Annaâs email requesting help with her finances began with a unique confession.
âFarnoosh, my money problem garners little sympathy,â the 32-year-old wrote. âMy issue is that I make too much of it.â
Now, THIS is interesting, I thought. I immediately followed up with many questions.
Hereâs what I learned through our conversation:
The Denver-based Mint user earns $220,000 per year as an engineer. Annaâs also benefited from years of big bonuses and her net worth, not including her home equity, is close to a million dollars.
After paying taxes and health benefits and maxing out her 401(k), Anna takes home between $8,000 and $10,000 each month. Her expenses mainly consist of a $1,200 mortgage payment, car insurance, gas, food and utilities, amounting to maybe a few thousand dollars per month.
The rest either goes into savings where she stashes about $5,000 to $10,000 for unexpected expenses or into a brokerage account where she has roughly $800,000 invested. A wealth management firm manages that portfolio and charges, she says, an annual 1% fee.
Anna has no consumer debt, besides her mortgage, which amounts to about $338,000. Itâs a 30-year fixed rate loan with a 2.85% interest rate. The home has appreciated in recent years with about $100,000 in equity (including Annaâs initial 20% down payment).
So, what is the problem, exactly?
âMy big worry is that I don’t have the habits to manage money well,â Anna told me. Her sizeable bank balance has her feeling financially free, although she worries about getting carried away with spending sometimes.
âWhen I see money in my bank account I rationalize that âyea, that vacation is doable. I donât hold back on the things that may seem frivolous,ââ she says. But It seems she wants more financial grounding and to be able to evaluate expenditures and price tags more critically.
Annaâs situation may be unique, but I think relatable in the sense that we all would like to feel more thoughtful with how we spend, save and invest. And while some may do well with earning money, it should not be assumed that they can also manage that money well.
I applaud Anna for wanting to be sure that, even with an impressive net worth, she is actually making wise financial decisions.
Hereâs my advice.
Take a Deep Breath
No need to panic when spending on things and experiences that you enjoy. From what I can tell Annaâs prioritizing the serious financial stuff first like contributing the max to her 401(k) and saving all of her annual bonuses in a brokerage account. She has no credit card debt and pays all her bills on time. Thatâs terrific.
Sometimes we just want to hear that weâre on the right track with our money and I have a very simple way to measure this:
If you manage each paycheck by saving, investing and paying all your bills first, then by all means, youâre entitled to have fun with whatever is left without any fear or regret. Am I right?
If youâve done the good work of taking care of your future with your money, then donât hesitate treating yourself and others with the remaining funds today. Splurge away and enjoy your hard-earned money. And remember to enjoy the moment.
Ditch Your Money Managers
I do think Anna could find a better home for her investments.
Paying one percent of her managed assets to this firm may not seem that high of an annual fee. But when you think about Annaâs balance of $800,000, thatâs $8,000 this year. What about next year and the decades after that as she contributes more to the account? That fee, compounded over the next 30 years, will amount to – conservatively – over one million dollars. Ouch.
That doesnât even factor in the expense ratios for each mutual fund thatâs in her portfolio.
If all Anna seeks is investment assistance, she may be better suited stationing her money with an automated wealth platform or robo-advisor where her money is largely invested in low-fee index funds or exchange-traded funds (ETF) and the portfolio management fee is typically 0.50% or less.
Of course, breaking up with your financial advisor is not always so simple. Itâs especially hard for Anna, as she equated her money managers to âfather figures.â
If I were Anna, I would just explain to my advisors over email something like, “I want be more conservativeâ¯withâ¯my money and that includes being extra mindful of the various fees that I’m paying. To that end, Iâve decided to manage my money more independently. Iâm sure you can understand. I appreciateâ¯yourâ¯help over the years. Please let me know next steps.”
Planners know the drill and are used to having clients end relationships.â¯ Stay strong. Nobody can really argue with the fact that saving money is a good thing!
Establish Short and Long Term Goals
Anna wants to spend and save with more conviction. I think having some concrete, tangible goals can help.
For example, she shared that sheâd like to get married, have a family and own two homes â one near her office downtown and another in the mountains as a getaway.
So, the next step is to understand what these goals cost. What are, say, the going prices on a vacation home in her state? How much might she want to stash in a separate account for the future down payment on this property? Knowing the underlying costs of her goals can better direct how much to spend elsewhere.
Next time sheâs planning a vacation, she may be more inclined to price compare or hunt down better deals, as opposed to just judge whether the trip is financially âdoableâ by the amount of money in her bank account. Now sheâll have the image of that second home and its costs and will make a more informed choice.
Contribute to a Cause
Last but not least, when you feel you make more than enough, like Anna does, this is a great opportunity to be extra charitable. If sheâs seeking a way to give her money more meaning and feel purposeful in her financial life, this is a truly wonderful way to go about it. Discover a cause that youâre passionate about and make an impact as a volunteer and donor.
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: Managing Money When You Make Enough appeared first on MintLife Blog.
If you’re thinking about how much is enough for retirement, you’re probably contemplating a retirement and need to know how to pay for it. If you are, that’s good because one of the challenges we face is how we’re going to fund our retirement.
Determining then how much retirement savings is enough depends on a number of factors, including your lifestyle and your current income. Either way, you want to make sure that you have plenty of money in your retirement savings so you don’t work too hard, or work at all, during your golden years.
If you’re already thinking about retirement and you’re not sure whether your savings is in good shape, it may make sense to speak with a financial advisor to help you set up a savings plan.
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How Much Is Enough For Retirement?
Your needs and expectations might be different in retirement than others. Because of that, there’s no magic number out there. In other words, how much is enough for retirement depends on a myriad of personal factors.
However, the conventional wisdom out there is that you should have $1 million to $1.5 million, or that your retirement savings should be 10 to 12 times your current income.
Even $1 million may not be enough to retire comfortably. According to a report from a major personal finance website, GoBankingRates, you could easily blow $1 million in as little as 12 years.
GoBankingRates concludes that a better way to figure out how long $1 million will last you largely depends on your state. For example, if you live in California, the report found, “$1 Million will last you 14 years, 3 months, 7 days.” Whereas if you live in Mississippi, “$1 Million will last you 23 years, 2 months, 2 days.” In other words, how much is enough for retirement largely depends on the state you reside.
For some, coming up with that much money to retire comfortably can be scary, especially if you haven’t saved any money for retirement, or, if your savings is not where it’s supposed to be.
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Your current lifestyle and expected lifestyle?
What is your current lifestyle? To determine how much you need to save for retirement, you should determine how much your expenses are currently now and whether you intend to keep the current lifestyle during retirement.
So, if you’re making $110,000 and live off of $90,000, then multiply $90,000 by 20 ($1,800,000). With that number in mind, start working toward a retirement saving goals. However, if you intend to eat and spend lavishly during retirement, then you’ll obviously have to save more. And the same is true if you intend to reduce your expenses during retirement: you can save less money now.
The best way to start saving for retirement is to contribute to a tax-advantaged retirement account. It can be a Roth IRA, a traditional IRA or a 401(k) account. A 401k account should be your best choice, because the amount you can contribute every year is much more than a Roth IRA and traditional IRA.
1. See if you can max out your 401k. If you’re lucky enough to have a 401k plan at your job, you should contribute to it or max it out if you’re able to. The contribution limit for a 401k plan if you’re under 50 years old is $19,000 in 2019. If you’re funding a Roth IRA or a traditional IRA, the limit is $6,000. For more information, see How to Become a 401(k) Millionaire.
2. Automate your retirement savings. If you’re contributing to an employer 401k plan, that money automatically gets deducted from your paycheck. But if you’re funding a Roth IRA or a traditional IRA, you have to do it yourself. So set up an automatic deposit for your retirement account from a savings account. If your employer offers direct deposit, you can have a portion of your paycheck deposited directly into that savings account.
Related: The Best 5 Places For Your Savings Account.
How long do you expect to live? Have your parents or grandparents lived through 80’s or 90’s or 100’s? If so, there is a chance you might live longer in retirement if you’re in good health. Therefore, you need to adjust your savings goal higher.
Consider seeking financial advice.
Saving money for retirement may not be your strong suit. Therefore, you may need to work with a financial advisor to boost your retirement income. For example, if you have a lot of money sitting in your retirement savings account, a financial advisor can help with investment options.
Figuring out how much is enough for retirement depends on how much retirement will cost you and what lifestyle you intend to have. Once you know the answer to these two questions, you can start working towards your savings goal.
How much money you will need in retirement? Use this retirement calculator below to determine whether you are on tract and determine how much you’ll need to save a month.
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Working With The Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is 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.
The post How Much Is Enough For Retirement? appeared first on GrowthRapidly.
It amazes us how quickly our girls are growing up. Next month when school starts up again, weâll have a fourth-grader and a kindergartener.
Even though we have some time before they are ready to move out of the house, we want to spend time now prepare them for the big transition. As a parent, you probably feel the same way too.Â
One crucial piece of a financial foundation kids and in particular, teens, need to master is learning to budget (and sticking with it),
While theyâre home now, you have a fantastic opportunity to get them comfortable with handling their money.
If youâre not sure where to start, here are some tips from fellow parents and experts in the personal finance space to make teaching this life skill a bit easier less stressful for you and your teen!
Teach Your Teen to Budget for Real Life
Teens or not, whenever most people hear the word budget, they also hear the word ânoâ. To them, budgets feel like a strict diet. Just as fad diets fail, an unrealistic or extreme budget will more than likely discourage your teen and they will quit.
The first step before you even talk about the numbers is to discuss exactly what a successful and sustainable budget should be. When done right, a budget is something that helps you move your money towards your goals. Explain to them that at its root, budget is simply a plan about what theyâd like to do.
You want a budget that can cover:
Â Â Essential bills
Â Â Future goals
Â Â Discretionary expenses
When your teenâs budget covers those goals, theyâre not only putting their finances in a good spot, but theyâre moving closer to their specific long term dreams.
Creating a Doable Budget (Theyâll Actually Enjoy!)
Once your teen(s) understands how a budget works, itâs important for them to create a budget that they can use in the real world. You can honestly budget however you want, but an easy budget to get your teen started is the 50/20/30.
Quite simplify, the 50/20/30 budget puts money into those three main buckets:
Â Â 50%Â goes towards essentials
Â Â 20% towards savings (or investing)
Â Â 30% for fun and discretionary expenses
I appreciate how easy and flexible this budget can be. You can adjust the percentages for your teenâs needs, but it gives them some ballpark idea of how to portion their finances when they are out on their own.
How do you start them out on this budget?
With teens, you may have expenses like clothing or their cellphone bill count as essentials, or you may want to give your child the experience of being responsible for a small, shared family bill while they are still at home.
For older teens, you could even charge them a nominal ârentâ to offset their portion of the bills. In some cases, parents give that money back to their child as a gift to help with moving expenses (like for their security deposit) or use as additional savings.Â
However you decide, talk it over so your teen understands why youâre doing it this way.
Share Your Family Budget
Creating a budget isnât complicated, but it can difficult if your teen has no idea what to expect. Knowledge can be empowering.
While we may take it for granted since have to deal with the numbers, but your teen may not be aware of how much it takes to keep the lights on and roof over their heads. If you havenât already shared your own budget already, now is the time.
Not knowing also puts them at a disadvantage when they start searching for a place or are comparing prices on expenses. Being armed with the numbers makes your teenager a more informed consumer.
When Your Teen Breaks Their Budget
Will there be times where your teenager will mess up with their budget? Probably so. However, thatâs not necessarily a bad thing. As parents, we tend to want to protect our kids, but we also have to prepare them for the real world. As Ron Lieber, author of The Opposite of Spoiled, pointed out we should let our kids make financial mistakes.Â
Wouldnât it be better for your child to break the clothing budget while theyâre still at home allowing you to help guide them through rather than having break their monthly budget while they are on their own and have bills to pay?
Mistakes will happen, theyâre a part of life so giving your teen time to work those them and adjust their budget is a blessing for their future selves.
Essential Accounts for Your TeenÂ to Have
Since weâre talking about budgets, we should also mention some essential accounts youâd want your kid to have so they can practice managing their money.
Opening up student checking and savings accounts (usually free low on fees as well as not having minimum balance requirements) are good foundational accounts for your teen. They can deal with real-world situations pending charges, automatic transfers, and direct deposits.
As Family Balance Sheet founder Kristia Ludwick pointed out, teens should have the skill of balancing a checkbook even if they decide to go all-digital with their banking.
If they work, talk it over together and see if they can open up an IRA and start contributing. It doesnât have to be much. The idea is to get them familiar and comfortable with the basics of investing.
Even if they put in $25 a paycheck, having them practice setting aside money in their budget for both long and short term goals is an invaluable lesson. You can also encourage them to contribute by offering a match for what they put in.
How Teens Can Easily Stay on Top of Their Money
With several accounts to keep tabs on, your teen is going to need an easy system to track their budget and goals.
With Mint, they can link up their accounts in one secure spot. They can also add their budget along with any savings goals they want to hit and make sure they stick with them.
Hopefully, these ideas and tips will make it easier to help your teen transition into a self-sufficient adult.
The post How to Teach Your Teen to Budget Like a Pro appeared first on MintLife Blog.
Hello! Are you interested in starting a dog treat bakery business? Well, good news, this article will tell you what you need to know. Plus, you can sign up for this free training workshop that will teach you how to start your own side hustle baking and selling dog treats.
Hi! My name is Kristin Larsen, and I runBelieve in a Budget, a blog about personal finance and my experience with various side hustles. (It feels like I’ve tried them all over the years!)
As I’ve written about before here on Making Sense of Cents, my favorite online side hustle is working as a Pinterest virtual assistant. Managing Pinterest accounts is a great way to earn an income entirely online.
But today, I’m here to talk about a completely different side hustle, one that can be run entirely offline if you want (or entirely online, or a combination!).
While I love being able to work from home (or anywhere) on my computer, there is something to be said about stepping away from the computer and doing work that doesn’t involve the ‘virtual world’ – work that requires you to move around a little instead of being planted in front of a screen all day long!
In the case of this side hustle, it involves moving around the kitchen baking up beautiful and delicious dog treats.
Yes, dog treats!
The side hustle I’m speaking of is starting a dog treat bakery and I’m so excited to share it with you today. As a successful dog treat baker myself, I know first-hand how in-demand and lucrative this business can be.
How do you start a dog bakery?
How I Took My Dog Treat Bakery from Passion to Side Hustle to Full-Time Job
My dog treat bakery story started over ten years ago when I was an interior architect and designer at my 9-5 job.
At the time, I was the proud dog mom of Bella, a sweet-but-very-high-maintenance pup. Her birthday was coming up and I wanted to give her a birthday treat that fit her ‘diva dog’ personality.
I went to the local pet store and perused the aisles, but all I could find were treats filled with ingredients I couldn’t pronounce that looked like they had been sitting on the shelves for years. After a disappointing visit, I walked out the door and decided that I was going to bake Bella a treat.
This was kind of laughable since baking was not something I had done much of in my life, but I was going to figure out a way to make it work.
I decided to do some research by going to a local bakery and spending a lot of time staring at the baked goods (awkward!), trying to figure out which one I could recreate for Bella. I finally decided on a pretty cupcake adorned with white icing.
I went home, researched dog-safe ingredients and got to work planning Bella’s birthday treat. After a quick trip to Target to buy a mini cupcake tin, I started baking.
About an hour later, her birthday cupcake was baked, iced and ready to serve. Despite its small size, it was a huge success – she loved it!
As soon as I saw how much she loved her treat, you could say I became a little obsessed with making wholesome, healthy treats for her. Soon, I started gifting them to friends and family.
I went from developing a single cupcake recipe to developing over 20 different dog treat recipes – everything from treat bones to cookies to brownies to cakes!
Pretty soon, the friends and family who were on the receiving end of my gifts were saying: ‘Kristin, our dog(s) LOVED your treats. Can we buy some to gift? Can my friends/family/co-workers/neighbors buy some?’
With those questions, Diva Dog Bakery™ was born!
My little ‘obsession’ quickly became a side hustle, first bringing in $100 to $200 a month, then over $500 a month, just selling through word-of-mouth.It was the easiest money I had ever made!
In a serendipitous turn of events, I ended up losing my 9-5 job a few months after I started Diva Dog Bakery™. It was during the Great Recession, so I couldn’t find a job in my industry anywhere. My unemployment checks weren’t enough and I was quickly going through my savings.
I was initially stuck in a ‘dog treat bakery = side hustle’ mindset, so it didn’t immediately occur to me to try to turn my side hustle into a full-time business. But when my money was drying up, it finally clicked: I can turn this into a full-time business!
I went all-in on my bakery and hustled hard. I sold at multiple farmers markets every Saturday (shout-out to my parents who helped me ‘be’ in multiple locations at once!), started a successful Etsy shop and also sold products wholesale.
Pretty soon, I went from going broke to making a solid $3,000 to $4,000 per month… despite the economy being in the biggest downturn since the Great Depression.
Needless to say, I was ecstatic!
The especially exciting thing about my earnings is this was nearly ten years ago when the dog treat industry wasn’t nearly as hot. These days, my efforts could easily bring in double that!
The Opportunities in the Dog Treat Industry (Why You Should Start a Dog Treat Bakery)
When I first started my dog treat bakery, the idea of buying homemade cupcakes or brownies or cookies for your dog was still considered a little ‘out there.’
These days, dog owners are much more tuned in to the idea of pampering their pooches and they’re willing to spend money to make it happen.
Here are a few interesting stats for you:
The dog treat market is incredibly hot right now and getting even hotter… to the tune of almost 7 BILLION dollars in sales in just 2020 alone! (source)
Over six out of ten dog owners are concerned about the safety of the dog treats they purchase. (source)
Dog owners are especially interested in purchasing dog treats with wholesome, easy-to-pronounce ingredients. (source)
It’s never been a better time to get started with a homemade dog treat bakery!
How Much You Can Earn Baking Dog Treats at Home
If you just want to run a fun-but-profitable hobby, you can easily earn $500 to $1,000 a month with a dog treat bakery as a side hustle.
At this level, you can do all of the work yourself in just a few hours a week. If you have kids, you can also have them pitch in. A dog treat bakery is a great family business!
If you want to turn your dog treat bakery into a full-time business, you can scale it into four figures a month, or even five figures a month.
If you want to scale your dog treat bakery into a full-time business, expect to work 30 to 35 hours a week yourself. If you want to have a heavy farmers market presence, you will probably need to bring on some help for a few hours each week so you can have a presence at multiple farmers markets at the same time. (The best ones are usually on Saturday mornings.)
If things get really busy, you can bring on baking help, marketing help, shipping help and more! You can make this business as big (or as small) as you’d like.
Where to Sell Your Dog Treats
As I mentioned at the beginning of this post, you can run your dog treat baking business in a way that suits your lifestyle. You can run it offline, online, or both!
There are so many ways and places to sell your treats, but here are a few ideas to get you started.
Wholesale to local businesses (e.g., pet stores, veterinarian offices, gift shops)
Social media for local sales
Social media for nationwide sales
How Much Does it Cost to Start a Dog Treat Bakery?
Like nearly all businesses, starting a dog treat bakery comes with a few start-up costs, but you will easily earn these back when sales start coming in, or you can even take pre-sale orders! (Have I mentioned that the profit margin on dog treats is amazing?!)
Typical start-up costs for homemade dog treat bakeries in the U.S.* include:
$20 to $50 for the initial ingredients, plus a few inexpensive baking tools if you don’t already have them in your kitchen
$0 to $75 for treat packaging costs
$25 to $50 for a business license
Between a $25 one-off fee to up to a $50 per-treat fee to register your treats with your state – this will depend on your state’s regulations
*Costs and laws outside of the U.S. will vary from what is listed here.
Are Dog Treat Bakeries Regulated?
Yes, but not nearly as much as‘people food’ bakeries. (Good for would-be dog treat bakers, but a little sad for our furry friends!)
In the U.S., the exact regulations you will need to follow are decided by your state and sometimes your local area (e.g., county, city). This is easy information to find out by contacting the following agencies:
State department of agriculture or feed control office
State and local health departments
You can also contact your state’s business agency and tell them you want to start a pet treat bakery. Many states have information on file about pet treat bakeries that tell you everything you need to do.
Don’t be intimidated by this process – in most cases, all you have to do is fill out a few forms and pay a few small registration fees!
How to Get Started as a Dog Treat Baker
When I first started Diva Dog Bakery™, I honestly had no idea what I was doing.
Although I saw success pretty quickly, there was a lot of trial-and-error because I had no one to guide me. I didn’t know anyone who owned a bakery, let alone a dog treat bakery.
The one thing I definitely did right at the beginning – and what I recommend to you if you want to become a homemade dog treat baker – was to spend some time in the kitchen learning how to make treats.
Because I wasn’t much of a baker (and maybe you aren’t either), getting a little baking experience under my belt was very helpful.
I also tested out my treats on my dogs and the dogs of some of my friends and family. Dogs may not be able to talk, but you can tell pretty easily which treats they love eating and which treats they’ll turn their nose up at!
With this data, you can start to package up and sell the most-liked treats. You can scale it from there and start to build up your business.
If the idea of going it alone on a dog treat bakery business sounds a little intimidating, I’d like to welcome you to join the Diva Dog Bakery™ course where I’ll teach you exactly how to build a thriving dog treat bakery business!
Here’s what the course covers:
How to best make and store dog treats (this is where you’ll practice your baking techniques)
How to turn your hobby into a legal dog treat business
How to package your treats beautifully without hours of effort (beautifully packaged treats command premium prices!)
How to price your dog treats so you maximize your revenue
Where to sell your dog treats: offline, online or both
The best methods for accepting payment
How to most efficiently and inexpensively ship and deliver your treats
The best ways to promote your business so you build up a following of raving fans and repeat customers!
You’ll also receive valuable bonuses, including:
My full dog treat recipe book, which includes the most popular and profitable recipes I used in my bakery
Guaranteed analysis/nutrition labels to use on your treats (required by certain states)
30 days of free access to the Diva Dog Bakery™ Community so you can get all of your questions answered while you grow your business, including live training
It has been so exciting to help new dog treat bakers launch their businesses! Cheering on every baking success and every business success is truly the best part of my day.
Lessons Learned from a Cupcake… and a Phone Call
I like to say that Diva Dog Bakery™ started with a cupcake.
But it really, truly started when, after gifting treats to friends, one of those friends called me and said: ‘Kristin, can I buy a bag of your dog treats?’
Until that moment, I had no idea that anyone would actually want to pay for the treats I had been making as a labor of love.
I learned a valuable lesson that day: there is a market out there for so many different products and services. Whether it’s a product or service that we dream up on our own or that we learn from a course, there is probably someone who wants to buy it from us.
We just have to figure out a way to make that sale happen… and then make it happen again and again!
Dog Treat Bakeries are a Great Business to Start
If you’re interested in starting a business that’s ‘outside the box’ of the typical online businesses, then I highly recommend starting a dog treat bakery.
The industry is booming, the work is enjoyable, the profit margin is fantastic and (maybe the best reason of all) you have the cutest customers!
To get started on your dog treat bakery journey, I’m offering a free dog treat bakery workshop! Check out the sales page here and sign up for the free workshop.
If you have any other questions about starting a dog treat bakery after watching the workshop, just email me and I’d be happy to answer them.
Are you interested in starting a dog treat bakery?
The post How I Earned Up to $4,000 Per Month Baking Dog Treats (With Zero Baking Experience!) appeared first on Making Sense Of Cents.
I had a great talk with Millennial Money Man yesterday and my favorite piece of advice he gave me was to âwrite what youâre passionate about.â It took me literally five seconds to think of the one thing Iâm really passionate…
The post Is Being Debt Free Worth it? appeared first on Modern Frugality.
If you have bad credit and need a car loan, there are some challenges when compared to obtaining a standard car loan. However, pick your head up because there are a handful of great lenders that specifically tailor their programs to people with bad credit. We researched the landscape of lenders that can help you get a car loan even if you have a below-average credit score.
Based on our study, OneMain Financial and LightStream are two of the top lenders offering bad credit card loans. This is due to factors including loan options, requirements to qualify, and interest rates offered. Of course, we offer in-depth reviews of all the top lenders who offer bad credit car loans further down in this piece.
Apply now with our top pick: OneMain Financial
In this guide we also help you understand the factors that go into selecting the right auto lender, and how to get the best rate you can.
Most Important Factors for Bad Credit Car Loans
If youâre in the market for a bad credit car loan, there are a plethora of factors to consider and compare. Here are the main loan details we looked at in our study, and the ones you should prioritize as you select the best car loan for your needs.
Check your credit score. And understand what is in your credit report.
FICO scores under 579 is considered ‘poor’. But you may need a bad credit loan with a score as high as 669.
Interest rates and fees matter. These can make a huge difference in how much you pay for an auto loan each month.
Compare loan terms. Consider your repayment timeline and compare lenders with this in mind.
Getting prequalified online can help. Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report.
Watch out for loan restrictions. Some lenders impose restrictions on what car you can purchase. Keep this in mind to avoid unpleasant surprises later.
The Best Bad Credit Car Loans of 2021
The best bad credit car loans make it easy for consumers to qualify for the financing they need. The following lenders made our list due to their superior loan offerings, excellent customer service, and reputation in this industry.
Car Loan Company
Best for Flexibility
Best Personal Loan Option
Best Loan for Bad Credit and No Credit
Best Loan Comparison Site
Best Big Bank Loan for Bad Credit
Best for Fast Funding
Why Some Lenders Didn’t Make the Cut
While the lenders we are profiling are the best of the best, there are plenty of bad credit car loans that didnât quite make the cut. We didnât include any lenders that only offer auto loan refinancing, for example, since we know many people need a car loan in order to purchase a new or used car or truck. We also stayed away from bad credit car loans that charge outrageous fees for consumers with the lowest credit scores.
Bad Credit Auto Loan Reviews
We listed the top companies we selected in our study above, but we also aim to provide readers with more insights and details on each. The reviews below highlight the highlights of each lender that made our list, plus our take on who they might be best for.
OneMain Financial: Best for Flexibility
OneMain Financial offers personal loans and auto loans with interest rates that range from 18.00% to 35.99%. You can repay your auto loan in 24, 36, 48, or 60 months, and you can use this lender to borrow up to $20,000 for a new or used car. You can apply for your auto loan online and from the comfort of your own home, and itâs possible to get approved within a matter of minutes.
While OneMain Financial doesnât list a minimum credit score requirement, itâs believed they will approve consumers with scores as low as 600. You should also note that auto loans from OneMain Financial come with an origination fee of up to 5% of your loan amount.
Sign Up With OneMain Financial Today
Why This Lender Made Our List: OneMain Financial offers a lot of flexibility in terms of your loan terms, including the option to repay your auto loan over five years. OneMain Financial also has pretty decent reviews from users for a bad credit lender, and they have an A+ rating with the Better Business Bureau.
Potential Downsides to Be Aware Of: OneMain Financial charges some pretty high rates for its bad credit loans, and donât forget that you may need to pay an origination fee that is up to 5% of your loan amount. Their loans are also capped at $20,000, which means this lender wonât work for everyone.
Who Itâs Best For: This lender is best for consumers with really poor credit who need auto financing but canât get approved for a better loan.
Upgrade: Best Personal Loan Option
Upgrade is an online lender that offers personal loans with fixed interest rates, fixed monthly payments, and a fixed repayment timeline. You can borrow up to $50,000 in an unsecured loan, which means you wonât actually use the car you purchase as collateral for the loan.
You can repay the money you borrow over 36 to 60 months, which makes it possible for you to tweak your loan offer to secure a monthly payment you can afford. Upgrade has a minimum credit score requirement of 620 to qualify, although theyâll consider additional factors such as your income and employment history.
Sign Up With Upgrade Today
Why This Lender Made Our List: Upgrade lets you âcheck your rateâ online without a hard inquiry on your credit report. This makes it easy to shop around and compare this loan offer to others without having to fill out a full loan application. Also note that Upgrade has an A+ rating with the BBB.
Potential Downsides to Be Aware Of: Upgrade charges APRs as high as 35.89% for consumers with the worst credit, and an origination fee of up to 6% of your loan amount might also apply.
Who Itâs Best For: Upgrade is best for consumers with decent credit who need to borrow a larger loan amount. This loan is also best for anyone who wants an auto loan that isnât secured by their vehicle.
AutoCreditExpress.com: Best Loan for Bad Credit and No Credit
AutoCreditExpress.com is an online platform that lets consumers with bad credit and even no credit get the financing they need. Once you fill out some basic loan information, youâll be connected with a lender who can offer you financing as well as a dealership in your area. From there, youâll head to the local dealership and pull the pieces of your auto loan together, including the purchase price of the car you want.
Sign Up With Autocreditexpress.com Today
Why This Lender Made Our List: AutoCreditExpress.com has an A+ rating with the Better Business Bureau. This platform also makes it possible for consumers with no credit at all to finance a car, which is a welcome relief for people who are building credit for the first time.
Potential Downsides to Be Aware Of: This website is a loan platform but they donât offer loans directly to consumers. This means you wonât have any idea on rates and terms until you fill out an application and get connected with a lender.
Who Itâs Best For: This loan is best for consumers with no credit or minimal credit history who cannot get approved for a loan elsewhere.
MyAutoLoan.com: Best Loan Comparison Site
MyAutoLoan.com is a loan comparison site that makes it easy to compare up to four auto loan offers in a matter of minutes. You can use this website to apply for a new auto loan, but you can also utilize it to consider refinancing offers for an auto loan you already have. You can also use funds from this platform to purchase a car from a dealer or from a private seller.
Sign Up With MyAutoLoan.com Today
Why This Lender Made Our List: Comparing auto loans in terms of their terms, rates, and fees is the best way to save money and wind up with the best deal. Since MyAutoLoan.com is a loan comparison site, they make it easy to shop around and compare competing offers.
Potential Downsides to Be Aware Of: Loan comparison sites connect you with other lenders who have their own loan terms and minimum requirements for approval. Make sure you know and understand all the details of loans youâre considering before you sign on the dotted line.
Who Itâs Best For: MyAutoLoan.com is best for consumers who want to do all their auto loan shopping with a single website.
Capital One: Best Big Bank Loan for Bad Credit
Capital One offers online auto loan financing in conjunction with a program called Auto NavigatorÂ®. This program lets you get prequalified for an auto loan online, then work with a participating dealer to coordinate a loan for the car you want. Capital One also lets you search available vehicles at participating dealerships before you apply for financing, making it easy to figure out how much you might need to borrow ahead of time.
Sign Up With Capital One Today
Why This Lender Made Our List: Capital One offers the huge benefit of letting you get prequalified online without a hard inquiry to your credit report. Capital One is also a reputable bank with a long history, which should give borrowers some comfort. They have an A+ rating with the BBB and plenty of decent reviews from consumers.
Potential Downsides to Be Aware Of: You should be aware that Capital One auto loans only work at participating dealers, so you may be limited in terms of available cars to choose from.
Who Itâs Best For: Capital One auto loans are best for consumers who find a car they want to buy at one of the participating lenders that works with this program.
LightStream: Best for Fast Funding
LightStream offers online loans for a variety of purposes, including auto financing. Their auto loans for consumers with excellent credit start at just 3.99% with autopay, and even their loans for consumers with lower credit scores only run as high as 16.79% with autopay.
You can apply for your LightStream loan online and get approved in a matter of minutes. This lender can also send your funds as soon as the same business day you apply.
A minimum credit score of 660 is required for loan approval, although other factors like your work history and income are considered.
Sign Up With LightStream Today
Why This Lender Made Our List: LightStream offers auto loans with exceptional terms, and thatâs even true for consumers with less than perfect credit. You can also get your loan funded as soon as the same business day you apply, which is crucial if you need auto financing so you can get back on the road.
Potential Downsides to Be Aware Of: With a minimum credit score requirement of 660, these loans wonât work for consumers with the lowest credit scores.
Who Itâs Best For: LightStream is best for people with decent credit who need to get auto loan financing as quickly as possible.
What You Need To Know When Applying For A Car Loan With Bad Credit
Interest rates and fees matter.
If you think your interest rate and loan fees wonât make a big difference in your monthly payment, think again. The reality is that rates and fees can make a huge difference in how much you pay for an auto loan each month. Consider this: A $10,000 loan with an APR of 35.89% will require you to pay $361 per month for five years. The same loan amount at 21.99% APR will only set you back $276 per month. At 9.99%, you would pay only $212 per month for five years. The bottom line: Make sure to compare auto loans for bad credit so you wind up with the lowest possible APR you can qualify for.
Take steps to improve your credit score before you apply.
Itâs not always possible to wait to apply for a car loan, but you may be able to secure a lower interest rate and better loan terms if you can improve your credit score before you borrow money. The most important steps you can take to improve your score include paying all your bills early or on time, as well as paying down debt in order to decrease your credit utilization. You should also refrain from opening or closing too many credit card accounts in order to avoid new inquiries on your credit report and maintain the longest average length of your credit history possible.
Compare loan terms.
Some lenders let you borrow money for up to 84 months, while others let you repay your loan over 36 or 60 months at most. If you need to repay your loan over a longer timeline in order to secure an affordable monthly payment, make sure to compare lenders based on this factor. If youâre having trouble figuring out how much can you can afford, gauging affordability based on the monthly payments you can handle can also help in that effort.
Getting prequalified online can help.
Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report. This makes it considerably easier to compare rates and shop around without formally applying for an auto loan. Getting prequalified with more than one lender can also help you determine which one might offer the lowest rate without having to fill out a full loan application.
Watch out for loan restrictions.
As you compare the lenders on this list, keep in mind that not all lenders extend loans for any car you want. Some only let you finance cars with participating lenders in their network, which can drastically limit your options and make it impossible to purchase a car from a private seller. If you hope to purchase a car from someone you know or a website like craigslist.org, you may want to consider reaching out to your personal bank or a credit union you have a relationship with.
Bad credit car loans donât have to be forever.
Finally, you should know that a car loan for bad credit doesnât have to last forever. You may need to borrow money for a car right now regardless of the interest rate and terms you can qualify for, but it may be possible to refinance your loan into a better loan product later on. This is especially true if you focus on improving your credit score right away, and if you use your auto loan as an opportunity to prove your creditworthiness.
How to Get the Best Rate
1. Check your credit score.
Your credit score is one of the most important defining factors that dictate loan costs. Before you apply for an auto loan, it can help you check your credit score to see where you stand. Your score may not be as bad as you realize, but it could also be worse than you ever imagined. Either way, it helps to know this important information before you start shopping for an auto loan.
2. Improve your credit over time.
If your credit score needs work, youâll want to take steps to start improving it right away. The most important steps you can take to boost your credit score include paying all your bills early or on time and paying down debt to decrease your credit utilization. Also, make sure youâre not opening or closing too many credit accounts within a short amount of time.
3. Check your credit reports.
Use the website AnnualCreditReport.com to get a free copy of your credit reports from all three credit bureaus. Once you have this information, check over your credit reports for errors. If you find false information that might be hurting your score, take the steps to have the incorrect information removed.
4. Compare loan offers from at least three lenders.
A crucial step to get the best rate involves shopping around and comparing loan offers from at least three different lenders. This is important since lenders with different criteria might offer a lower APR or better terms than others.
5. Be flexible with repayment terms.
Also consider a few different loan terms provided you can afford the monthly payment with each. Some auto lenders offer better rates for shorter terms, which can help you save money if you can afford to repay your loan over 24 or 36 months instead of 60+.
How We Chose the Best Auto Loans
The lenders on our list werenât plucked out of thin air. In fact, the team behind this guide spent hours comparing auto lenders based on a wide range of criteria. Hereâs everything we considered when comparing the best bad credit car loans of 2021:
Interest Rates and Loan Terms: Our team looked for loans that offer reasonable rates and terms for consumers with poor credit. While higher APRs are typically charged to consumers with a low credit score, we only considered lenders that offer sensible rates that donât seem out of line for the auto loan market.
Ratings and Reviews: We gave preference to lenders who have decent reviews online, either through Consumer Affairs, Trustpilot, or another third party website. We also gave higher marks to lenders who have a positive rating with the Better Business Bureau (BBB).
Online Availability: Lenders who offer full loan details online were definitely given top priority in our ranking, and lenders who let you get prequalified online without a hard inquiry on your credit report were given the most points in this category. But since not everyone wants to apply for a loan online, we also included some lenders that let you apply over the phone.
Approval Requirements: Finally, we looked for lenders that extend credit to consumers with low credit scores in the first place. Not all lenders offer specific information on approval requirements, but we did our best to sort out lenders that only accept borrowers with good or excellent credit.
Summary: Best Bad Credit Card Loans of 2021
Best for Flexibility: OneMain Financial
Best Personal Loan Option: Upgrade
Best Loan for Bad Credit and No credit: AutoCreditExpress.com
Best Loan Comparison Site: MyAutoLoan.com
Best Big Bank Loan for Bad Credit: CapitalOne
Best for Fast Funding: LightStream
The post What Are the Best Car Loans When You Have Bad Credit? appeared first on Good Financial CentsÂ®.
Heading off to college is exciting. Really exciting. You finally have freedom! You’re out on your own for the very first time, managing your studies, managing your social life and… managing your finances.
Despite being a big part of your newfound independence, personal finance is a subject you probably won’t find on your course schedule. If you didn’t take a personal finance class in high school and never had money lessons from your parents, you may not know how to manage a checking account as a college student.
“College students have very different needs for their checking account than their parents or other adults,” says Tommy Martin, CEO of Clear Path Financial Planning and a finance blogger at TommyMartin.com. If you live in a different city during the school year than you do during winter and summer breaks, for example, you may be after a bank for which location doesn’t matter.
Ok, so how do I manage my checking account in college, you ask? First, don’t get overwhelmed. Learning how to manage money while in college and getting a handle on checking account basics is simpler than you might think (oh, and the skills will serve you for years to come). Second, you can kick off your checking account education with these tips for managing a checking account in college:
1. Compare checking accounts before signing up
While your college life may center around your school campus, you should consider venturing off-campus to pick the right checking account for your lifestyle.
“Students typically sign up with a bank that’s on campus or close to campus,” says Sahil Vakil, a financial planner and president of MYRA Wealth in New Jersey. However, the nearest bank might not be the one that best fits your needs, he adds.
Instead of picking a bank based solely on proximity, consider all of your options, including banks with off-campus locations and online-only banks.
Martin agrees, saying that learning how to manage money while in college means considering all of your banking options rather than “automatically enrolling or choosing the official school bank just because it has the school logo on it.” There are other ways to show your school pride, after all.
2. Learn about checking account fees and rewards
Vakil and Martin both say a tip for managing a checking account in college is to consider an account’s fees before signing up. Costly fees can eat into your savings and spending money, which can be a blow for students who are not working full-time. When you are choosing a checking account in college, consider fees for:
Monthly maintenance (essentially keeping your account open)
Minimum balance (not maintaining one)
Online bill pay
Replacement debit cards
Martin says a checking account with no minimum balance requirement or minimum number of transactions could be a good fit for students. “It allows them to focus on their education” instead of worrying about incurring penalties, he says. “Even a $5 fee on a checking account with $60 in it can be devastating.”
Costly fees can eat into your savings and spending money, which can be a blow for students who are not working full-time.
Martin also suggests finding an account that has a large network of no-fee ATMs located across the country to better manage your checking account as a college student. “Especially if you’re going to a school in a different state, the local bank from home might wind up costing you a lot in terms of ATM fees,” he says. If your parents plan to wire you money, find an account that doesn’t charge incoming wire fees, Martin adds.
While fees should be a focus when you are learning how to manage money while in college, don’t forget about incentives. You may be able to find a checking account that actually helps you grow your balance by paying interest or offering a cash back rewards program.
“If you have to pay for books or supplies, at least you can get some cash back and use it for a free dinner,” Martin says. Discover Cashback Debit, for example, offers 1% cash back on up to $3,000 in debit card purchases each month.1
Luckily, you don’t need to take Banking 101 to figure out your funds, and tech makes tracking your balance and account activity easier than ever. Most banks let you log in to your account online (don’t get distracted in class!), and with a bank’s mobile app you can transfer money to friends, pay bills, deposit checks and check your balanceâall while you’re on the go.
Knowing your balance at all times is a tip for managing a checking account in college because it can help you avoid overdrafts and insufficient funds fees. It can also help you forecast your income and expenses to ensure you’ll have enough money to cover future costs. Surpriseâthat’s budgeting!
There’s no one-size-fits-all budgeting program or system, though. You can go old-school and track your budget on a printed-out budget sheet, or you can go tech-savvy with a budgeting and spending app. “What’s best for you is the one you’re actually going to use,” Martin says.
If you learn how to manage money while in college and make a practice of maintaining your budget, the habit will follow you after graduation.
âCollege students have very different needs for their checking account than their parents or other adults.â
4. Secure your account
One of Vakil’s tips for managing a checking account in college is to make sure your account stays secure. Create a unique account name and password that you use only for your checking account, and never share your credentials.
Vakil says you can also enable two-factor authentication if your bank offers it and you’re looking for another way to improve the management of your checking account as a college student. “This additional layer of protection safeguards your sensitive financial data and strengthens the security of your account by requiring two methods of verifying your identity.”
For example, if you log in to your account from a new device, you may be sent a text message with a code that you’ll need to enter to access your account.
5. Keep an eye out for debit card holds
No matter where you bank, a merchant may place a hold on funds in your checking account when you use your debit card. Generally, a hold is placed for travel-related purchasesâsuch as at rental car companies, hotels and gas stationsâand used by merchants to protect against fraud and errors.
“Holds on a debit card can make it tricky for you to manage your finances,” Vakil says. For example, “when you rent a car, the car rental company might put a $500 hold on your account. If the balance in your account was $550, now you can only use another $50.”
Being aware of holds can be particularly important if you are managing a checking account as a college student and tend to have a low account balance.
If a merchant will be placing a hold, it will generally post a sign to notify customers. The hold will typically be removed after the funds are transferred to the merchant from your financial institution, typically within three to four days.
Knowing when a hold will be placed, the amount of the hold and how much money you have in your checking account can help you manage your checking account as a college student by avoiding overdrafts and missed bill payments due to insufficient funds.
6. Don’t let one mistake throw you off track
If you can learn how to manage a checking account as a college student, and more generally, how to manage money while in college, you can lay the groundwork for a solid financial future. Checking account mistakes may occasionally happen (oops, I didn’t budget enough for that spring break trip), but don’t let them discourage you to the point of apathy. Instead, try to continually expand your knowledge and practice healthy financial habits.
1Â ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as VenmoÂ® and PayPal, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries. Venmo and PayPal are registered trademarks of PayPal, Inc.
The post 6 Tips for Successfully Managing a Checking Account in College appeared first on Discover Bank – Banking Topics Blog.
When I got my first apartment after college, I needed my mom to co-sign my lease.
The landlord required proof that I made three times the rent, but since I wasnât making nearly enough, I called Mom to sign on that second dotted line.
Then, in my mid-20s, when I bought my first condo, I needed a co-signer again. Once again, my mom was there for me.
Now I’m almost 30, married, and expecting our first child. Both my husband and I are gainfully employed and have good credit histories, so you’d think we wouldn’t need any parent co-signing for us to rent a home! But alas, we’d recently moved to New York City, where rents were so high, snagging a half-way decent apartment would require Mom to co-sign once again.
What’s going on? Would I need my mother to co-sign forever?
Of course, I feel lucky to have a parent whoâs so supportive. But I canât help but think that thereâs something wrong with me, where I was choosing to live, or perhaps the housing system in general.
So, I started looking into why co-signing is so often required, even in cases where it seems unnecessary. Hereâs what I learned, and some words of wisdom from experts that could help you get through the inconvenient (and embarrassing) cycle.
Why co-signers are required
What bothered me most about needing a co-signer was that I felt like I wasnât being taken seriously as a tenant. I had a good job and a college degree, why couldnât I be trusted to pay my rent?
As it turns out, many people face this problem.
While landlords may have differing requirements, the industry standard is that your take-home income must be three times what you pay in rent. So if you make $3,000 a month, your monthly rent should not exceed $1,000.
But is this realistic with today’s runaway rent prices?
For instance, in 2013, as a fresh college graduate, I paid $1,600 a month for a one-bedroom, third-floor walk-up in Los Angeles. So based on the three-times rule, I should have been earning $4,800 a month, or $57,600 a year.
A salary that size was an unattainable dream for me right out of college. Even though I had a great sales job and a minimum-wage side hustle, I was making only about twice the annual rent, or $40,000.
And I was one of the lucky ones. The minimum wage in California is $12 an hour, but in 2013 it was $8. To afford a monthly rent of $1,600 in 2013, a minimum-wage worker would have needed to put in 150 hours a week.
Is the three-times rent rule realistic?
Because I needed a co-signer, I couldn’t help but wonder about the three-times rent rule, and the reason for it. Did this mean I’d overextended myself?
As it turns out, I had no reason for worry. With a monthly rent of $1,600, I had another $1,600 left for other expenses, and it was more than enough.
So I started wondering: If twice my income worked just fine for my bills, why do landlords want proof that renters make three times their rent?
âThe exact origins of the three-times rule is unknown,â says Michael Dinich of Your Money Geek. Nonetheless, this rule has remained the industry standardâfor renters and home buyers alike.
âMortgage lenders have often used the guideline that housing costs should be no more than 30% of income,” Dinich says. “The three-times rule is likely a handy approximation based on those old guidelines.â
This guideline may even contribute to younger generations’ low rates of homeownership.
âThe income of many people, particularly younger adults, has not kept up with home prices in many areas,â says Andrew Latham, managing editor of SuperMoney. “This is why millennials have lower homeownership rates than previous generations.â
Plus, experts say that most landlords (even the nice ones) donât necessarily care if people arenât making as much money as they used to. They care more about finding a renter who will be able to pay their rent on time. And if that means sticking to the tried-and-true method of renting to those who can prove they have plenty of income to spare, or can at least get a co-signer, theyâll do it.
How I pay my rent without a co-signer today
While it’s tough for young renters and home buyers almost everywhere to cover their housing costs, it’s even worse inÂ New York City.
Sure, my mom agreed to co-sign the lease, as always. Yet with a baby on the way, my husband and I decided that, rather than taking my mom up on her kind offer, I’d try to find an apartment with a rent that fell comfortably within the three-times rule.
We started crossing things off our wish list. We moved our search from Manhattan to Brooklyn. We stopped looking at homes near subway stations and cute cafes and started touring apartments that were a bit farther out. In the end, we found a studio we liked, and the low rent didn’t require a co-signer.
The post Why I’m Grown-Up and Employed, but Still Need Mom to Co-Sign on My Home appeared first on Real Estate News & Insights | realtor.comÂ®.
The post The “Cashless” Cash Envelope System appeared first on Penny Pinchin' Mom.
You have probably heard people talk about how to use a cash envelope budget to save money and help you get out of debt. But, what if you don’t want to use cash? Does that mean you can’t use envelopes? Nope. Not if you follow one of the cashless cash envelope methods available.
If you follow any money advice, you are usually taught about using cash and implementing the cash envelope system. Â That is what I recommend here on our site.
As much as this is the perfect solution for our family (and one of the catalysts to help us kick-start our debt pay-off plan), I also understand this is not an option for everyone.Â Even if you don’t use cash, you still should budget and spend as if you do.
If you are just learning about budgeting, you will want to check out our page — How to Budget. There, you will learn everything you want to know about budgets and budgeting.
The way to do this is by using a cashless envelope system.Â It is how to use cash envelopes without using cash.Â The idea is simple, but there different ways to track it.
HOW DOES A CASHLESS CASH ENVELOPE SYSTEM WORK?
The idea is the same as the regular cash envelope method.Â You have a budget and need to ensure you don’t spend more than what you should.
Each pay period, you record the amount budgeted for each category onto your “envelope.”Â As you spend, you keep track of it.Â When you are out of money, you can’t spend anything else.
Using the cash envelope system without using cash can work – if you want it to.
WHY IS THIS METHOD BETTER?
When you are trying to get control of your finances, you need to know where you spend.Â The best way to do this is to track your spending.Â Not tracking after you spend – but as you purchase.
Most of the time, you swipe your card without worry.Â This action can easily throw your budget out of balance.
While using cash has emotion attached to it, tracking every purchase requires awareness.Â You are always watching what you spend and where.Â There are no surprises that you spent $250 on groceries when the budget was $200.Â You see it happening right in front of you.
The cashless envelope system works because:
You don’t have to worry about carrying or getting cash.
It forces you to track of your spending in real time.
You can see exactly where your money goes and make budget adjustments as needed.
The cashless envelope system forces you to be more responsible for your spending without the hassle of carrying money.
CASHLESS CASH ENVELOPE SYSTEMS TO TRY
When you are ready to try a cashless system, you need to determine which is the best for you.Â You can find one on your phone, or there is also a printable option.
CASHLESS CASH ENVELOPE APP
There are several apps that claim they can help you keep track of your spending with virtual envelopes. If you have found one that works well for you, then I say keep using it!Â But, if you are new to this idea – or want something new – the one I recommend is Mvelopes.
Mvelopes has three different plan levels, starting as low as $4 a month.Â You can use the one that best suits your needs.Â If you are new to the platform, I recommend starting out with the basic plan.
To start, you will add the app to your phoneÂ — or you can use their online site (which I love).Â Once you do that, you sync your various accounts.Â Make certain to include the cards you will use for your various categories.
For example, you may charge every purchase to your credit card to earn rewards or cash back.Â If this is you, you will connect your credit card.Â Some may use the debit card for some purchases and a credit card for others.Â Those of you who do this will connect both cards to your account.
Once that is done, you set up your online envelopes and add budgeted amounts to each.Â Then, you just swipe as usual.Â Every time you make a purchase, the purchase amount is deducted from your online envelope.Â With a couple of swipes, you see not only how much you have left to spend, but even where you spent your money.Â There is no guessing.
This system helps you give every dollar a job.Â You know where it will go even before you spend it.Â Using Mvelopes puts you back in control.
If you want or need even more help, Mvelopes has other plans that you can purchase.Â They offer the Mvelopes PLUS plan for $19 per month.Â This service includes all of the services available under the basic plan but also helps you tackle your debt.Â You even receive you a personal finance trainer who will visit with you once per quarter.Â This plan helps you set and achieve your financial goals.
Should you need more one-on-one help, you may want to consider the Mvelopes Complete package instead.Â You get all of the benefits of the Plus plan but receive your own, one-on-one finance trainer.Â This coach works with you to help you achieve your financial goals.Â You aren’t left alone to figure things out as there is someone right there, guiding you along the way.
As I said you don’t need to purchase one of the larger plans as the basic plan will meet most people’s needs. However, it is great to have these options available at your fingertips.
Related:Â Â The Best Apps for Your Budget
CASHLESS ENVELOPE PRINTABLE
Apps are great, but there are times when you would rather have the simplicity of writing something down rather than having to pull it up on your phone.Â That’s where the printable cashless envelopes come in handy.
These work in the same way as regular envelopes — just without cash.Â Print them off and keep them handy.Â Record the budgeted amount for that category at the top.Â Then, as you spend, keep track of it.Â Jot down every purchase and keep a running total of how much you have left to spend.
I get that it is a pain to keep track of “cents”, so I recommend you round up.Â For example, if your grocery budget is $200 and you spend $105.74, record that you spend $106 and have $94 left to spend.Â That is MUCH easier than keeping track down to the penny.Â (Truth be told, this is what I do with our cash envelopes too).
Once you reach your spending limit, then you are done with that category!Â If you budget $100 for dining out and there is just $5 left, don’t pick up that coffee and cake for $7 – or you will have just busted your budget!Â If you find that you are always out of money for select categories, or often have money left over for others, then it may be time to make adjustments to your budget.
Grab your cashless envelope printables.Â Now, I don’t recommend you print this onto regular paper, as that is really thin and will tear easily. Purchase card stock to use to print out your cashless envelopes as they will be more durable.
Related:Â How to Figure Out How Much Money to Budget For Groceries
Even if you don’t want to use cash, it is still essential that you continue to track your spending, so you never exceed your budget.
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Saving for retirement is an important financial goal and there are different options when it comes to where to invest. A qualified retirement plan can make it easier to build wealth for the long term, while enjoying some significant tax benefits.
Qualified retirement plans must meet Internal Revenue Code standards for form and operation under Section 401(a). If you have a retirement plan at work, it’s most likely qualified. But not every retirement account falls under this umbrella and those that don’t are deemed “non-qualified.”
So just what is a qualified retirement plan and how is it different from a non-qualified retirement plan?
Understanding the nuances of these terms can help you better shape your retirement plan for growing wealth.
What Is a Qualified Retirement Plan?
Qualified retirement plans allow you to save money for retirement from your income on a tax-deferred basis. These plans are managed according to Employment Retirement Income Security Act (ERISA) standards.
The IRS has specific rules for what constitutes a qualified retirement plan and what doesn’t. Public employers can set up a qualified retirement plan as long as these conditions are met:
• Employer contributions are deferred from income tax until they’re distributed and are exempt from social security and Medicare tax
• Employer contributions are subject to FICA tax
• Employee contributions are subject to both income and FICA tax
Following those guidelines, qualified retirement plans can include:
• Defined benefit plans (such as traditional pension plans)
• Defined contribution plans (such as 401(k) plans)
• Employee stock ownership plans (ESOP)
• Keogh plans
Section 403(b) plans, which you might have access to if you’re a public school or tax-exempt organization employee, mimic some of the characteristics of qualified retirement plans. But because of the way employer contributions to these plans are taxed the IRS doesn’t count them as qualified plans. The same is true for section 457(b) plans, which are available to public employees.
Defined Benefit vs. Defined Contribution Plans
When talking about qualified retirement plans and how to use them to invest for the future, it’s important to understand the distinction between defined benefit and defined contribution plans.
ERISA recognizes both types of plans, though they work very differently. A defined benefit plan pays out a specific benefit at retirement. This can either be a set dollar amount or payments based on a percentage of what you earned during your working career.
This type of defined benefit plan is most commonly known as a pension. If you have a pension from a current (or former) employer, you may be able to receive monthly payments from it once you retire, or withdraw the benefits you’ve accumulated in one lump sum. Pension plans can be protected by federal insurance coverage through the Pension Benefit Guaranty Corporation (PBGC).
Defined contribution plans, on the other hand, pay out benefits based on how much you (and your employer, if you’re eligible for a company match) contribute to the plan during your working years. The amount of money you can defer from your salary depends on the plan itself, as does the percentage of those contributions your employer will match.
Defined contribution plans include 401(k) plans, 403(b) plans, ESOPs and profit-sharing plans. With 401(k)s, that includes options like SIMPLE and solo 401(k) plans. But it’s important to note that while these are all defined contribution plans, they’re not all qualified retirement plans. Of those examples, 403(b) plans wouldn’t enjoy qualified retirement plan tax benefits.
What Is a Non-Qualified Retirement Plan?
Non-qualified retirement plans are retirement plans that aren’t governed by ERISA rules or IRC Section 401(a) standards. These are plans that you can use to invest for retirement outside of your workplace.
Examples of non-qualified retirement plans include:
While these plans can still offer tax benefits, they don’t meet the guidelines to be considered qualified. But they can be useful in saving for retirement, in addition to a qualified plan.
Traditional and Roth Individual Retirement Accounts
Traditional and Roth IRAs allow you to invest for retirement, with annual contribution limits. For 2020 and 2021, the maximum amount you can contribute to either IRA is $6,000, or $7,000 if you’re over 50.
Traditional IRAs allow for tax-deductible contributions. These accounts are funded using pre-tax dollars. When you make qualified withdrawals in retirement, they’re taxed at your ordinary income tax rate. IRAs do have required minimum distributions (RMD) starting at age 72.
Roth IRAs don’t offer the benefit of a tax deduction on contributions. But they do allow you to withdraw money tax-free in retirement. Unlike traditional IRAs, Roth IRAs do not have RMDs, meaning you donât have to withdraw money until you want to.
A self-directed IRA is another type of IRA you might consider if you want to invest in stock or mutual fund alternatives, such as real estate. These IRAs require you to follow specific rules for how the money is used to invest, and engaging in any prohibited transactions could result in the loss of IRA tax benefits.
Advantages of Qualified Retirement Plans
Qualified retirement plans can benefit both employers and employees who are interested in saving for retirement.
On the employer side, the benefits include:
• Being able to claim a tax deduction for matching contributions made on behalf of employees
• Tax credits and other tax incentives for starting and maintaining a qualified retirement plan
• Tax-free growth of assets in the plan
Additionally, offering a qualified retirement plan, such as a 401(k), can also be a useful tool for attracting and retaining talent. Employees may be more motivated to accept a position and stay with the company if their benefits package includes a generous 401(k) match.
Employees also enjoy some important benefits by saving money in a qualified plan. Specifically, those benefits include:
• Tax-deferred growth of contributions
• Ability to build a diversified portfolio
• Automatic contributions through payroll deductions
• Contributions made from taxable income each year
• Matching contributions from your employer (aka âfree moneyâ)
• ERISA protections against creditor lawsuits
Qualified retirement plans can also feature higher contribution limits than non-qualified plans, such as an IRA. If you have a 401(k), for example, you can contribute up to $19,500 for the 2020 and 2021 tax years, with an additional catch-up contribution of $6,500 for individuals 50 and older.
If you’re able to max out your annual contribution each year, that could allow you to save a substantial amount of money on a tax-deferred basis for retirement. Depending on your income and filing status, you may also be able to make additional contributions to a traditional or Roth IRA.
Making Other Investments Besides a Qualified or Non-Qualified Retirement Plan
Saving money in a qualified retirement plan or a non-qualified retirement plan doesn’t prevent you from investing money in a taxable account. With a brokerage account, you can continue to build your portfolio with no annual contribution limits. The trade-off is that selling assets in your brokerage account could trigger capital gains tax at the time of the sale, whereas qualified accounts allow you to defer paying income tax until retirement.
But an online brokerage account could help with increasing diversification in your portfolio. Qualified plans offered through an employer may limit you to mutual funds, index funds, or target-date funds as investment options. With a brokerage account, on the other hand, you may be able to trade individual stocks or fractional shares, exchange-traded funds, futures, options, or even cryptocurrency. Increasing diversification can help you better manage investment risk during periods of market volatility.
While a qualified retirement plan allows investors to put away pre-tax money for retirement, a non-qualified plan doesnât offer tax-deferred benefits. But both can be important parts of a retirement saving strategy.
Regardless of whether you use a qualified retirement plan or a non-qualified plan to grow wealth, the most important thing is getting started. Your workplace plan might be an obvious choice, but if your employer doesn’t offer a qualified plan, you do have other options.
Opening a traditional or Roth IRA online with SoFi InvestÂ®, for example, can help you get a jump on retirement saving. Members can choose from a wide range of investment options or take advantage of a custom-build portfolio to invest.
Find out how an online IRA with SoFi might fit in to your financial plan.
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