRA.
- Best Online Stock Broker Sign Up Bonuses – You can get hundreds of dollars or thousands of airline miles just for opening up a brokerage account.
- Beginner Investing Strategies – If you’ve never invested before it can be overwhelming. This list breaks down getting started into manageable pieces.
Step 7: Build wealth and give.
Life is now very good! You have no debt, a great emergency fund, and a paid for house. All of the cash flow that used to go toward debt reduction and house payments is now at your disposal.
This, by the way, is the step Mandy and I are on. Being semi-retired, we donât have a huge income, but it is very sufficient because we also donât have any debt. We continue to invest every month and we are able to give more than we have ever given before.
Once we got our house paid off, we started to budget âblessâ money, which we put into an envelope every month just to have available so we can bless others as we see the needs. We are also able to help our grown daughter and daughter-in-law cash flow their college.
As I said, life is good. Mandy and I are experiencing great financial peace and we are very grateful for Dave Ramseyâs Baby Steps.
I wish the same for you.
This article is a general overview of what Dave Ramsey has to offer and is not intended to replace his course, nor is this sponsored or endorsed by Dave Ramsey or the Lampo Group.
The post Dave Ramseyâs Baby Steps Explained appeared first on Good Financial CentsÂ®.
Think back to what the stock market looked like to you in March 2020, aka, the apocalypse. Did it look like:
A.) The biggest bargain sale youâve ever seen in your lifetime?Â
B.) A burning pit of money that was about to incinerate your lifeâs savings?
If you answered âB,â you probably have a low risk tolerance. You worry more about losing money than missing out on the opportunity to make more of it.
Being cautious about how you invest your money is a good thing. But if youâre so risk-averse that you avoid investing altogether, youâre putting your money at greater risk than you think.
Do Safe Investments Actually Exist?
When you think about the risks of investing, you probably think about losing principal, i.e., the original amount you invested. If you keep your money in a bank account, thereâs virtually no chance of that happening because deposits of up to $250,000 are FDIC insured.Â
But consider that the average savings account pays just 0.05% APY, while in 2019, inflation was about 2.3%.
So while youâre not at risk of losing principal, you still face purchasing power risk, which is the risk that your money loses value. Your money needs to earn enough to keep up with inflation to avoid losing purchasing power. If inflation continues at 2.3%, buying $100 worth of groceries will cost you $102.30 a year from now. If youâre saving over decades toward retirement, youâll be able to buy a whole lot less groceries in your golden years.
Thereâs also the risk of missed opportunity. By playing it too safe, youâre unlikely to earn the returns you need to grow into a sufficient nest egg.
Though thereâs no such thing as a risk-free investment, there are plenty of safe ways to invest your money.
12/29/20 @ 2:51 PM
9/28/20 @ 3:53 PM
11/2/20 @ 6:59 PM
8 Low-Risk Investments for People Who Hate Losing Money
Here are eight options that are good for conservative investors. (Spoiler: Gold, bitcoin and penny stocks did not make our list.
If you have cash you wonât need for a while, investing in a CD, or certificate of deposit, is a good way to earn more interest than youâd get with a regular bank account.
You get a fixed interest rate as long as you donât withdraw your money before the maturity date. Typically, the longer the duration, the higher the interest rate.Â
Since theyâre FDIC insured, CDs are among the safest investments in existence. But low risk translates to low rewards. Those low interest rates for borrowers translate to lower APYs for money we save at a bank. Even for five-year CDs, the best APYs are just over 1%.
You also risk losing your interest and even some principal if you need to withdraw money early.
2. Money Market Funds
Not to be confused with money market accounts, money market funds are actually mutual funds that invest in low-risk, short-term debts, such as CDs and U.S. Treasurys. (More on those shortly.)
The returns are often on par with CD interest rates. One advantage: Itâs a liquid investment, which means you can cash out at any time. But because they arenât FDIC insured, they can technically lose principal, though theyâre considered extraordinarily safe.
3. Treasury Inflation Protected Securities (TIPS)
The U.S. government finances its debt by issuing Treasurys. When you buy Treasurys, youâre investing in bonds backed by the âfull faith and credit of the U.S. government.â Unless the federal government defaults on its debt for the first time in history, investors get paid.
The price of that safety: pathetically low yields that often donât keep up with inflation.
TIPS offer built-in inflation protection â as the name âTreasury Inflation Protected Securitiesâ implies. Available in five-, 10- and 30-year increments, their principal is adjusted based on changes to the Consumer Price Index. The twice-a-year interest payments are adjusted accordingly, as well.
If your principal is $1,000 and the CPI showed inflation of 3%, your new principal is $1,030, and your interest payment is based on the adjusted amount.Â
On the flip side, if thereâs deflation, your principal is adjusted downward.
4. Municipal Bonds
Municipal bonds, or âmunis,â are bonds issued by a state or local government. Theyâre popular with retirees because the income they generate is tax-free at the federal level. Sometimes when you buy muni bonds in your state, the state doesnât tax them either.
There are two basic types of munis: General obligation bonds, which are issued for general public works projects, and revenue bonds, which are backed by specific projects, like a hospital or toll road.
General obligation bonds have the lowest risk because the issuing government pledges to raise taxes if necessary to make sure bondholders get paid. With revenue bonds, bondholders get paid from the income generated by the project, so thereâs a higher risk of default.
5. Investment-Grade Bonds
Bonds issued by corporations are inherently riskier than bonds issued by governments, because even a stable corporation is at higher risk of defaulting on its debt. But you can mitigate the risks by choosing investment-grade bonds, which are issued by corporations with good to excellent credit ratings.
Because investment-grade bonds are low risk, the yields are low compared to higher-risk âjunk bonds.â Thatâs because corporations with low credit ratings have to pay investors more to compensate them for the extra risk.
6. Target-Date Funds
When you compare bonds vs. stocks, bonds are generally safer, while stocks offer more growth. Thatâs why as a general rule, your retirement portfolio starts out mostly invested in stocks and then gradually allocates more to bonds.
Target-date funds make that reallocation automatic. Theyâre commonly found in 401(k)s, IRAs and 529 plans. You choose the date thatâs closest to the year you plan to retire or send your child to college. Then the fund gradually shifts more toward safer investments, like bonds and money market funds as that date gets nearer.
7. Total Market ETFs
While having a small percentage of your money in super low-risk investments like CDs,
money market funds and Treasurys is OK, there really is no avoiding the stock market if
you want your money to grow.
If youâre playing day trader, the stock market is a risky place. But when youâre committed to investing in stocks for the long haul, youâre way less exposed to risk. While downturns can cause you to lose money in the short term, the stock market historically ticks upward over time.
A total stock market exchange-traded fund will invest you in hundreds or thousands of companies. Usually, they reflect the makeup of a major stock index, like the Wilshire 5000. If the stock market is up 5%, youâd expect your investment to be up by roughly the same amount. Same goes for if the market drops 5%.
By investing in a huge range of companies, you get an instantly diversified portfolio, which is far less risky than picking your own stocks.
8. Dividend Stocks
If you opt to invest in individual companies, sticking with dividend-paying stock is a smart move. When a companyâs board of directors votes to approve a dividend, theyâre redistributing part of the profit back to investors.
Dividends are commonly offered by companies that are stable and have a track record of earning a profit. Younger companies are less likely to offer a dividend because they need to reinvest their profits. They have more growth potential, but theyâre also a higher risk because theyâre less-established.
The best part: Many companies allow shareholders to automatically reinvest their dividends, which means even more compound returns.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Choosing a card with an introductory APR can be a great move for a small business. You can pay off large purchases over time without worrying about accruing interest â allowing you to truly invest in your business.
If you have a large business purchase looming ahead that you want to finance, there are plenty of great small business credit cards that offer 0% interest on new purchases for the first few months of card ownership.
Read on to learn about some of the best business credit cards with an intro APR.
See Related: How does credit card APR work?
Chase Ink Business CashÂ® Credit Card
Best intro APR business card for office supplies: Chase Ink Business CashÂ® Credit Card
The Ink Business Cash Credit Card offers one of the longest introductory periods available on the market â 0% for the first 12 months on purchases (13.24% to 19.24% variable APR thereafter). Plus, the card comes with a competitive earning rate that makes it a particularly good choice for small business owners who need to stock up on office supplies.
|Chase Ink Business CashÂ® Credit Card|
Why should you get this card?
If youâre determined to keep costs to a minimum, the Chase Ink Business Cash Credit Card offers a lot of cash back on your business purchases â including purchases made on employee cards â for no annual fee.
Read full review
|Other things to know:
Beyond a competitive intro APR, the Ink Business Cash card offers plenty of potential value for cardholders with a competitive rate of cash back on internet, cable and phone services, office supplies, gas and dining purchases. If you spend a lot of money on office supplies or you frequently charge client dinners to your business card, you can rack up plenty of rewards with the Ink card.
Best intro APR business card for a flat rate on all purchases: American Express Blue Business Cashâ¢ Card
The American Express Blue Business Cashâ¢ Card offers an intro APR of 0% on new purchases for the first 12 months of card ownership (13.24% to 19.24% variable APR thereafter). Unlike the Ink Business Cash card, the Amex Blue Business Cash offer the same 2% cash back on all purchases, up to $50,000 per calendar year (1% thereafter). If you have a wide variety of purchases to make for your business, this flat rate might equate more rewards.
|American Express Blue Business Cashâ¢ Card|
Why should you get this card?
The American Express Blue Business Cash Card comes with a major selling point: 2% cash back on your first $50,000 of purchases each year for no annual fee.
Read full review
|Other things to know:
Adding to its appeal for small business owners, the Blue Business Cash card comes with access to top-notch business perks from Amex, including expense-tracking tools and the ability to enroll in Working Capital Terms.
Alternate #1: The Blue BusinessÂ® Plus Credit Card from American Express
If points are more your speed than cash back, the Blue BusinessÂ® Plus Credit Card from American ExpressÂ offers the same generous rewards rate as the Blue Business Cash â with one key difference. Rather than cash back, Blue Business Plus cardholders earn 2 Membership Rewards points per dollar on the first $50,000 in spending each year and 1 point per dollar on all purchases thereafter.
value Membership Rewards points at an average of 1.19 cents per point. If you redeem your rewards strategically, you can stretch them a long way.
Plus, the Blue Business Plus card offers the same lengthy introductory interest rate on new purchases â making it a top-notch card for financing large purchases in the first year (after that, it’s 13.24% to 19.24%).
Alternate #2: Chase Ink Business UnlimitedÂ® Credit Card
Another popular Chase small business credit card, the Ink Business UnlimitedÂ® Credit Card offers the same 12 months interest-free for new purchases (13.24% to 19.24% variable APR thereafter) as the Ink Business Cash. But unlike the Ink Business Cash card, the Ink Business Unlimited offers the same flat rate of cash back on all purchases â 1.5%.
Though a slightly lower rate than the Amex Blue Business Cash or Blue Business Plus, this earning rate is still great for cardholders who donât weigh their spending heavily to one particular category. For a card with no annual fee, it is a pretty generous earning scheme. Plus, there are no caps on what you can earn. If you spend significantly more than $50,000 per year on your business, the ongoing flat rate of 1.5% might make more sense for you.
Other intro APR business cards
While a 0% interest rate is a compelling reason to choose a business rewards card, you should also ensure that the rewards rate on the card closely matches your spending habits. This will boost your ability to eke plenty of value out of the cards even after the intro APR ends.
If none of these Chase or American Express cards seem right for your spending, Capital One also offers two cards with introductory APRs. Both the Capital OneÂ® SparkÂ® Cash Select for Business* and the Capital OneÂ® SparkÂ® Miles Select for Business* offer a 0% APR on new purchases for the first nine months (13.99% to 23.99% variable APR thereafter).
Though this introductory period is shorter than those on competing business cards, it might be worth taking a shorter offer if one of these cardâs rewards better suits your spending. With the Spark Cash Select, you can earn 1.5% cash back on every purchase. The Spark Miles Select comes with 5 miles per dollar on hotels and rental cars booked through Capital One Travel, while other purchases earn 1.5 miles per dollar.
Business credit cards are a valuable resource, as they can improve your cash flow while allowing users to rack up rewards on all their business purchases. By choosing a card with an introductory APR, you can pay off large purchases or debt over time without racking up interest â saving yourself money to reinvest in your business.
*The information about Capital One Spark Cash Select for Business and Capital One Spark Miles Select for Business has been collected independently by CreditCards.com. The card details have not been reviewed or approved by the card issuer.