This website receives compensation for products or services you obtain through the links on this site.
While I’ve been somewhat critical of Dave Ramsey and his “Debt Snowball” in the past, he’s definitely helped an awful lot of people get their finances in order. Thus, I thought that it might be worth spending a bit of time talking about Dave’s “Baby Steps” for getting out of debt and improving your finances. Here they are:
This website receives compensation for products or services you obtain through the links on this site.
Life insurance is an incredibly important financial product. Unfortunately, it’s also relatively costly. With that in mind, I thought I’d put together some tips for saving money when you’re in the market for a life insurance policy.
Any insurer worth their salt will require a physical as part of the underwriting process. The good news is that it’s easy — they’ll send someone out to your home or office. Smoking, obesity, high blood pressure, etc. will all result in significantly higher premiums. So, leading a generally healthy lifestyle will save you a lot of money on your life insurance premiums.
Life insurance makes the most sense for people with significant financial responsibilities. If others depend on you for financial support, then you most likely need it. However, if you’re young, unmarried, and childless, you may be better off skipping it and banking the savings.
The simplest and cheapest form of life insurance is a term policy. Sure, insurance policies with a cash value — such as whole life or universal life — can make sense in certain circumstances. But you can save a good bit of money by foregoing the investment component, buying a term policy, and investing your savings on your own.
The more coverage you buy, the more it will cost. You don’t want to go cheap and leave your loved ones high and dry. However, it also doesn’t make sense to buy more than you really need. Just don’t forget to factor in the effects of inflation.
Most insurers allow you to pay monthly, quarterly, semi-annually, or annually. While paying monthly might sound better than coughing up a year’s worth of premiums in advance, keep in mind that many companies charge for the privilege.
The premiums on identical policies from different issuers can vary widely. Thus, it pays to shop around. Either enlist the help of a reputable insurance agent or get a quote online from a company like Haven Life (many policies don’t require a physical exam). Just don’t buy from a company on the brink of bankruptcy in the interest of saving a few bucks.
So there you have it… Six simple tips for saving money on life insurance. If you have any further suggestions, please be sure share them in the comments.
And if you’re generally reviewing your insurance policies, see our articles on how to save money on car insurance, how to save money on homeowners insurance and how to save money on health insurance.
This website receives compensation for products or services you obtain through the links on this site.
Passive income is money received on a regular basis that requires little effort to maintain. Sounds great, doesn’t it?
Generating passive income is a great financial goal because it’s a smart way to build wealth. One thing to realize is that creating passive income requires an upfront investment — whether it’s money or time. You’ll need to be committed in order to be successful at creating a passive income stream. Here are three passive ideas and how they work:
Investing is a tried and true way to make passive income. Of all the passive income ideas, investing is probably one of the most passive. The most significant investment you’ll make is your money upfront. There isn’t much upkeep after that.
Whether you’re starting out with $1, 000 or $100, 000, you can make money in the stock market. The important thing to know is that investing doesn’t come without its risks. The value of your stock portfolio will continue to fluctuate as long as you own it. If you’re in it for the long haul, however, you can ride out those fluctuations and see profits over time.
There are many methods for investing your money in the stock market. One way is to invest in dividend-paying stocks. A dividend is a payout some companies provide to shareholders on a regular basis. Dividend yields vary from company to company, so keep that in mind.
It’s important to not merely go after stocks with the highest dividend yield. Instead, focus on companies that have a proven track record of increasing dividend payouts over the years. You can either receive your dividend payouts as cash or choose to reinvest them in the same stock. The latter is known as DRIP, a dividend reinvestment plan.
One way to invest your money that doesn’t involve the stock market is peer-to-peer lending. Peer-to-peer lending involves funding personal loans to borrowers through an intermediary like Prosper or LendingClub. As a lender, you make money through interest payments on the personal loans.
Although peer-to-peer lending doesn’t have the risk of stock market fluctuation, your money isn’t completely secure. Borrowers have the ability to default on loans. To mitigate this risk, you can diversify your portfolio with multiple personal loans. You can also review personal loan requests and decide which ones you’d like to fund. For example, you can review criteria such as credit worthiness and the reason for the loan.
Making passive income from rental properties is effective, but it often takes more time than people expect. The way you make passive income is by receiving rent payments each month that exceed the mortgage payments. If you bought the property outright, you’ll begin making passive income right away. However, you will need calculate how many years it’ll be until you recoup your initial investment.
There are many things besides the cash investment that go into making rental properties profitable, though. You’ll need to spend the time learning about real estate to make sure you don’t lose your investment.
When looking for rental properties to invest in, one of the first things you’ll want to consider is location. In the real estate industry, properties in good school districts tend to have great potential. The same goes for properties near expanding retail or local transportation.
The next thing you’ll want to consider is your return on investment. If you want to charge a higher rent, consider doing renovations to the property. For example, tenants are usually willing to pay a higher rent for updated kitchens and bathrooms. Make sure you leave some buffer room for occasional expenses such as plumbing problems and other tenant requests.
The least passive part of rental property income is managing tenants. You’ll want to minimize the amount of time that your property is vacant because this means no rental income for you. Finding and screening tenants can be a time-consuming process. Moreover, managing tenant requests takes up time as well. To save time, you can hire a property manager to take care of these tasks for you. This expense will eat into your returns but may be worth it to avoid the headache of tenant management.
Unlike investing and rental properties, information products generally do not require much upfront monetary investment. Instead, it requires a greater upfront time investment.
You’ll need to spend time researching the market for your information products (whatever type or topic they may be), creating the actual information products, and then marketing them. Despite the time investment required, creating information products is a very attractive way to generate passive income because you don’t have much to lose. If you don’t sell any, you won’t be losing money.
There are many different types of information products. There are eBooks (which you could sell on Amazon or your own website), physical books, online courses, training material, and audio content, among others. The type of information product you create will greatly depend on the topic. For example, if you want to teach people about software programming, an online course would be ideal so that you can show live examples and include practice prompts. The barrier to entry for creating information products is low. If you’re an expert in a subject matter that people are interested in, you’ll have a market. You can even outsource the creation of your information product if you just have a good idea.
A good way to prepare yourself for creating a profitable information product is to start by freelancing or consulting. Not only will working in industry increase your credibility, it’ll also give you insight into your market. For example, if you have a personal fitness training business, you can take note of the common problems your clients experience. Then, you can use that insight to package a set of videos and training material to sell to people who’d like to get in shape.
As you can see by the three examples above, passive income requires some upfront investment. Whether it’s money or time, you’ll need to invest something before you can begin generating passive income. Seeking after passive income is well worth it though. Once you establish the right foundation, you can create a continuous stream of income that requires little maintenance.
This website receives compensation for products or services you obtain through the links on this site.
I frequently receive e-mails asking my opinion as to which online bank has the best high-yield savings account. I’ve used several online banks over the years for my emergency fund and look to a few factors in selecting a savings account:
Considering these factors, we’ll look at a number of high yield savings accounts. Here’s an automated rate table that will show you several of the top options.
I’ll also update the list below with accounts that FiveCentNickel readers have identified as their favorite online savings accounts.
Looking for the best online high-yield savings account? Here are some of the most popular online savings options. All savings rates were updated as of May 15th, 2018.
Barclays has been around for over 300 years and operates in 50 different countries. Barclays is a large bank and offers competitive rates on savings accounts. There is no minimum balance or any monthly fees, and don’t worry, its FDIC insured.
Formerly known as GMAC Bank, Ally is one of my favorites. They offer one of the highest savings rates out there, and they also have very competitive CD rates. Accounts with Ally have no monthly fees as well as no minimum balance requirement. We’re actively holding a portion of our savings with them.
Synchrony offers one of the highest rates available today on a savings account. There is no minimum balance required and Synchrony does not charge monthly fees. Money can easily be withdrawn from the account online, and it is FDIC-insured.
Formerly GE Capital Bank, Goldman Sachs acquired the online bank and renamed it Marcus Bank. Its online savings account features a highly competitive yield, no transaction fees and no minimum monthly balance or opening deposit. All Marcus Bank accounts are insured by the FDIC.
CIT was founded by Henry Ittleson in 1908 with a mission to provide financing for businesses. CIT continued to grow, offering financing, lending and insurance for corporations in many different sectors. CIT Bank, an FDIC-insured institution, offers CDs, savings accounts and custodial accounts to consumers and small businesses.
FNBO is currently offering a 1.75% APY on their Online Savings Account. There are no minimums and no monthly fees. They offer a return that has averaged ten times higher than traditional savings accounts according to a study by Bankrate.com. Maximum principal deposit balance: $1,000,000.
Building off the legacy of online-banking pioneer ING DIRECT, Capital One 360 is a new favorite. Capital One 360 offers both an online money market account and a high-yield checking account. There are no fees, and its site has an ultra-slick interface with lots of useful features. $10,000 minimum balance required to receive the 1.60% APY.
EverBank offers a high yield money market account. For first-time account holders, new account bonus rate for Yield Pledge Money Market Account – first year APY is currently 1.50% for account balances up to $250K, and an ongoing APY currently at 1.05% – 1.25%. There are no fees associated with your account as long as you maintain a $5, 000 minimum balance. They also have a high-interest checking option. While you may not have heard of them, they’re FDIC insured. Definitely worth checking out.
If you’re looking for a significantly higher yield than a regular bank can offer, you might want to check out online investing company Lending Club. They are a good option if you don’t mind taking on some additional risk. It’s not FDIC-insured, but an average net annualized return for Lending Club notes are between 5.25% for grade A notes and 8.57% for C grade notes. It’s free to open an account, and you can get started with as little as $25. I’ve been using them for the past few months, and have had a great experience thus far.
I should also note that USAA was a popular option among those that have access to it. I did not, however, include it in the main list, as it’s only available to members of the armed services (active duty, reserves, or retired) and their families.
This website receives compensation for products or services you obtain through the links on this site.
Your 2016 taxes are due in just over three months. That also means that you have just over three months left to make any 2016 IRA contributions that you might have been putting off.
But what if you’ve neglected to contribute to an IRA because you’re not sure you can afford it? Maybe the only cash you have on hand is earmarked for emergencies, and you’re not willing to risk the 10% early withdrawal penalty that comes with a traditional IRA.
Well, I’d like to encourage you to think twice about that stance and still consider making a Roth IRA contribution. As I’ve noted before, Roth IRA contributions can be withdrawn at any time and for any reason without penalty. And if you don’t believe little old me about this, you can check it out for yourself in IRS Publication 590.
Now, I’m not necessarily crazy about this flexibility, to the extent that it encourages (or at least allows) people to raid their retirement to buy shiny things. However, one huge benefit is that it gives you the flexibility to make a contribution, even if you’re not sure you can afford it.
This flexibility is very valuable because you’re only allowed to contribute a limited amount to IRAs each year. In other words, if you fall behind on contributions now, you won’t be able to make up for it later when you can (hopefully) better afford it.
If you make the contribution now and fate smiles upon you, you’ll be able to re-build your emergency savings “on the outside” while having more money stashed away inside your Roth IRA. And if things go awry, you’re free to yank that money out (up to the amount that you’ve contributed) and use it to take care of whatever emergency you’re dealing with.
Some issues to be aware of:
This website receives compensation for products or services you obtain through the links on this site.
Whether you want to pay off outstanding debt, save up for a house, or just have extra spending money, having a side hustle is a great way to reach your financial goals faster. The nice thing about side hustles is that they do more than just bring in extra income. Side hustles can be a source of fulfillment as well.
Before we discuss how to find the best side hustle for you and look at some ideas, let’s define what a side hustle is:
A side hustle is something you do in addition to your main employment, as a way to make extra money. Since a side hustle isn’t your primary source of income, it gives you flexibility to use it as an opportunity to explore something that truly interests you. If you aren’t in love with your full-time job, a side hustle could be exactly what you need to do something more fulfilling while making some money at the same time.
One thing a side hustle is not is a part-time job. If you seek hourly employment at a place like a retail store or fast food chain, that generally isn’t considered a side hustle. That’s just part-time employment. A side hustle is more of a venture that you embark on for both money and enjoyment.
The first step to find the best side hustle for you is to identify your interests. As previously mentioned, a side hustle is not only a means for extra income but also a way to explore a passion you may not be able to explore at your day job. When you decide to pursue a side hustle, now’s the time to decide what truly interests you. Do you have a passion for cooking? Are you fascinated by technology? These are just a couple of interests that could turn into a side hustle.
The next step is to identify your money-making skills. Not all of your interests may easily translate into a lucrative side hustle. To determine which skills are easiest to monetize, simply do a web search and see what other people are offering. For example, if your skill is writing, you can look up other writers’ websites and search for their rates. If your skill is coding, you can search on freelance job boards and see how much those types of projects are paying.
The last step is to evaluate the time commitment needed. Some side hustles require more time commitment than others. You want to find one that doesn’t require more time than you’re willing (and able) to dedicate.
Now that you know how to find the best side hustle for you, you may already have some ideas in mind to get started. In case you don’t, though, here are 10 that you can try:
When deciding which side hustle you’d like to explore, remember to consider both your skills and interests. In addition to being an additional source of income, a side hustle should be something that brings you enjoyment.
Another thing to consider is how much time you’re willing to commit. This may rule out certain side hustles that require a lot of time in order to make good money. Once you get the hang of things and begin bringing in a consistent stream of income, you can brainstorm ways to increase your income even more. One day, your side hustle income may even exceed that of your full-time job!
This website receives compensation for products or services you obtain through the links on this site.
See also: Dave Ramsey is Good at Psychology
If you’re familiar with Dave Ramsey, then you’ve no doubt heard of his ‘snowball’ approach to paying down your debt. In short, Ramsey suggests that you make minimum payments on all but the debt with the lowest balance. Any additional money you have goes to that lowest balance debt. Once the low-balance debt is paid off, you add the dollars that had been going there to what you’ve been paying against the next lowest debt. And so on.
The idea is to pick up steam in paying down your debts by knocking them out one by one and piling up the payments that would have gone to each of the paid off debts in order to knock out the next one. Sounds enticing, but is it a good idea? (more…)
This website receives compensation for products or services you obtain through the links on this site.
On the way home from work the other night, I heard a radio commercial touting a debt reduction system that (supposedly) works like no other. As I drove along, I couldn’t help but chuckle. After all, they made it sound like there’s some sort of silver bullet out there that will magically make your debt disappear — for a fee, of course.
Guess what? There isn’t. That’s the bad news. The good news is that, with a bit of hard work and focus, you can do it on your own. What follows are some tips for making it happen.
It may sound trite, but the first step in tackling your debt is to admit that you have a problem. Unless you’re willing to own up to your situation and commit to changing it, you’re going to be in debt for a long, long time. If you’re married, now’s the time to sit down and have a heartfelt talk about money.
This is a hard one, especially if you’ve become reliant on credit cards for making ends meet. If you want to climb out of the hole, you have to stop digging. If you don’t have the money to pay for something, don’t buy it. Period. If you have to cut up your credit cards in order to make this happen, DO IT.
Here, it’s important to understand why you are going into more debt. For some, it’s the unexpected emergency (see building up a cushion below). For others, it’s just steady overspending. One solution is to create and follow the dreaded budget.
It’s really not that bad, and there are several different ways to budget. Pick one that works for you. It may take some trial and error, but stay the course and you’ll get into a good rhythm in no time.
If you’re planning on living without credit, then you’ll need a cushion to handle unexpected expenses — i.e., an emergency fund. Debt reduction experts, such as Dave Ramsey, recommend saving $1, 000 for starters. Of course, this number might vary depending on your circumstances. If you’re single and on your own, you can probably get away with less than someone with a family.
Just remember, as important as your emergency fund is, you shouldn’t overdo it. Build it up, stash it in a local bank or online savings account, and move on. After all, your debts will just keep on growing until you start wiping them out.
In the interest of developing an effective debt repayment strategy, you need to know exactly what you’re up against. Develop a detailed list of who you owe, how much you owe them, and the associated payment terms (e.g., minimum payments, interest rates, etc.). Don’t leave anything off.
Call the creditors on your list and ask if there’s any way they can reduce your interest rate. As unlikely as it seems, this strategy actually works. No, they won’t all agree to it, but some will. And the worst they can do is say no.
There’s been a lot of debate over the best debt reduction strategies. Some say to attack your smallest debts first, whereas others say to focus on those with the highest interest rates. Guess what? How you do it doesn’t really matter. The important thing is to pick a method and get started.
In order to stay current on all of your debts, and thus avoid unnecessary fees, send at least the minimum due to each creditor every month. After that, take whatever money you have left over and attack your #1 target. As your debts begin to melt away, you’ll be able to direct more and more money toward your next target. Lather, rinse, repeat.
If you’ve made it this far, you’re doing great. Now it’s time to ramp things up. Start by ditching any recurring, discretionary expenses, and cut back wherever else you can. Whatever extra savings you have should be directed toward your debts.
Some additional ideas:
Every little bit helps.
So, there you have it. A thumbnail sketch of my magical system for getting out of debt. And it’s all yours for the low, low price of… Free.
This website receives compensation for products or services you obtain through the links on this site.
Let’s talk about a somewhat controversial subject, at least in financial planning circles: paying off your mortgage early.
A great deal of conventional wisdom says you should never pay a mortgage off early. Well, I’ve gone against that conventional wisdom. Twice. I don’t know if that means I lack conventionality or I lack wisdom, but it seems to have worked out well.
First, I’ll explain why I thought it was a good idea, and then I’ll address some of the common arguments against paying your mortgage off early. Finally, I’ll give you some advice about what to consider if you face this decision.
When I reached the point in life where I started to accumulate some meaningful savings, I was confused about what to do with it. It happened to be at a time when both the stock market and the bond market had made huge runs. I didn’t fancy the idea of putting the money into an overpriced market, so I was at a loss with where to put it all. My wife and I discussed it and, without hesitation, she asked, “Why not put it into the mortgage?”
Why not? Well, I was aware of a few reasons why not (but more on that in the next section). Personally, though, when I thought about the choice between putting money into some overheated financial markets or putting it into the roof over our heads, it seemed logical to do the latter.
What we got out of it immediately was a feeling of satisfaction and peace of mind. We’ve always looked at debt as something that you don’t simply try to manage, but something you strive to get out of as soon as possible. That may sound terribly old-fashioned, I know. But years later, having witnessed a housing crisis in which too many people lost their homes because they had failed to build equity, I can tell you I’m even happier for having played it safe.
The following are three reasons financial planners often give for not paying off a mortgage early, followed by my arguments against those reasons.
Of course, virtually no financial advice applies universally. Facts and circumstances matter greatly. Here are three things to consider before you pay off a mortgage early:
If interest rates have fallen since you got your mortgage, consider a hybrid strategy of refinancing to a shorter-term mortgage. This will allow you to get an even lower interest rate (15-year rates are lower than 30-year rates) and pay down your mortgage faster without immediately tying up your liquidity.
In the end, as you ponder this decision, just remember that having these options is an opportunity, not a problem.
This website receives compensation for products or services you obtain through the links on this site.
When looking at different health insurance plans, one of the biggest decisions you’ll likely have to make is whether or not to enroll in a high-deductible plan. Regular health insurance plans offer more predictable medical costs and often more comprehensive coverage. Unfortunately, the monthly premiums for these plans can be out of budget for a lot of people.
That’s why some look to high-deductible health insurance plans in order to cut the costs of healthcare. Let’s take a look at exactly what a high-deductible health insurance plan is, as well as its benefits and drawbacks.
A high-deductible health insurance plan is defined as a policy in which the amount an individual must pay out-of-pocket for medical expenses before the health insurance coverage kicks in is “high.”
What is considered “high” is determined by the IRS. For 2017, the annual deductible for a health insurance plan must be at least $1, 300 for an individual and $2, 600 for a family in order for it to be considered a high-deductible health plan.
High-deductible health plans (HDHPs) do cover preventive care whether or not you’ve met your annual deductible. This is required by federal law. However, you’ll have to pay for all of your other medical expenses out-of-pocket until you reach your annual deductible.
After that, the health insurance company will pay for your healthcare according to the benefits outlined in your health plan. After you’ve met your annual deductible, medical expenses are usually then covered at 100%.
There are several benefits to being enrolled in an HDHP. The main benefit is that you save money on monthly premiums. Generally speaking, the higher the deductible, the lower your monthly premium will be. If you don’t have any chronic conditions that require frequent doctor visits or don’t plan to have any major medical expenses in the coming year, you can save a considerable amount of money by choosing an HDHP and enjoying lower monthly premiums.
Another benefit is that you’ll be eligible for a health savings account (HSA). An HSA is a tax advantaged savings account that’s used for medical expenses. HSAs are tax advantaged because contributions are tax-deductible. Earnings also grow tax-free, and withdrawals are untaxed.
Because of all of this, you can experience a lot of savings over time by enrolling in an HDHP and using an HSA for your medical expenses.
Learn More: Why We Are Sticking With Our HDHP (and an HSA)
There are several drawbacks to being enrolled in an HDHP, as well. The main drawback is the possibility of a large medical bill. For example, if you’re in an accident and have to have a major surgery worth thousands of dollars, you’ll have to pay your entire deductible upfront before your health insurance covers its share of the cost. Unless you’ve been saving money for medical expenses in an HSA or other account, this large medical bill could seriously hurt your finances and even put you in debt.
Another drawback is that you may be more likely to forego medical care because of the upfront cost. If you enroll in an HDHP in order to save money, you may not be able to afford one-off visits to specialists or even a trip to the emergency room. If you find yourself avoiding necessary medical care because you can’t afford to pay the full cost up to your annual deductible, then it may not be a good idea to enroll in an HDHP.
Given these benefits and drawbacks, there’s a lot to consider with it comes to enrolling in a high-deductible health insurance plan. The savings benefits are definitely worth looking into. In addition to paying lower monthly premiums, you can take advantage of an HSA, which offers multiple tax benefits. The monthly premium savings coupled with the HSA could be a good setup for people who want to have more control over how they spend their healthcare dollars.
This is less beneficial for people who visit doctors frequently, are planning to have babies in the near future, or otherwise expect to spend a lot of money on medical expenses. Instead, these folks may benefit from a health insurance plan with a lower deductible.
I’ve personally been enrolled in both types of plans at different points in time. My preference is to have a regular health insurance plan that offers comprehensive coverage. I’d rather pay a little more each month than have to worry about being sent large medical bill if an emergency happens.