Budgeting is an important part of everyday life, but sadly, many younger generations are not taught the skills needed to budget effectively. Truth be told, the older generations weren’t taught how to budget either.
Unfortunately, this means some will find it all too easy to overspend each month, drawing on additional credit sources and generally applying for a more substantial loan than what they really need.
Technology Brings Financial Challenges
The heavily digitized nature of finance exacerbates this situation in the 2020s. For the younger generation, the reality is they rarely see or handle “physical cash.” They haven’t visited their bank or felt their wallet getting lighter at the end of the month.
Instead, money is just numbers on a screen, and it doesn’t hold the same tangible meaning to a financially inexperienced generation.
I know first hand of several young adults in their 20s that live inside their credit card overdraft because it’s “free credit.” This credit is perpetually borrowed, and they are content to pay off the minimum repayment each month to stay within their limit.
The fact that this has become part of their normal comfort zone could very easily result in a real mess as they progress through life. Unexpected emergencies with no extra borrowing cushion available and the prospect of missed monthly repayments, thereby permanently damaging your credit score and affecting your lifelong borrowing prospects, are real potent risks.
So why not get your financial life in shape in 2021?
Financial Changes Start With The Four Pillars
This doesn’t just apply to the younger generation, the four pillars of financial literacy (more on what these are here) is a core life skill that significant numbers of people were never properly taught either in school or by family.
You do not need an accountant to do this. All you need is an honest and open outlook. You need to start by embracing all of your financial comings and goings, however difficult it is to face any debts that you have accumulated.
Creating A Budget
So, open a blank spreadsheet on your computer and bring the last six months of bank account statements with you. You may want to use highlighters or colorful pens to help you identify what the purchases are on these bank statements.
Look at how you spend your money and the pattern of this throughout the month. Do you overspend at the start of the month on frivolous items? Do you overspend on your morning coffee on your way to work every morning?
The next thing that you should do is create a budget template. There are a plethora of these available for free online. Here is one example of many, but we like the Wonga one as it gives you a very clear breakdown of expenditures.
It breaks it down into 12 categories for you, which includes:
On this specific budget template, each category is further broken down, which really allows you to get into the nitty-gritty of your finances.
Personal Finance Is Personal
Every budget template is slightly different, and you may even want to create your own, which suits how you like to visualize your finances. Perhaps you could make the data into a graph if you are a visual person, so you can get an accurate idea of what takes up the most of your money. There are also pie charts or line graphs that could track your spending over time.
The trick here really is, to be honest – any areas that you mark down or calculate wrongly are just going to make things more difficult for you overall. It is a personal document, so make sure you create it how you want and in a way that helps you the most. You will also want to password protect this document for confidentiality!
Due to lockdown or COVID 19 restrictions, it may appear that you haven’t spent money in your ‘usual’ pattern, so you may also want to look at statements from further back. This will offer a true reflection of your spending when shops and entertainment venues were open and your regular spending habits.
These are known as variable expenses.
Budgeting For Variable And Essential Expenses
Money Fit explains that variable costs may include clothing, fuel, recreational expenses, personal care, and entertainment. They say that these are the areas you have the most control over, as they are not essential costs.
For instance, you might choose to walk to work once a week rather than spend money on public transport or fuel. You can change the amount each month.
When it comes to your essential costs, these may appear to be more ‘fixed,’ but you might be able to negotiate them.
For instance, your mortgage payment – you may be able to contact your lender to refinance your mortgage loan, spread it out over more years, or reduce the interest rate entirely so that less money is being spent each month on this expense.
Your energy bills are similar and could be easier to switch than you think. Energy companies are very competitive and depending on where you live, it may be easy to change your plan to a better one that sees less money coming out of your account each month. Some energy also install smart meters so you can keep better track of your budget.
Ultimately, your finances are changeable, and if you find yourself in a hole financially, it is best to address this issue head-on, create a budget and force yourself to change old habits.
What better time to start this than right now?
Paolo Bacigalupi once said, “debts are a heavy burden. Throw them off, and you walk free.” Many today look way older than their age, not because of any ailment, but because of the yoke of debt. More specifically, they are drowning in debt.
Almost everyone has been in debt in one phase of their life, but as they say, “it’s not what happens when you fall down that matters, but what you do to get back up.”
Follow These Steps If You Are Drowning In Debt
If you ever find yourself tangled in an unending web of debt, the following lifehacks listed below will get you out of the situation as long as you are willing to diligently follow the principles and apply them to your daily life and routine — success is not an accident that happens to those who are unwilling to move a muscle.
1. Decide You Want To Remain Debt-Free
The first step to leaving a lousy predicament is taking a bold and daring stand to win regardless of the uphill task facing you. Generally speaking, living debt-free can be really exciting, especially when you consider the emotional freedom and benefits that come with it, but you have to understand that there are mountains to climb in this journey as well as bumps on the tracks.
Knowing the challenges and what it will cost you — as well as the gains at the end of it all — will always add gasoline to your fire anytime you feel weary or worn out.
Why do you think you have had enough of the red stamped envelopes filling your mailbox? Why have you suddenly decided to tow the part of financial freedom? Answer these questions, write down your answers, and constantly remind yourself of what you stand to gain at the end of it all.
Remember, the end will always justify the means — never forget.
2. Seek Help Where Necessary
There is no shame in asking for help when you need it. The first place to begin is canceling subscriptions you don’t need — why pay for a gym class when you spend most of your time working?
You can also try reaching out to your creditors and letting them know the state of things with you. There are lots of kind hearts out there who have equally been through what you are currently facing, and you would be surprised at the help or suggestions that come your way.
I won’t guarantee every creditor would be willing to give you a listening ear or offer to lend a helping hand, but it’s definitely worth the try. The moment you catch up on your bills is the moment that prepares you to clear your debts.
3. Avoid The Temptation Of Incurring More Debt
Things couldn’t get messier than they already are, so avoid the urge to repeat the vicious circle that got you into debt in the first place. It’s always fun to keep swiping your credit card from time to time, but you have to be constantly reminded of your goals anytime the opportunity to swipe your card presents itself.
You can start by asking yourself the following questions; do I need this stuff? Does my life depend on it? Is there any health fulfillment that comes with swiping my credit card at this instant? What do I stand to gain at the end of all this?
Asking and answering these questions will always remind you of where you are and where you are headed. Don’t trade a lifelong achievement for a few hours of pleasure. Remember, is it worth it?
4. Revive Your Piggy Bank Habits
If you had a habit of saving pennies while growing up, then it’s time to revive it — if you didn’t, then it’s not too late to start.
People in debt will always feel the need to spend every penny they earn or get on servicing their debt, but while this might seem ideal, having a piggy bank stashed away for emergencies is always worth it to stay afloat during the entire process.
Learning how to increase your liquid net worth and emergency funds is a great financial strategy to help you with unexpected expenses such as fixing a flat tire or paying for necessary repairs without incurring more debt on yourself.
5. Have A Budget
There is an old proverbial saying, “cut your cloth according to your cloth,” that most people take for granted. Most times, people’s mistake is cutting their cloth according to their size, without considering the material or resources available to them.
You might be desirous for a particular lifestyle, but if your resources aren’t cut out to get you that life, you have to learn to make the necessary adjustments until things fall into place — and they always do if you are willing to discipline yourself.
Having a considerate budget based on your income is the map that’ll take you out of debt. Budgets keep you on track and also help you identify things you need the most. They help you create a meaningful scale of preference which is essential in such times.
Remember, what you want is not necessarily what you need — your budgets help you make such decisions accurately.
6. Put Extra Spending On Hold
Now is not the time to pay or renew a Netflix subscription, pay for that expensive diner, or get that costly jacket — there is a time for everything, and unfortunately, you don’t have the time nor resources to afford certain luxuries — it still boils down to cutting your dress according to your cloth.
Let me make it a bit simpler for you. Since the internet is now agog with one challenge or the other, why not try a “no spending challenge”? It simply means that you don’t get to spend on things that aren’t needed for your survival. Of course, you will have to keep paying rent, buying food and needed groceries, and other very essential commodities, but any additional frivolous spending would have to wait.
I dare you to try this for a month and see the astronomical changes it makes on your finances — I dare you.
7. Diversify Your Source Of Income
Aside from taking the logical step of not being a spendthrift, the next best thing that can happen to you in such times is to increase your source of income.
What do you do in your spare time? Do you just laze around and wait for your next shift? Or you simply try to catch up with the latest events on the news? I know we have to relax now and then, but don’t let it stretch too long.
The Good Book couldn’t have put it better when it said, “A little sleep, a little slumber, a little folding of the hands to rest — and poverty will come on you like a thief and scarcity like an armed man.”
Thanks to the emergence of apps like Doordash, Uber, UberEats, Grubhub, and other amazing platforms, you now have the opportunity to make some extra cash on the side without much stress. The good thing about such gig economy apps is that you can work whenever you want and sign out anytime you want.
The money realized from such platforms can be used to offset bills and set you on course for the financial freedom you deserve.
Another platform to leverage is freelancing sites such as Freelancer.com, Upwork.com, and Fiverr.com, which offer you the chance to sell your services. Unlike the other platforms I mentioned earlier, you would need some level of commitment to meet clients’ deadlines, but it’s worth trying if you feel your work schedule can be flexible.
Services required on these sites can include website development and design, graphics design, ghostwriting, and a whole host of others.
If there is one thing you have to remain committed to cheating on, it should be your 9 to 5 income. Remain aggressively committed to raking in more money, and in little or no time, your financial woes would be a thing you would use to inspire others.
8. Use The Debt Snowball Method
The snowball method simply involves you paying up your smaller debts, then moving on to the larger ones until every debt is eventually cleared up. In any race we are in, we need the slightest motivation to keep going, and little wins such as clearing minor debts will go a long way in assuring us that all will eventually get well – He who is faithful in little will be faithful in much.
The more debts you clear, the more your debt snowball continues to gather momentum until you eventually stand above the debt that once stared you down.
9. Try Refinancing Your Loans
Refinancing your debt is another effective means of paying your debt if handled correctly. The explicit goal of refinancing your debts is to get new loan deals that offer you a lower interest rate than the one you initially signed up for. With such arrangements, it’s very possible to save lots of money that wouldn’t have been possible. Such savings can be channeled to paying off your debts faster.
The thing to look out for in such deals is the new loan charges and other additional costs and excesses they are likely to come with. Stay away from any refinance deal that doesn’t enable you to save money overall — you will be better off with your old loan instead.
Student loans are one of the loans that need careful consideration before attempting to refinance them. This is because refinancing student loans can make you lose some key benefits such as income repayment options amongst many others — in such cases, I suggest you stick with the devil you know rather than embracing the angel you don’t.
In Summary, Don’t Panic!
It’s very easy to fall into despair and desperation when faced with meeting up your loan obligations and their deadlines, but the key here is to remain calm. Embrace every day as an opportunity to win regardless of what the present predicament states. You are better off believing you can win.
You might be currently going through a lot at the moment, but it only gets worse when you allow it to sieve through to your inside. Develop a tough skin for such situations, and don’t allow it to dictate how you approach other events that occur around you.
Don’t let debts affect how you treat a loved one or speak to customers at your place of work — many have gone through something worse or similar and came out with victory stories — your case won’t be different.
Stay positive, remain calm, take an aggressive approach, and will, but most importantly, don’t be tempted to take up illicit means to clear up your debts — those at the top did not fall there — there is a climbing phase we all have to endure to eventually win, and I know you will.
There are many reasons businesses choose to relocate. Whether you want to cut costs, move to a better location, or find a bigger space, relocating can be timely and costly. Yet, with the proper knowledge and planning, you can save time and money when relocating your business.
If you are considering moving your business and want to save, then keep reading.
1. DIY Is Not Always The Best Option
Getting help with relocating is a must to move your large items, such as furniture, tech, and cars. You may have a lot of expensive equipment you need to move, which can be dangerous if you are not an experienced mover.
Most companies have the option to purchase additional insurance for your most valuable possessions, and you can avoid accidentally destroying something of value. Although you will be paying out for this, you will save time by hiring professionals, and there are plenty of affordable and reasonable deals to reduce the stress of moving.
For instance, you can use Cars Relo to help you relocate your vehicles, no matter if they are cars, trucks, or SUVs. So, if your business has a collection of company cars that need relocating when you move, they can assist you and make the move fuss-free. This can save you time and money, as they will offer you the best deals for moving your vehicles.
Getting assistance is likely to save you more time than money, but it may be worth paying to get help.
2. Have Employees Move Their Own Items
Depending on your insurance and the suggestions from your Human Resources Department, you may be able to require your employees to move their own belongings. More than likely, your employees have lots of their own stuff in the office, especially in their lockers and on their desks.
Aside from not wanting to be responsible for their belongings, it will also cause you more work to move the stuff for them. Plus, you might need extra moving trucks to store and transfer the staff belongings, which will cost you more money.
So, asking them to move their own stuff will take the responsibility away from you and also take your time and money.
3. Don’t Wing It – Make A Plan
To be organized for the move, you will want to preplan. Moving a business entails moving across important documents, expensive tech, and data. Thus, making lists and planning the safest way to transport these goods will make the process smooth.
Planning ahead of the move will help you find the best moving deals and also reduce the stress on moving day. You may benefit from taking a few days to move the office to ensure everything is moved safely to avoid damaging or misplacing important or expensive items.
4. Be Realistic About The Space You Are Moving To
Renting office space is not cheap, so you won’t want to pay for more space than you need. Even if you do need or want to increase the size of the workplace in the future, you need to be realistic.
It may help to measure the size of your current space and decide how much extra space you need for new staff, items, or areas. The larger the size of the office, the more expensive the rent will be. Because of this, be realistic to ensure the rental price stays within your budget and does not put your business at a loss.
Getting rid of things you no longer need before the move will reduce the amount of stuff you need to relocate. This may result in needing fewer trucks for the move and save you a lot of time when you unpack in the new office.
You can donate the items to other smaller businesses or friends you might know who could benefit from them.
6. Label Every Box
Labeling every box is extremely time-consuming and can be a frustrating process. Packing up the items is not the most thrilling job, and due to that, you may do it as quickly as possible and then forget what you put where. You could save yourself a lot of time down the road by labeling the boxes when packing them to ensure you know where everything is.
Also, labeling the boxes will reduce the risk of misplacing something. You could easily lose smaller tech gadgets if you do not label the box, which could cost your business unnecessary money.
7. Update Your Physical Business Address
Every successful business has loyal customers. Whether you are a store or an appointment-based company, your customers will be familiar with your physical address. So, if you move and you do not update your address, your customers may be disappointed if they show up and have no idea where to find you.
It is not worth losing customers over, and changing your address is easy. Put it on your website ahead of time, email your customers, and put a notice on your current address/building to notify customers of the relocation.
8. Take Special Care Of Expensive Equipment
Your tech equipment is most likely your most expensive equipment. You will want to take care of it to ensure it is not damaged during the move. Ensure you pack up cables carefully because they can be easily damaged. Plus, pack the gadgets with sensitive features (such as screens) with protective packaging to reduce the risk of breaking when being moved or in the moving truck.
Computers and monitors should ideally be packed individually as they can easily be damaged. Even a scratch can hinder their look. If you are moving to a new office, you will want the gadgets to stay in quality condition and not have to pay out for new equipment.
Similarly, other sensitive equipment that should be packed and moved according to their instructions are printers and FAX machines. These contain cartridges and scanners that can become damaged if moved incorrectly.
9. Pay For The Insurance
If you are moving expensive equipment or important data, don’t be cheap – get the additional insurance. If you are using a moving service, it can help to insure your goods before they are picked up to avoid a loss of money and ensure they are covered if something happened.
Most moving companies will offer insurance policies, which will give you peace of mind and have your goods covered in case damage or loss does occur.
Because if you don’t get the insurance, you know exactly what will happen. Your most expensive piece of equipment will inevitably be damaged. But if you do get the insurance, everything will arrive in one piece.
It’s Murphy’s Law.
Passing a rental credit check doesn’t have to be stressful if you prepare in advance. Before applying for a lease, be sure to check your credit report and fix any errors, gather pay stubs or bank statements to verify your income. You can also talk to friends or family to find a willing cosigner, save enough to pay a higher deposit or multiple months rent up front, collect references from previous landlords and, above all else, be honest with your potential landlord.
Credit checks are nerve-wracking at the best of times—and if you need to pass a credit check to rent your next apartment, the pressure’s really on. Wondering how to make the grade? Don’t worry. Credit repair, cosigner agreements, bigger deposits and simple honesty can all help you pass a rental credit check.
In this article, we’ll explore those four solutions in a little more detail—and we’ll dive into six other ways you can increase your chances of credit check success.
Why Do Landlords Perform Credit Checks?
Landlords perform credit checks because they want to make sure that a prospective tenant is trustworthy. Some landlords use additional screening tools, like consumer reports, before making rental decisions. Occasionally, landlords look at potential tenants’ public social media profiles before issuing leases—so be careful what you post online.
Your prospective landlord or letting agent must get your permission before running a credit check. Your signature on a rental agreement could serve as written permission, or you might have to sign a separate credit screening document.
What’s Included in a Rental Credit Check?
Some landlords use services provided by landlord associations or tenant screening companies, while others request credit reports directly from credit bureaus. The reports they receive will generally contain your:
Credit reports pulled on potential tenants sometimes include credit scores. Tenant screening and landlord association reports often include the following additional information:
How Do I Pass a Rental Credit Check?
Worried about your next rental credit check? Here are ten proactive things you can do to improve your chances of success:
1. Check Your Credit Report
Knowledge is power, so order a copy of your credit report from all three bureaus—Equifax, Experian and TransUnion—before you do anything else. Thanks to the Fair Credit Reporting Act (FCRA), consumers get one free report from each agency every year. Other free options include our free credit report card, which helpfully includes an Experian VantageScore 3.0 credit score that updates every 14 days.
Prefer a comprehensive all-in-one solution to the DIY approach? Sign up for ExtraCredit and you’ll get a full overview of each of your credit reports, plus access to 28 of your FICO scores. You’ll also receive personalized credit profile-building offers to help you strengthen your credit profile. ExtraCredit alerts let you know if things change on any of your reports.
2. Fix Reporting Errors
If you notice any errors on your credit report, challenge them right away. You can dispute mistakes at any of the three main credit bureaus online, via email or by phone. Bureaus have 30 days to respond to challenges, and if they agree with you, they have to remove the erroneous information immediately.
While it is possible to challenge the accuracy of errors on your own, it can be tricky if you’re not super familiar with the process. If you’re too intimidated to tackle the process on your own, you can work with a professional credit repair firm.
3. Be Honest
Honesty is often the best policy—especially if you have bad credit. People with poor credit histories rent homes all the time, so you’re unlikely to fall completely flat. Talk to your potential landlord about your financial history and show them what you’ve done to get back on the credit wagon.
Honesty is often the best policy–especially if you have bad credit.
4. Provide Alternate Proof of Good Credit History
Don’t have much of a credit history? Time to think outside the box. Ask your prospective landlord or letting agency if you can provide your utility payment history or your rental payment record to prove how responsible you are.
5. Demonstrate Provable Income
Money talks. If you show the landlord or letting agent solid proof of your income, you’ll demonstrate your ability to pay the rent. Pay stubs and bank statements can help paint a picture of your financial situation. You could also offer to pay your rent via direct deposit at the beginning of every month.
6. Shop Around
Don’t be afraid to shop around to find a receptive landlord or letting agency. Multiple credit inquiries of the same type within a short time—a few days, or a few weeks—usually count as just one hard inquiry.
7. Find a Rental Without Credit Checks
Some landlords don’t check credit or consumer reports. Instead, they go on instinct and prefer a good old-fashioned hunch over a stack of paper. If you’re really worried about your credit history, try to find an old school landlord with a good reputation.
8. Get a Recommendation
Do you have a good rental or employment history? If so, get references from previous landlords, former managers or your current boss. Include one or more written recommendations with your rental application, and provide telephone numbers in case your prospective landlord wants to dig deeper.
9. Get a Cosigner or Roommate
If you’re new to the rental market or you’ve had problems paying rent in the past, you might need a cosigner. Also known as guarantors, cosigners promise to pay the rent if you don’t. Roommates can play a similar role.
10. Pay a Bigger Deposit
If all else fails, offer the landlord a bigger deposit. A couple of months rent in advance rather than one month, a larger damage deposit or a bulk payment for the whole year might land you a lease.
What To Watch for as a Tenant
You know how to pass a rental credit check—but what should you look out for as a potential tenant? Avoid the following red flags:
Who Pays for a Rental Credit Check?
Rental property applicants almost always pay for their own credit checks. Most of the time, credit check fees are rolled into application fees. If you don’t feel confident that you’ll pass or you can’t afford the credit check fee, you may be able to obtain—and pass on—copies of your own credit reports from all three bureaus for free.
What if You Have Bad Credit?
Everyone starts off with a thin credit profile, so if you don’t have a robust credit history—or if your credit needs work—don’t despair. Instead, use the following tips to nurture your credit and improve your rental chances:
ExtraCredit’s Build It tool adds rent and utilities as tradelines on your credit profile, too. You can use Built It to report on-time rental payments, utility payments and cell phone payments to all three credit bureaus.
What Credit Score Do Landlords Look For?
Some landlords prefer applicants with credit scores over a particular baseline, but many landlords examine their applicants’ credit reports in more detail. Most landlords simply want to evaluate potential tenants’ characters before issuing leases.
The Rental Credit Check Wrap
Rental credit checks are hard to avoid, but if you monitor your credit reports and fix any errors you find, you’ll get off on the right foot. Still worried? In that case, honesty, proof of income, a bigger deposit and a cosigner might all come in handy, too. Remember—where there’s a will, there’s nearly always a way.
DISCLAIMER. The information provided in this article does not, and is not intended to be, legal, financial or credit advice; instead, it is for general informational purposes only.
More than 43 million people in America pay rent, but you wouldn’t know it to look at their credit reports. In fact, most rent and utility payments are not reported to the credit bureaus, which means you may not be getting credit for bills that you regularly pay. Here’s how to add rent and utility payments to your credit report.
>> Learn more:How Rent Can Affect Your Credit Score
How Tradelines Work
Your creditors—including your credit card issuer, loan issuer, utility provider, and landlord--are not required to report to the credit bureaus. In fact, they have to pay a fee in order to report to the credit bureaus. That’s why many creditors like landlords and utility providers don’t report on-time payments, or will only report to one or two bureaus instead of all three.
But if you pay your rent and utilities on time regularly, those payments could be helping you build your credit profile. You just need to convince your creditors to report them to the bureaus. If they’re reported, the credit bureaus will include that information on your credit report and use it to determine your credit scores.
Sign Up for ExtraCredit
We don’t want to sound arrogant, but ExtraCredit is one of the easiest way to get your rent and utility payments added as new tradelines on your credit reports with each bureau. One account with ExtraCredit allows you to add those payments, and so much more—for less than what many other services charge.
ExtraCredit will securely connect to your bank account and automatically identify rent and utility payments, then facilitate a connection with each credit reporting agency. You’ll start seeing your payments show up as tradelines on each credit report in a matter of weeks. If you keep up with your on-time payments, these could help you build your credit profile with these payments as tradelines on your report.
What’s the “so much more” included in an ExtraCredit account? How about 28 FICO® scores and credit reports from all three credit bureaus. And dark web monitoring. And $1 million identity theft protection insurance. And cashback opportunities. And an exclusive discount to one of the leaders in credit repair. For just $24.99 a month. ExtraCredit may not be the only company to offer rent and utility reporting, but we are the only company to combine it with total credit coverage.Learn more.
Try Experian Boost
Experian Boost allows you to add utility and mobile phone payment history to your Experian credit report. Boost is free and will only add positive payment history, but it is only added to your Experian credit report. So if a creditor pulls your Equifax or TransUnion scores, the boost you got from Experian Boost won’t help.
Use Other Third-Party Services
There are other third-party services that can help you add tradelines to your report, like RentReporters and SimpleBills. But that means signing up for multiple accounts and keeping track of them separately—and without easy access to your credit scores and credit reports so you can see how those payments are affecting your credit profile. These services also generally have a high sign-up fee plus monthly fees. And many only report to one or two credit bureaus, not all three.
Talk to Your Landlord
Another option is talking to your landlord or other creditor directly and asking them to start reporting your payments to the bureaus. Remember, there’s a fee for them to do so, so they might not be interested. You could offer to pay—but if you’re paying, you’re probably better off signing up for an account that you can regularly access.
Other Ways to Build Credit
Getting your rent and utility payments added to your credit report is far from the only way to build your credit. Your payment history accounts for 35% of your credit score, so the best way to build your credit is to pay all of your bills on time—every time.
DISCLAIMER. The information provided in this article does not, and is not intended to be, legal, financial or credit advice; instead, it is for general informational purposes only.
There really is a lot to consider when it comes to your money and achieving financial success in this lifetime. We are not taught about mortgages, interest rates, pensions, and so on while we are at school. Therefore, we are left to our own devices to ensure that we achieve monetary success.
Because many of our money decisions are left to trial and error, mistakes are often made. However, you should not punish yourself. By letting the past remain in the past, we can change our path and influence our future financial life in a positive manner.
Just because you may have struggled with finances in the past, this doesn’t mean you’re destined to live with money stresses for the rest of your life. Create the future you want by continuing to educate yourself with consistent intentional steps.
Learn more about financial terms and educate yourself regarding money matters
As I stated earlier, the best place to begin when it comes to your financial future is with education. One of the biggest reasons why people make mistakes when it comes to their finances is because they have not been educated on the subject.
It would certainly help if we were taught about this subject in school, wouldn’t it?
The good news is that there are resources out there that can be helpful. A good example is this Financial Literacy Book, which is a great place to begin if you want to expand your knowledge on financial matters.
Start saving for your retirement today
It can be difficult to get your head around saving for your retirement while you are young. After all, it seems so far away, doesn’t it?
However, if you start saving for your retirement today, it can make a big difference. This is because you will be able to save small amounts over an extended period of time, making it a lot easier. Plus, compound interest will ensure that you are able to accumulate more funds and earn more interest on your savings. You will thank yourself for starting the saving process early.
The best way to start saving for retirement is by taking advantage of any employer-sponsored retirement plan benefits offered by your employer. These plans allow you to invest by paying yourself first and getting used to living off less.
By investing a percentage of your paycheck each period, your retirement contributions will increase or decrease according to how much overtime you earn.
Another trick is to forgo any raises and increase your contributions by the amount of your pay increase. This will allow you to increase your retirement contributions without seeing any impact on your take-home pay.
Look for a second income source
If there is one thing that we have learned as a consequence of the pandemic, it’s that no one knows what the future holds. In addition, it’s extremely difficult, if not impossible to predict what will happen to our economy or our financial situation.
Because of this, it makes sense to lower our financial risk by making sure that we have at least two income streams. If something were to happen where one of your income streams was compromised, you would have the other source of income to fall back on as a result.
Just like retirement income and investments, diversifying your income will give you much greater financial security for you and your family.
Wrapping it up
To conclude, many different factors must be considered when it comes to achieving monetary success. We hope that the advice and tips that we have provided you within this post will enable you to achieve greater success when it comes to your finances.
Do not forget that you can always use the services of an expert in finances should you need further and advice in this area. Do not be afraid to reach out for help. That is what these professionals are there for, and their assistance can make a massive difference.
Increasing your net worth is easy if you follow the basic fundamental tips of personal finance. Don’t overcomplicate things. Take small actionable steps today that will increase your net worth tomorrow.
Starting with the basics
“I read your article and it was mostly common sense.”
A friend brought this up to me. He commented about how everything about my financial advice seemed so simple. While I agreed with him that most financial advice would seem like common sense, I also acknowledged that he had just complained to me about his finances and how he had no money.
You see, we’re all looking for secret hacks when we need to master the boring fundamentals first in order to grow our bank accounts. Let’s look at the boring advice that will get us to the next level with our finances.
There are many people looking for hot stock picks and the next big thing that will get them rich. However, there aren’t enough people building their net worth up with the basics (cutting out the crap, growing a side hustle, investing in things they understand, and so on).
I spent an entire year reading the “get rich quick” kind of content as I tried to figure out what to do next with my life in 2008. I eventually discovered that you couldn’t get 6 figures or a 6 pack overnight. I wasted the entire year and had neither to show for it.
So what did I do? I focused on mastering the fundamentals, and I finally got to where I wanted to be (enough money in the bank to travel and enjoy my life).
What are the boring basics that need to be mastered if you want to grow your net worth and actually have money in the bank?
Figure out where your money’s going
Do you know where your money’s going?
Nobody’s saying that you have to track every purchase on a spreadsheet or that you have to count pennies. This isn’t 1999, where you have to write everything down with a pen and paper. Your phone does everything for you automatically.
It’s important to see where your money goes so that you know what your problem areas are and how much money you need to be making to maintain your desired lifestyle.
How do you figure out where your money’s going?
The good news is that you find holes that you want to fix so that you can save more money and have more money for what you actually enjoy in life. You may also discover that there are things you absolutely can’t live without.
I realize that it can be stressful to look at the numbers, but if you never address the problem, you’ll never solve it.
How do you fix problem areas?
Can you eliminate a fixed cost? Can you cut just one thing out of your spending?
You only get better by working on your problem areas. The only way to work on them is to make them a priority. If you always eat out, maybe you can try to watch some cooking channels in your spare time to work on cooking up a few meals so that you can save some money and eat better.
Call your cell phone provider or your car insurance company to ask for a discount. I did this with my cell phone and got $30 off. Every little bit helps. It’s your money. Nobody’s going to call you to offer a discount. You have to ask for it.
What if you don’t want to stop spending money on something?
Don’t. It’s your money and your life. Work on problem areas and then spend lavishly on what you enjoy.
For example, I would never consider “eating food” a problem area. I train hard and prioritize proper nutrition. I have no issues with spending money on food. Clothing? Meh. I try to shop on a budget. Cars? Meh. I never care for cars.
What I’m getting at is that you have to find ways to cut back on what you don’t want to have more of what excites you.
On that note…
Find ways to have fun on a budget to grow your net worth
Your compliance with any plan goes up when there are fewer restrictions.
Nobody wants to follow some “budget” that doesn’t allow them to ever do anything. This is why I always highly recommend that you sneak some fun into your life so that you don’t get bored and you always have something to look forward to.
Can you have fun without going broke? Of course. I’m at the point now where I can have a blast for under $20.
Here are some ideas for having fun on a budget:
Whatever you do, it’s important that you find a way to have fun without spending a fortune. You don’t have to get bottle service at a club to have an enjoyable evening. It’s possible to have a memorable weekend without being in a club.
Save money from every paycheck
Your goal should be to save money from every single paycheck. You can’t wait until you’re making lots of money to save. You have to start right now regardless of what your situation’s like.
How do you do this?
Set automated payments with your bank/employer.
When I was 18, I started putting aside $50 bi-weekly. I took out money a few times for emergencies. When I turned 30, I cashed this investment in and treated myself to a trip around the world with half of the money. The other half went towards my savings.
The goal is to always be putting money aside so that you build the habit of saving money so your net worth is always going up. If you don’t start when you’re making a little bit of money, you won’t suddenly become good at saving money when you’re making more of it.
Figure out how to make more money
This is the part of personal finance that most people get stuck on. Anyone can cut their expenses down to the point that they’re not spending any money. Not just anyone can make more money. This is where you’ll spend a long time trying to figure out what to do.
The reason that I’m a huge proponent of making more money is that there’s only so much that you can cut before you drastically reduce the quality of your life. When you make more money, you have more options.
How do you make more money?
Those are just a few options. Each option will obviously take a long time. This is why it’s important that you stick with one thing until you see results because most people give up too easily.
You’re in luck because every source of income has been covered on social media platforms (YouTube, Spotify, and so on) so that you don’t have to guess about how to start. All of the information is available for you out there when it comes to earning more.
My best advice is to choose on strategy for making more money and to follow it through until you increase your income. Don’t try to tackle everything at once.
Look into investing to grow the net worth
Have you looked into investing your money?
Before you get into crypto, please take some time to learn about what a stock is, if index funds are for you, and if you have enough money saved to take some risks.
What should you know about investing your money?
That’s how you can handle your finances for now so that you can start growing your net worth. Mastering the boring basics will easily take a few years. Build up your savings so that you have more money to take on some risks in the future.
Everyone should be investing in some capacity if they can. Whether it’s through a 401(k), a Roth IRA, real estate with help from Fundrise, or just a personal brokerage account, investing is one of the best things you can do for yourself! If all those fancy numbers and abbreviations (looking at you, Roth IRA) mean nothing to you, don’t worry, we’re breaking down how anyone can get started in this index investing for beginners guide.
Magic right? Nope, that is the power of investing in the stock market which has historically provided 7% returns every year.
So now you’re 18, or 25, or 35, or 55, or however old you are today, and you want to set yourself up for a better future. Good! It’s never too late to start, and starting now is better than starting tomorrow.
So let’s start at the beginning.
Why Investing Works
Magic piggy bank examples aside, investing just works. It works for one simple reason: compounding returns. Compounding returns is actually a very simple topic and it explains why the $100 a year was able to double. Here’s how it works:
For example, let’s start by investing $100 in the stock market. Based on historical returns, it may average a return of 7% per year. After the first year, you will end with $107 in your account. Nice! A growth of $7.00 ($100 x 7%).
What’s even better is that in year two, your money will grow by more than $7! In the second-year, you will start at $107. So the 7% growth on this slightly higher base of money will lead to gains of about $7.50.
After the second year, you could be ending the year at $114.50. In year three with this same formula, you could end with $122.50 (+$8.01). Year four? You could end with $131.08 (+$8.58)
Here is a table to help bring this to life. At the end of a 40 year time period, your $100 would have grown to $1399.48!
What I love is that 40-year mark. By year 40, you are making over $91 per year. On an investment that started at only $100!
Now let’s add some fuel to the fire.
Let’s say you didn’t just invest $100 in year 1, but you added $100 every year after that as well. What would your total capital look like in year 40 if that was the case?
Your eyes are not deceiving you, that is almost $20,000 even though you only put in $4,000!
Investing Basics Everyone Should Know
What’s that? You’re sold on investing? Do you want to start now?!
Let’s just slow down for one second though, and get up to speed on some investing basics. Including the common questions:
What Can You Buy?
All of the examples above have been assuming that you invest in stocks or equities. Past data shows that on average, they usually return about +7% a year. But that is no guarantee.
And they are not your only investment option. There are four major asset classes you can choose from when investing:
Generally speaking, most investors focus on a portfolio of stocks and fixed income.
Fixed income encompasses both bonds and real estate because both provide fixed income payments (usually monthly). They are generally viewed as safer and less volatile investments than stocks. However, they usually do not provide as good of returns on average (as the typical 7% stock returns).
To buy any of these asset classes, you do so by investing in investment vehicles. They include:
Obviously, as you can see, asset classes and investment vehicles overlap. Later in the post, we’ll dive deeper into how to invest in my favorite investment vehicles: index funds and ETFs.
Where Can You Buy It?
To buy any of the asset classes above and start investing, you first need to open an investment account. There are a few basic types of investment accounts that beginners can open:
You can learn more about the pros and cons of these account types here.
To open one of these accounts, you typically need to go through a broker.
Online brokers are the popular options these days. Companies like Charles Schwab and Vanguard are great firms to open a brokerage account through, and either one provides brokerage accounts and IRAs for customers to open.
You could also consider robo-advisors, which are also a form of online brokers. But more on that later. I want to get to the good stuff…
What Is Index Investing?
Index investing is the process of investing in index funds. Not surprisingly, an index fund is the combination of an index and a mutual fund.
Let’s break both down quickly: indexes and mutual funds.
An index, simply stated, is a measure of something. In the financial world, an index is used to measure a group of stocks or bonds. For example, the S&P 500 or the Dow Jones Industrial Average are both indexes.
A mutual fund is an investment vehicle that pools multiple investors’ money together in order to put together a larger, more diversified group of assets.
For example, let’s say you want to invest $1,000 in equities by purchasing a selection of stocks. You wouldn’t want to pick just one stock, because it could go bankrupt and fail and then you would be out all your money. Even though there is an upside, it’s just too risky.
So you pick a few stocks to diversify your investments.
With your $1,000, you could buy 5 stocks and invest $200 in each. Or 10 stocks by investing $100 in each. Or 100 stocks by investing $10 in each.
The problem is, buying 100 stocks is complicated and time-consuming. Not to mention it can be costly, especially if you are investing small sums of money.
Transaction fees to buy 100 stocks could be upwards of $500! Plus, you might not be able to afford all the stocks you want to buy – one share of Amazon is currently at about $1,800!
This is where mutual funds come in. Mutual funds collect money from a bunch of investors and then spread the collective funds over a group of stocks. So you can invest your $1,000 in one mutual fund (with many other investors also putting in money) and get the diversification of the entire fund.
Putting It Together
An index fund is a mutual fund, except instead of having a manager pick stocks to invest the collective funds in, the funds are invested in an index.
If Amazon makes up 3% of the S&P 500, 3% of the funds go into Amazon (with an S&P 500 index fund). A money manager does not get to put 10% in Amazon because he or she has a hunch. The index fund mirrors the index – no exceptions.
Why Index Investing Is So Great For Beginners
Index investing is great for beginners for countless reasons, but below are the top 4 in my book:
1. It’s Easy
Investing in index funds is simple and extremely hard to mess up, which makes it great for beginners. Once you buy a few (or even just one) index funds, you can “set it and forget it”… for the most part. Many index investors will check in just once a year to rebalance and make sure everything is still on track (not including adding money to invest on a regular basis).
2. You Get Broad Diversification
As already described, with an index fund you get broad diversification with just one purchase. There is no need to buy a huge number of individual stocks because your one index fund did that for you!
3. It’s Extremely Affordable
Index funds are affordable for a few reasons, but mainly because they have low expense ratios. We’ll focus on comparing costs to classic mutual funds since that is the index fund’s “main competitor” so to speak.
Expense ratios are what mutual funds and index funds charge per year to use their fund. Some mutual funds charge 1% per year or higher! So if you have a portfolio of $100,000, that means you have to pay $1,000 per year just in fees!
Most index funds are in the 0.05% – 0.25% expense ratio range. With some even boasting 0% expense ratios!
4. The Strategy Is Proven
Last, but certainly not least, the index investing strategy has been proven to work over the years.
The S&P 500 (an oft-cited index) has historically returned +7% annually. $10,000 invested today would be worth $138,426 in 40 years at that rate (also assuming a 0.03% expense ratio). Not bad.
An actively managed mutual fund would not only have to beat the +7% benchmark, but also has to beat it enough to cover its annual fees (which, as mentioned, can be as much as 1%, or higher).
If the actively managed fund doesn’t beat the benchmark and grows at the same +7% rate (with the 1% fee), it only grows to $97,035 over a 40 year period. That’s over $40,000 less than the index fund!
How You Can Start Index Investing Today
There are 5 simple steps to take to start index investing today. We’ll walk through them briefly below, and you grab a more detailed (but not too detailed) guide here if you’re interested.
1. Decide On The Right Investment Account
The first step to index investing is deciding where you want to invest. Remember, you have 3 basic options to choose from:
If you’re in the workforce, the bottom two (the tax-advantaged accounts) are usually a good place to start. Otherwise, a personal brokerage account is available to just about anyone over the age of 18.
2. Select An Online Broker
The second step is part two to the “where should I invest?” question. This part involves choosing the right online broker to open an account with (step 1) and invest money through (parts 3-4).
In general, there are two types of online brokers to choose from: traditional brokers and robo-advisors.
Traditional online brokers include Charles Schwab and Vanguard. They give you more control over how to invest your money but require a little more work and oversight.
Robo-advisors are an up and coming online platform that does 99% of the work for you. In most cases, you complete a simple survey before opening an account with them and then the robo-advisor will invest on your behalf based on your answers. Usually, taking into account your age, retirement/investing goal, and appetite for risk.
Robo-advisors are great, new tools. But be warned, they usually charge a slightly higher fee (that they try to win back for you through tax-loss harvesting).
3. Determine Your Initial Deposit
The first step in determining your initial deposit is figuring out how much you need to invest to reach your goals.
The initial deposit can be small. What’s even more important is making sure that you have the right ongoing plan and reinvestment schedule.
4. Choose Your Blend Of Investment Vehicles
We walked through earlier your options for “what you can buy,” and now it’s time to decide! Finding the right blend of investment vehicles is never easy as everyone has individual needs. A rule of thumb I once heard was to invest your age in bonds and the rest in stocks.
So, if you’re 25, you’ll be 75% in stocks and 25% in bonds.
It’s not a bad rule of thumb, but for me personally, it was not aggressive enough. This is why you need to examine where you are and make a decision based on that.
If you need some help getting started, looking a 3 Fund Portfolio may be a good place to start.
5. Set An Ongoing Strategy And Maintenance Plan
Last but certainly not least, you need to set an ongoing maintenance plan. This should likely include two things:
And that’s it!
Get started today and start setting your future self up for success!
Before diving into the various liquid investments you can profit from, we need to define and understand what a liquid investment is. Before you invest in anything, you should understand everything about it – from availability to potential risk.
Liquid Investment Definition
In simple terms, a liquid investment, also known as a liquid asset, is any type of investment that can quickly and easily be converted into cash.
For example, a money market fund would be considered a liquid investment, or liquid asset, because it makes money from interest, but is still quickly accessible to cash out.
Real estate, in comparison, can not be quickly turned into cash because it requires the sale of the property and transfer of ownership, which can take an extended period of time.
Understanding Liquid Investments
There are various liquid investment vehicles you can invest in. Liquid assets that are cash equivalents are the most liquid and the best. It is very easy to find worthwhile offers on something that you can exchange for cash each day. This means that it is relatively easy to find liquid investments.
It is important to know that liquid investments can turn illiquid when there is pressure. During the World Trade Center attack on September 11, 2001, the New York Stock Exchange (NYSE) and the Nasdaq Composite (NASDAQ) remained closed for approximately a week, which froze liquid investments.
During the closure, investors were unable to effectively exchange and trade securities. For this reason, the majority of traditionally liquid investments became illiquid for an unprecedented period of time.
Due to volatility and investor panic, some individual sectors or securities can quickly shift from liquid to illiquid assets.
Even though some liquid investments experience extreme volatility, there are several stable liquid investments most individual investors commonly use. Some of the most common liquid assets include mutual funds and bonds.
Keep in mind, these investments do not flow in and out of your bank accounts as hard cash. However, you can sell them at the end of a trading day, even during a turbulent market. For Exchange-Traded Funds (ETFs) and individual securities, trading prices continually change, so while they are liquid assets, they are not guaranteed to hold a constant value.
Any portion of real estate you directly own is relatively illiquid. As previously stated, it is possible that selling that piece of property could take days, weeks, or months, even when the market is stable.
Defining Liquid Investments (Liquid Mutual Funds)
Liquid funds are frequently referred to as debt mutual funds that invest in treasury bills, fixed deposits, commercial papers, and other types of debt securities (investments).
To qualify as “liquid funds,” they need to be short-term investments that mature within 91 days.
A benefit of liquid mutual funds is they are not locked in. Meaning you can withdraw your funds within 24 hours upon request.
Among all the debt funds available, liquid funds usually have the lowest risk compared to their interest rates. This is because liquid funds mainly invest in securities that have fixed income and therefore mature faster.
Who Can Invest In Liquid Funds?
Investment in liquid funds is advisable for investors who need ways to store their cash, similar to saving it in a regular bank account. These should be used for people who may need quick access to their money but also would like to earn interest on their cash.
Due to the liquid nature of the investments, the interest rates earned are usually lower because the risk is less.
Even though the risk is minimized with liquid funds, your retirement savings should be in employer-sponsored retirement investment accounts or a 401k and invested in slightly riskier investments to take advantage of compounding interest and dividends.
Liquid funds are most suitable if you intend to reach short-term financial goals. There are liquid funds that make 7% to 9% in returns, and they are better than regular savings bank accounts where interest is almost 0%.
Due to the nature of liquid mutual funds, asset allocation can protect you from volatility, risk, or defaults as long as you invest in established securities with a good track record.
Factors To Consider When Investing In Liquid Funds
Review these important concepts before investing in liquid funds.
As stated previously, liquid funds can provide 7% to 9% returns. These are significantly higher than regular savings accounts where the interest is basically meaningless. However, the liquid funds’ returns are often not guaranteed, but they can give positive dividend returns.
If your goal is to establish your emergency fund, liquid funds are very appropriate. While you should still have $2,000 or so in cold hard cash, the remainder of your emergency fund cash can quickly grow in a liquid fund. The funds generate returns, and you can easily pull out your invested cash when you want to or when there is an emergency.
Liquid funds are best suited for short-term financial goals and investing money not allocated for retirement. This target period should be approximately three months since short-term investments boost the potential of the underlying securities. For long-term investments of a year or more, consider other funds to invest in.
Among all available debt funds, liquid mutual funds have the least amount of risk. Since the underlying assets take 60 to 91 days to mature, the Net Asset Value (NAV) does not fluctuate very often. This helps by preventing the changes in the underlying asset price from impacting the NAV of liquid funds.
However, the NAV can experience a sudden drop due to the impromptu decline in the underlying security’s credit rating. Even though liquid funds are not entirely immune from declines, they are the safest.
You will be charged a fee for liquid funds, such as mutual funds, in the form of expense ratios. This fee depends on the jurisdiction. The expense ratio for liquid funds is usually lower than traditional investments due to the fund manager’s investment strategy to hold till maturity.
This low expense ratio helps to provide favorable higher returns in a short time. Normal expense ratios are between 0.5% and 1%.
Evaluating Liquid Investments
Understanding how different aspects of a fund can impact your investment is crucial to protecting your money.
How the liquid funds perform is very important when selecting the investment. We mainly invest in getting returns and funds that give consistent returns from varying prospects. Go for the funds that consistently perform better than the targeted benchmark and peer funds.
For better results, take time to review the fund’s performance and identify the one in line with your target. Review previous performance to ascertain the fund’s track record.
As previously mentioned, the expense ratio indicates the fee charged by the mutual fund. Funds with high expense ratios are not guaranteed to perform any better than those with lower fees. Pay careful attention to the fees charged because they can significantly impact your overall return.
Financial ratios vary, and they enable you to use different perspectives to analyze how a fund performs. You can use financial ratio tools such as alpha, beta ratios, and standard deviation to review the fund’s risk rate and the risk-adjusted returns.
When the beta and standard deviation of a fund are high, the fund is considered riskier. For financial ratios, choose the funds with a higher Sharpe ratio for better returns and less risk.
History Of The Fund
When selecting a fund, it’s important to look over the fund manager’s historical performance and prior investment decisions. While not necessarily a predictor of future performance, a lengthy fund history that shows good consistent performance may remain consistent compared to an untested fund.
A good fund history should deliver consistency for at least 5 to 10 years.
Liquid Funds Taxation
Taxation applies to dividends of all mutual funds. These dividends are included in your total earnings, and taxation happens according to your rate. At the end of the year, you will be sent a 1099-DIV form you must file as income.
For tax information specific to your individual situation and investments, refer to a Certified Public Accountant for advice.
Why Use Liquid Investments?
Is Real Estate A Liquid Investment?
This is a commonly asked question, and it is not a yes or no answer. Depending on how you own the real estate, it can be liquid or illiquid. When you have ownership of the real estate and the market is not doing well, it may be difficult to get your money out of the property quickly.
In contrast, a real estate investment trust (REIT) is a non-publicly traded security. Depending on your contract, selling it for cash is bounded by each specific REIT’s conditions and regulations.
If invested in a traditional REIT, you may be able to sell your real estate security on a regular trading day. This is only when your real estate is in the form of marketable security like a mutual fund or ETF that capitalizes in real estate securities. This form of real estate ownership is the most liquid one.
Planning For Liquid Investments
For an investment to be considered liquid, it should have cash equivalents. You should have enough cash on hand outside of your investment to take care of immediate needs, such as a vehicle breakdown, etc.
Your budget can include adding more money into your liquid investment, but before doing this, ensure you still have cash on hand for any financial emergencies.
What Are The Different Types Of Investments?
We will cover four main available types of investments. These investments may also fall into different asset classes, and they are each unique in terms of characteristics, benefits, and risks. It’s important to understand the various types of assets and choose a good blend depending on your financial goal and risk tolerance level.
A good understanding of what you want to invest depending on your financial goals can make your money work for you.
Growth investments usually invest in small, quickly growing companies. These are referred to as “growth stocks” due to the growth potential of the company. These types of investments are generally focused on long-term growth and wealth creation.
For growth investments, you should also be able to withstand higher risks and market fluctuations.
We refer to physical real estate as a growth investment since the prices of houses and properties change often. It is highly likely for these prices to shift over time significantly. Before you invest in property, consider its value could decline, and investment property ownership can include potential losses due to maintenance and upkeep. An alternative is to invest in property through a property investment fund involved in ownership.
Defensive investments focus on generating slow and steady returns without the highs and lows of a standard growth fund. Defensive investments are suitable for people who are less tolerant of risk but content with smaller returns.
13 Best Liquid Investments Available
This section will go over some of the most common and stable liquid investments you can make this year.
1. Cash Investments
These investments include banking with regular savings accounts, term deposits, or high-interest savings accounts available at traditional banking institutions. Cash investments give the lowest returns of all investments available. Simultaneously, cash investments do not have any growth capacity but offer the most protection from market risk.
2. Fixed Interest
Of all fixed interest securities available, bonds are the most common. Bonds are sold when companies or governments need additional capital and issue bonds to borrow money from investors for a quick cash infusion. The borrowed money is usually paid back at a set interest rate.
These kinds of bonds can also be a type of defensive investment because they are relatively safe investments which result in lower returns than high volatility investments. You can also sell bonds very easily, but you may have to deal with capital losses.
Think of a share of a company (stock) as a type of growth investment that can help you boost your original investment value. This is a type of medium or long-term investment. When you have ownership of shares, you can also earn from dividends if the company offers them.
Dividends are part of the company profits, or earnings, that is paid out to the shareholders. The value of each share differs and may drop below the price you initially purchased it for. The value of a share, known as equity, can fluctuate daily due to active market trading.
Owning individual shares (individual stocks) are generally long-term investments meant to profit from their success. However, with the potential of company growth comes the potential of an industrial decline and a reduction in your investment value.
4. Online Savings Account
An online savings account is an excellent liquid investment, and it is risk-free. Consider a good high yield savings account and earn some interest on your money.
This investment is suitable for people with some idle cash that want to avoid the annual losses that come with inflation. You can simply move your money from a regular bank account, where it earns no value, and transfer it to a high yield savings account where it will make a small amount of interest – while remaining liquid.
These accounts can be opened easily and usually do not have any expense ratios or transaction costs attached to them.
5. Block Savings Account
Saving money in a regular bank account does not earn you money. However, having a cryptocurrency savings account is an option.
Through platforms like Block, you can easily deposit cash and purchase a stablecoin. The stablecoin will trade at a ratio of 1:1 with the dollar, and you can make your exchange at any time. You can also access your money anytime for this investment because the money is liquid in your cryptocurrency account.
Just like banks, companies like Blockfi also make loans for interested parties. Block loans are, however, in cryptocurrency. While relatively new, Block accounts can pay you as much as 8.6% in stablecoin annually. The stablecoin can undergo a cash conversion back into US dollars. The Block rate is more than 15 times higher than what a bank offers, which is a good investment.
You also need to know that having a cryptocurrency savings account means that your money does not always have FDIC insurance like a traditional savings account. In addition, Cryptocurrency accounts are also linked to numerous cases of digital theft.
Working with Block, however, gives you deposited funds insurance. This means that your money is more secure from issues like theft. Block is an optional liquid investment opportunity, and you can begin by investing a small amount of money.
6. Certificates of Deposit (CDs)
A Certificate of Deposit (CDs) involves depositing money for a particular period of time. The investment guarantees your return regardless of interest rate fluctuations during the length of the investment.
Consider buying a CD from a financial institution with FDIC insurance. This gives you investment insurance for as much as $250k. CDs are structured so that the longer you tie up your money in the certificate, the more interest you can earn.
7. Money Market Account
Money market accounts are a reliable investment option to consider for your liquid funds. At the moment, these accounts pay comparable Annual Percentage Yields (APY) to one-year CDs and still allow direct access to funds.
Money market account holders get ATM cards, deposit slips, and checks after opening a money market account. The money market accounts operate based on the balance in an account. They do not perform based on the amount of time you invest in your money.
The risk involved in this investment is minimal, yet you get to earn a higher return rate for your money than a traditional savings account. For these reasons, money market accounts are a common investment preference among smart investors.
Alternative Liquid Investments
The investments discussed here are more diversified than the previous ones described. However, the disadvantage with most of these alternative investments is that they are not entirely liquid. This means that the assets will be locked up for a period of time.
If the investment is in real estate, for instance, it is considered a great alternative investment. The real estate investor generally should invest for a long time for the best returns.
Currently, there are some new and unique alternative investments that utilize real estate to create wealth. These investment ideas are short-term maturities and quite convenient. They work outside the stock market, and that is why they are regarded as an alternative. They include companies like Fundrise that sell real estate investments as well as low-cost ETFs.
To invest in Fundraise, you need $500 as a minimum deposit, and you can expect 8 to 12% returns. Another example of recent alternative investments is worthy bonds. This investment entails investing in small businesses through buying their bonds. From the investment, you can up to a 5% rate of return.
8. Online Checking Accounts
Online checking accounts are like online savings accounts. This type of investment is suitable, especially if you are looking for short-term investment. The accounts give you many of the benefits you receive with an online savings account since online checking accounts offer more liquidity on investment.
Online checking accounts offer the highest liquidity level because you can withdraw your money with a click of a button. The other great feature about online checking accounts is that they offer free cash bonuses to investors.
Some of the recent promotions have included cash bonuses worth $150 from a deposit of $15k, and for a $25k deposit, a cash bonus of $200. The bonuses and low interest rates are factors that encourage people to invest in online checking accounts.
To make it convenient, online institutions provide account holders with debit cards for easy ATM withdrawals.
9. A Roth IRA
This type of investment is funded with after-tax income, and your money grows tax-free. This means the interest you make from your investment in a Roth IRA can be withdrawn at a later time without paying income tax! Roth IRA’s are one of the best investments available due to the tax benefits.
In addition, if you leave your money in a Roth IRA for five years, you can withdraw portions of the money you have deposited into the account at any time. However, there are certain restrictions on withdrawals from a Roth IRA.
If you withdraw any of the interest gained from your investment before the age of 59 ½, you will pay income tax on the money and an additional 10% withdrawal penalty. There are a few qualified exemptions for early withdrawals that will not be discussed here.
Funds in a Roth IRA can be invested in mutual funds, bonds, ETFs, and more which will provide various returns on your investment.
10. Corporate Bond Funds
Compared to money markets, bonds are not as stable. Due to volatility, bonds usually offer investors a higher return on investment. Bonds are a market product, and earnings are, therefore, based on the existing market condition in changing monthly payments.
Short-term bonds usually take two years or less to mature, which is a motivation for many investors. The short time of maturity is a factor to consider before investing in bonds. You can buy bonds from many online brokerages like Robinhood and Webull.
11. Pay-off High-Interest Debt
This is a great investment in yourself that enables you to earn fantastic investment returns. If you own a credit card with an interest rate of 15% and a balance of $10,000, you pay extremely high fees each month. Paying off this debt is similar to getting a return of 15% on a $10,000 balance.
Paying off high-interest debt not only makes excellent financial sense, but it also helps you to save money. You save from future investment costs, and your financial situation is likely to improve. This investment is a complete win, giving you returns and saving you money.
Many people in the United States live paycheck to paycheck and use credit cards to pay for their basic needs. Credit card debt is extremely detrimental to financial stability and should be paid off as soon as possible.
12. Treasury Inflation-Protected Securities (TIPS) – 5-Year Investment
Commonly referred to as TIPS, these are inflation-indexed government bonds. The TIPS interest rates are tied directly to the consumer price index and current market conditions. TIPS are offered in 5, 10, and 30-year investments.
For example, suppose an investor owns $100 in TIPS with a coupon rate of 1%. After the first year, if there were no inflation, the investor would make $1. If inflation rises by 3% the next year, the coupon rate will increase by 3% for a total of 4%. However, if deflation would occur, the interest rate would decrease by the deflation percentage rate.
Since TIPS’ interest is taxable, many investors prefer going into a mutual fund and TIPS ETF. Mutual funds and ETF shares are bought through brokerage accounts.
13. Municipal Bonds
Compared to TIPS and other government treasury investments, municipal bonds are a bit riskier. However, most municipalities do not default bonds. The most significant risk with municipal bonds is that of interest rates.
Government bond funds usually have lower interest rates than short-term corporate bond funds,, and in such an environment, the bond’s value lowers to compensate the rates when they arise in the marketplace.
Unless the municipality defaults, holding the bond to maturity enables you to gain 100% back on your original investment as well as the interest your investment earns.
Wrapping It Up
If you have some money that you want to sock away, what better way is there than to have it earn you more money? That is the fundamental reasoning behind liquid investments. There are various short-term and less risky investments you can venture into and secure your money while earning more.
The main factor to always consider is that the investment should be easy to liquidate and have immediate access to cash for a financial emergency.
Check Out These Great Investment Opportunities
Having bad credit doesn’t mean it lasts forever. You can choose to rebuild your credit score little by little until you reach a good credit score. If you become successful in rebuilding your current credit score, you can then take advantage of credit cards and loans with much better interest rates than you usually get with bad credit.
The following are some of the tips you can use to start rebuilding credit:
Make On-time Payments
It would be best to pay loan payments and other bills on time as long as you can do so. If you plan to only pay the minimum since it is what your budget permits, that’s also okay. But, if you see that it is quite impossible for you even to make a small amount of payment, it would help if you talk to your creditor and ask for any payment arrangements that might help you in the meantime.
Why does making on-time payments rebuild credit?
Your payment history is the biggest factor that influences your credit score. If you want to improve your credit score status, you can’t afford to have late payments. That is why paying early can only benefit you.
Most of the time, late payments are reflected in your credit reports for up to 7 years. This means it takes longer for this to improve or recover than other credit missteps. Furthermore, if you have bills that have already been added to collections, it would be best to prioritize the ones where your account is still open. Collectors most likely make the most noise but, they shouldn’t be your priority.
Sustain Most of Your Credit Limit Available
Credit utilization is also a huge factor in your credit score. This is the ratio of the amount of credit you are using divided by the total available credits. Moreover, most of the time, experts recommend not going over 30% of your credit limit.
You can check all the credit utilization ratios of your credit cards and lower the highest ones. When your credit card issuer records and then reports a lower balance than the usual to the credit bureaus, your credit score will have a positive impact. Besides that, once you have brought down the balance, your credit score won’t be negatively impacted by the past high credit utilization ratio.
Consider a Secured Credit Card
Getting a secured credit card makes a lot more sense for people whose goal is to build credit from scratch. For example, if you have a credit card account that has recently been closed, you might need to open a new account with a secured credit card. Moreover, these cards will most likely need to require a deposit upfront.
The deposit you are going to give to the credit card issuer is most likely your credit limit. Besides that, a secured credit card then works like any other credit card. Furthermore, it would be best to get a secured credit card from a credit card issuer that reports to all major credit reporting bureaus to ensure your credit score benefits.
Try Out a Credit-Builder Loan or Secured Loan
If you want to rebuild your credit score, getting a credit-builder loan is one of the best loan options you currently have. As the name suggests, taking out a credit-builder loan can help improve your credit score.
You can get a credit-builder loan through a bank, credit union, or online lenders. When you take out this type of loan, the lender will keep your money safe as you repay the loan. It then releases the said cash after you successfully paid the loan in full.
Suppose you have cash on deposit. You might borrow against that savings with a certificate- or share-backed loan. This type of loan is a secured loan that is backed by the cash in your money market, savings, or CD account. Just like a credit builder loan, the lender (usually a bank or credit union) keeps your funds until you pay in full. Sometimes, financial institutions give you the money incrementally as you continue to pay the balance.
Become an Authorized User
It will also help if you ask someone to select you as an authorized user on a credit card. By doing so, your credit benefits from it just by being part of the account. Plus, you are not required to access the account or make any charges to it.
Several credit cards permit primary cardholders to lay down the spending limits for authorized users. This will make the primary cardholder more comfortable in placing you as an authorized user. Moreover, you can also opt to ask someone to add you as an authorized user without even asking for the credit card number or giving you the credit card.
In becoming an authorized user, you need to know two things. One is that its impact on your credit score might be modest. This is because you are not legally obligated for the debts in the account. Second, being an authorized user might hurt your credit score if the primary cardholder does not have good credit habits.
It might be challenging to start rebuilding your credit. However, once you gain momentum, you will be on your way to a good credit score. This will eventually lead to better credit card and loan offers.
Hi I am Unique Balistreri, 37 years old from Texas, TX, USA, working on Online Digital Marketing from the last 7 years. Here I am sharing special tips about it.