Showing posts with label finance. Show all posts
Showing posts with label finance. Show all posts

Monday, August 28, 2017

Four Resources for Investing on a Budget

I once had a friend make the following overgeneralized statement. As a paraphrase he stated that the poor don't have money, the middle class buys "toys" (meaning things like boats and quads) and the wealthy invest. for some reason this stuck with me.

While I do not necessarily aspire to be wealthy, I would like to provide a means for my family to be comfortable; especially in my old age. Throughout American history investing has been a means of growing that money. The stock market is somewhat volatile, but bonds are generally minuscule and you might as well ditch that savings account (in respect to interest). The higher the risk, the higher reward. The lower the risk, the lower the reward. How do you get started when you feel as though you don't have a lot of dough to spare?

1. Vanguard

Vanguard is a huge financial company that specializes in mutual funds and ETFs. Their real strength for me is in management of retirement and index funds specifically. Their expense ratios are low and their returns are at least on par with any other financial institutions. The low expense ratios allow more money to stay in the account and be invested which has huge implications when speaking to the exponential growth that happens with long term investments. One down side is that you need to put in the time and research to decide which funds you would like to invest in. There are target retirement funds that start more risky and become more safe over time for those that like to set it and forget it. They don't have individuals micro manage most funds, but the expense ratio is so low and diversity so high that it mitigates risk. Another potential barrier is that most funds require a minimum initial investment of $3,000. While this is pretty small in terms of long term investing, it may be a lot for someone to do at once. If you can put in an initial value of $10,000 you can invest in Admiral funds which are the same thing, but with an even lower expense ratio (a fraction). I personally use this to manage the bulk on my investments that I self manage. Also, since it is so big, there is a lot of information about their various offerings so the research is relatively easy. Check out for more information.

2. Prosper

Prosper is a peer to peer lending site that allows individuals to request personal loans at rates that are generally  lower than traditional brick and mortar establishments. This allows individuals to invest in other individuals loans and benefit from the interest incurred. Prosper is just the middle man. What is really interesting is that the loans are crowdfunded. This means if someone is requesting $3,000 for dental work, for example, that you don't have to give them all $3,000. Instead, you invest in a $25 portion for that loan and you make your interest based on your investment. This means that you can buy many different loans instead of just one and really diversify. The minimum initial investment that Prosper will accept is $25 so it is very easy in terms of barrier to entry. You may need to check your state because it is not available everywhere. On the down side, personal loans are a little on the risky side. When someone defaults on their loan you are just out. They state that they have credit services that go after the money, but I've had quite a few default rather quickly. I started with 100 notes ($2,500) because their website stated that nobody has lost money with that much diversification.  To date, after about 3 years, I am at about 8.15% annualized return, which means this is a solid piece of the investment pie for me.

3. Robinhood

Robinhood is one of my newest and most exciting adventures. It is a phone app only, resource and it allows individuals to trade stock during normal trading hours completely free. Seriously, no commission, transaction fees, nothing. It is legitimately completely free. They do offer a Gold program that allows after hours trading and other benefits which is not free. The app is clean, easy and has enough information that I have been comfortable buying and trading quite a few stocks. There is no minimum initial investment (other than buying a specific stock) and the response time to buying and selling has been immediate. For me it feels a bit like fantasy football, but with money. I started by just buying and selling a couple little stocks and then have steadily been tinkering and building a portfolio. The research withing app is pretty much limited to a line graph with performance back as far as 5 years. It is pretty useful if you want to look at general trends. This would require you to do a lot of your own research if you are looking to get an edge of what to buy and sell and when. It links to your bank account and funds are immediately available once you place them in Robinhood. Potential downsides would be that you have to really put in the work to know what to buy and sell, and when you don't have a lot of diversification there is more risk. Luckily, there is a lot of information out there about stock trading (thank you Internet!).  If you're interested in trying it out (you could seriously buy one $2 stock) please click here. It will give both you and I a free stock as a promotion.

4. Betterment

Betterment is also pretty new to me. I've had it for a few months and it is very intriguing. In general, Betterment has some goal based bot traded funds. That's right; bots! Their computer algorithms work diligently to buy and sell stock at the right times to maximize investment returns. While my sample time hasn't been long enough to make a conclusion about returns, their past returns have been a little better than similar funds that are managed by humans; so that's pretty cool. There is no minimum investment and it links up real nice with existing bank accounts. There is a small maintenance fee at 0.25% a year. This is probably because that bot isn't going to be asking for a raise. I just plunked $600 in a retirement growth fund and I'm just going to keep an eye on it and see how it does for now. I'll be able to compare it to similar accounts I have with my employer and through Vanguard to make a decision if I'd like to add more in the future. Either way, I just kind of nerd out over the idea of the bot and I pray it doesn't turn into a Terminator situation. The only negative I can currently see with Betterment is that it is still linked to the volatility of the stock market. But, all investments with potential of quality return are somewhat risky.

So, what are investment resources that you are having success with on a budget? What kind of success have you found with the ones I am sharing?

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Thursday, April 30, 2015

Quick Tip Thursday: Your Next Reward Card...Citi Double Cash

One of our blog's original posts was entitled: "The Plastic Debate". This article is a little controversial because I advocate for the use of a reward credit card. We historically have used, and have been happy with the Chase Freedom Card. This card is great because it offers 1% cash back on all purchases, and 5% cash back (on up to $1,500) on purchases in promotional categories quarterly such as gas, groceries, Amazon, etc. It's pretty good! (A trend you may see in the financial posts is that I am big on playing the "Percentage Game". That is also why we decided to ditch our savings account for high interest checking accounts.)

However, it is just that...pretty good. You are potentially limited by the rewards you can incur with the $1,500 limit and the 1% is pretty standard. We still have the card and use it for the quarterly promotions but have stopped using it to pay our bills and everyday purchases that we usually use a credit card for, and here's why.

The Citi Double Cash is our new GO TO credit card. This card gives 1% cash back when you make a purchase, and 1% cash back when you pay your bill, resulting in 2% cash back. In effect, doubling your cash back that you would get for non-promotional purchases with Chase. DOUBLE! (I guess that is why it is called Double Cash

The application process was easy to do online and the card came quickly. (Disclaimer: please be advised that canceling and opening credit cards does affect your credit score.We have great credit scores and don't plan on buying anything that needs a credit score in the near future so we were fine with potentially lower our scores)

It took some time but we changed all of our automatic online bills to pay with the Citi Double Cash card. Although it initially takes some time and energy it pays off because we effortlessly make double the money by paying the same bills we would have paid with the Chase card, aka FREE MONEY!

So now we use the Citi Double Cash credit card for everyday purchases and for paying bills and only use our Chase card when the promotional quarter works for us. For example, last quarter it was groceries so we still used our Chase card for all of our grocery shopping. 

Of course, all of this goes with your ability to spend with a credit card as if it is cash. A lot of  time research shows that a lot of people over spend when using credit cards, which would defeat the whole purpose of getting cash back.

On an slightly different note, I encourage you not to use credit cards when supporting small local businesses because they get charged service fees, thus reducing their profit.

HUGE SIDE NOTE: I finally found an alternative to my bulky wallet for carrying my money and credit  cards. It is the EZGO wallet. It floats, holds up to 15 bills, 8 cards, 2 micro sd cards, and an sd card. It is light, thin and durable. My Chiropractor also approves!

My final recommendation for those who use credit cards appropriately would be to ONLY use Chase Freedom for promotional category purchases and use your Citi Double Cash for everything else.

Feel free to comment with what reward cards you are using and what you like/dislike. 

Have a great day and thanks for reading. Please make sure if you've been enjoying the blog to put your email in the right column and check us out on Facebook and Twitter!

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Ditch Your Savings Account

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Thursday, February 12, 2015

5 Steps to Get the Best Mortgage

5 Ways to Get the Best Mortgage

1) Do Your Research - Before you even step into a house you should have an idea what current interest rates are. Do a little internet research and ask friends and family what types of interest rates they got. You can use this to inform yourself as to what to expect when walking into an appointment with a mortgage broker. It will help you to know if a rate you are offered is good, bad or average from what you have seen with your research. Be mindful that these rates are always changing as well.

2) Get lower rates by having a larger down payment. This also may influence the price of house you are seeking.

3) Get pre approved for a loan at a place that is close, easy and accessible. You do not need to end up using that pre approved loan for your mortgage; it just gets you in the door to view houses. (We chose Chase Bank because it was easy and you can even do it over the phone!)

4) Shop around!!! When we secured our mortgage I went to at least five different places to get quotes. I paired this with research I had done and knew what offers were good and which weren't. Also, by accident I found that bringing all of the folders from potential lenders with me as I went place to place really caught the attention of the lenders. They knew I was shopping around and I felt as though they knew they needed to be more competitive to get my business. I ended up having a couple of places get into a little bit of a bidding war to get my business and I came out on the better end of that!

5) Refinance for a lower rate. Depending on the time left on your loan it is a great idea to refinance. A lot of people I talk to hate all of the "work" they have to do in order to do so. There are fees so you really need to look at whether or not you end up saving money. When refinancing we ended up saving $3,000 over the life of a loan. It doesn't sound like a lot when you look at the monthly change, however, it was the easiest $3,000 I have ever made/saved.

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