Category: Financial

Learn from our financial experts who provide clear advice and tips on everything from taxes to loans and all that is in between.

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Financial Real Estate Savings

Rule of Thumb: How Much Should Your Rent Be?

Grab Your PopRule of Thumb: How Much Should You Spend on Rent

Now that winter has broken in many parts of the country, and it won’t be a punishment to move, people are heading to virtual rental tours in droves so look for new digs. But before you start cruising Zillow, Redfin, or other similar sites to look at your options, take a few minutes to figure out what you should be paying for rent.

The Short Answer Is 30%

Most experts agree that you should spend approximately 30% of your gross income. That’s before taxes are taken out. This means if you make $1,900 per month before Uncle Sam takes any, you should be planning on about $570 for monthly rent. Keep in mind that this is a general guideline and not a rule.

The major factor in how effective this estimate is is the cost of living in your area. While a simple one-bedroom apartment in the Bay Area or North Jersey could cost $2,000 or more per month, renters in rural areas of the midwest could see the rental of a 2 bedroom single-family home for less than $400 per month.

The 50/30/20 Method Works Well For Many

Another great method is the 50/30/20 split. This looks at your total take-home pay and splits it into three categories. This is 50% for your needs, 30% for your wants, and 20% for saving, investing, additional debt payments.

Your needs are expenses like insurance, broadband access, utilities, consistent debt payments, groceries, and of course, rent. Your wants are shopping splurges, dispensary trips or happy hour, concerts, and cosplay. For the last 20%, remember that you should only be keeping an emergency fund in a savings account, while all of your long-term savings should be invested in some fashion, so avoid inflation decay and begin building retirement income. If you have any debt, payments above the minimum should be in this category as well.

This means if you bring home $1,500 per month after taxes, your 50/30/20 split would look similar to this:

  • $750 for your needs
  • $450 for your wants
  • $300 for your future

The second and third categories are necessities, though in different ways than the first. You need a proper work-life balance, so if you can only afford to constantly work just to be able to eat, sleep, and work, your life can get bleak, fast. Make sure you make it a consistent goal to invest in your leisure, and your future.

With this in mind, you can get a really good idea of your rent payment by taking your $750 for needs, from our example, by starting with your relatively constant monthly bills, and working backward. For example, if broadband is $50, your groceries are $150 (I know, just pretend for our example), insurance is $35, and your minimum payment on your only high-interest debt account is $15, that comes to $250 in needs otherwise, so there’s $500 available for rent.

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Savings

Investing Vs. Saving: Which Should You Do?

Investing Vs. Saving: Which Should You Do, When, And How?

When you look at your opportunities in investing your money compared to your opportunities from saving your money, you might wonder: Is this a difference in quality, or kind? Is your money going to be more valuable in the future, or less?

And how do you act on these evaluations?

The Qualities of Investing and Saving

You have probably heard that when a person wins the lottery, they are given two ways of claiming their prize money: Either by taking it all in one big, heavily taxed, cartoonishly-oversized check, or in smaller installments overtime that ultimately amount to more money.

It seems obvious that the smaller installments overtime would be the more economical option. It amounts to more money, doesn’t it? Only a short-sighted fool would take the smaller sum.

Thinking about this is very similar to thinking about investing versus saving. Even a static amount of money has forces acting upon it.

Imagine you have a healthy sum of money in your bank account. After a year, your bank provides you with a 1% allowance of the money you have. So, a bank account with $100,000 in it would yield $1000 in interest.

However, the economy grows by more than that percentage every year. In fact, inflation goes up by more than that every year. Inflation usually results in every dollar losing 3% of its value. So while you may be given 1% in interest, you lose 2% of the value of that inanimate $100,000.

But if you invest that money and grow it by 4%, then in that case you have affected a growth of 1%. Granted, this is not a large increase. But it at least offsets the natural entropy of money’s value in the face of inevitable inflation.

Investing comes with risks that saving does not, however. Investing can make you lose money if you make a bad investment.

When To Do Either

For this reason, if you are currently managing your debts and not seeking to buy a house, car, or start a business, then you should save rather than invest.

The reason is because of the aforementioned risk involved in investment. You don’t want your ability to pay a bill to be reliant on the whims of the market.

Once your income eclipses your debts, then you can risk investments.

How to Invest and How to Save

The methodology of investing and saving are far more similar than you might expect. Saving your money means giving it to a bank. A bank will turn that money into loans, and the interest rate of the bank will see your savings grow as the bank grows.

Investing money is similar, as you still essentially give it away, but this time to a hedge fund. They will invest your money into venture capital and start-up businesses.

These will allow your money to grow as those businesses grow.

When, where, and how to invest and save is a matter of your own personal trust in these institutions. Use your money responsibly, and stay safe.

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Financial Real Estate

How To Be Approved For A Mortgage

mortgage approval for buying a home

As we continue to come back from the significant recession that the housing bubble caused, more and more people are thinking about buying a home. With many being first-time homebuyers, we’ve compiled a list of the essentials you’ll need to know to get mortgage approval.

1.   Look At Your Debt-To-Income Data

The very first step to mortgage application preparation is to determine your monthly income as well as your debt payments. Your potential lender will want to see evidence of employment, generally going back two years, but often a few recent pay stubs can get you started with many lenders.

If you are one of the millions of Americans who are self-employed or have variable income such as performers, be prepared to have that process be much more involved. Getting the best mortgage overall, as well as the best payments and interest rates, is going to be dependant on your debt to income ratio.

2.   Clean Up Your Credit Health

This is often one of the largest challenges for many people. Your credit history report and your credit score will be instrumental in your lender’s eventual decision. You should aim to have a FICO score of 680-700 as a floor. However, if your credit score is only missing 680 by a small margin, you may want to look into an FHA loan, which has a little bit easier approval requirements in some cases.

3.   Calculate Your Mortgage Budget

Before you make an appointment with any potential lenders or mortgage officers, you will want to know for sure, how much house you can afford, and what you can commit to in terms of a monthly payment. This payment will include your taxes, fees, and insurance, and should not be more than 33%-35% of your pre-tax income. This can be a difficult stage, since many mortgages have variable interest rates, meaning your payment could fluctuate at some point in the future.

4.   Plan To Save For Your Home Down Payment

This is a very significant step and can make or break your house hunt. Many lenders will require you to be able to put at least 10% down unless you are participating in an FHA loan or other special lending program. If you can put at least 20% down, you can avoid having to obtain PMI, or private mortgage insurance, to protect your lender against a possible foreclosure of the property before it has enough equity built up.

5.   Figure Out The Best Time To Apply

You can often get a pre-qualification without a hard credit pull. It will however stay on your credit report for some time. A pre-qualification can give you a good indicator of whether you can obtain a mortgage at a glance, and is often a very strong indicator of being a serious buyer.  You can often get a pre-qualification letter that will be good for 60-90 days depending on the lender, it’s non-binding, and will put you in a great position to start looking around.

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Financial Health & Home Savings Wellness

5 Things To Do For Your Future Without Spending

5 Things You Can Do For Your Future Self That Don’t Cost A Dime

So many people have a good idea of where they want to be in the future. We envision ourselves working until a certain age in a career that we love, often living in a particular area in our dream home, while not worrying about money, and being able to live a life that we enjoy.

While this is something that many people can admit that they do, often advice on how to get there can seem sparse. But luckily there is some good information out there, and we’ve compiled 5 of the best things you can do today to put yourself on a better path for the future, for free.

1.   Start the habits that you want to see your future self practicing.

This goes for just about anything, from quitting smoking, exercise more consistently, painting, reading more, spending money more sensibly, literally anything. If you take small steps to incorporate this new activity or habit into your life, it will be easier to carry that small step into additional actions. If you are wanting to start a new hobby or learn a new skill, try to set aside 30 minutes a day to work on that activity. It will pay dividends.

2.   Keep your credit in the back of your mind.

It is used to score you for so many things, it just makes sense to keep your credit in as good of shape as you can. This means monitoring your credit and credit score, paying down old debt if you have any, and improving your credit where possible.

3.   Automate your saving and investing.

With apps like Stash, Acorns, Robinhood, and even Cashapp, you can automate saving and investing your money. Make sure you aren’t letting all your money sit and die of inflation in a savings account, though. Keep a liquid emergency fund, and invest the rest in stocks, bonds, and crypto to generate passive and retirement income with almost zero effort over time.

4.   Learn the difference in various retirement accounts before you need one.

The best time to start investing is whenever you can start. Employer-offered funds like a 401(k) are perfect starting points, particularly with many companies offering matching up to a certain point. Not only is it smart to invest early and often, but you can invest from pre-tax money to reduce your tax liability, and an employer match is basically free money.

5.   Test yourself monthly by cutting out one paid “extra” each month.

This can be almost anything that you pay for as an extra. One of the many streaming services, eating at a particular fast-food restaurant, a subscription box, and so on would be a perfect example. You cancel or cut one out for a month, and see if you can live without it. Many times we forget that we have grown attached to many “needs” that are actually well-disguised “wants”. Skipping a month here and there can save big bucks and build big discipline.

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Financial Health & Home Home Improvement Tax Services

Are Home Improvements Tax Deductible?

are home improvements tax deductible

Tax code is a complex web of rules and regulations. Things you would never expect to be tax deductible are, while others that you might be certain are tax deductible are not. So, are home improvements tax deductible?

No, they are not ordinarily tax deductible. But that is not the full story.

What Home Improvements Are Not Deductible?

Home improvements will not count as tax credits on a home that you are currently using yourself. Whether it is a home you live in year-round, or a beach house you live in during the summer, these are the kinds of homes that you get no tax credit for improving.

However, you can get tax credit for the improvements you make to a home (or part of a home) that you use as part of a business.

If you sell a home, for instance, or if you rent it out during certain parts of the year, then the improvements you make to it become business expenses.

What kind of improvements count as the kind that will give you tax deductions?

Well, so long as the improvements extend the life of the home, or adapt it to new situations, the improvement will count as a tax deduction. Sadly, this means that luxuries like entertainment systems and saunas do not count as tax credits.

Interestingly, the definition of “improvements” in the context of taxes is rather specific. If you repair your roof or prepare it for harsh weather, that counts as an improvement that can be tax deductible if you sell or rent out the home.

If you call an exterminator to clear the house of bed bugs, rats, or termites, that can also count.

But what if you do not have a second home to rent out?

What if you do not plan to sell your current home before the end of the year? Is there anything you can do?

Well, yes. Odd as it is, if you register your home office as a part of your business, then money that you spend on that office is tax deductible. Sadly, this does not come with as many loopholes as you might think it does.

You cannot just install a new entertainment system, call it your office’s break room, then expect to be able to write that off as tax deductible.

A good example of how the office deductions work is thinking of replacing your roof or windows. If you replace five windows, but only one window for your office, then 20% of the cost of those window replacements is deductible.

One very important note: Improvements can only be deductible if they exist at the time taxes are incurred. So, if you install weathering on your home, but that weathering is gone by the time you sell your home, then you cannot use that weathering as a tax deduction.

Taxes are a truly dizzying maze of rules and regulations. While home improvements are not meant to be deductible, doing so is still possible.

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Financial Savings

The Low Effort Ways I Earn An Extra $125 A Month

Earn Extra Income

Earning money in my spare time has always been a kind of hobby for me. I love hacking my spare time and using it to generate income, even if only in passive ways. There is nothing like being able to pay all my bills, have some spending money, and still have money left at the end of the month after budgeting for everything else.

The only problem is, I don’t generally like to stick to anything with a very rigid schedule, so any thought of a dedicated side hustle went right out the window. So after a lot of digging and some research, I found a healthy handful of ways to earn both active and passive income. Here are some ideas to help give your account some wiggle room.

Surveys and Focus Groups

This is the one that most people focus on, largely the portion of the survey since there are so many paid survey companies. The caveat of doing surveys is that there are a lot of spammy and even outright scammy survey sources. But once you find a reputable survey site, such as HiveMind or Respondent, you can spend a good portion of your free time answering questions and earn modest sums. Focus groups pay much better but are rarer and harder to do continuously.

Cashback Cards

If you can effectively manage your credit spending, be sure that you are taking advantage of a solid cash-back offer. Find one with a 1%-3% cashback deal, and use it for anything it qualifies for. Just be sure that you keep an eye on your utilization ratio if you’re concerned about your credit score.

Gig Opportunities

The gig economy is booming, and there are tons of organizations that need help on a daily, weekly, or gig basis. This could be working as an extra in a local film project or even working election polls or walking dogs. The money is modest for the hours you may work, but it’s a steady bit of income if you need it and most gigs will pay for training as well.

Selling Items

This isn’t one you can do all the time, but if you were looking to minimize some of the clutter in your life, you could use a marketplace app like Facebook, Poshmark, or LetGo to pare down your stuff. I use this method about every three months or so, just to keep up on it and make a little scratch as well.

Rebates

Rebates from shopping rebate apps are a great way to earn passive income on money you’re already spending for things you already use. Ibotta is a popular app, but there are several that all serve a similar purpose.

Selling Plasma

More profitable than blood donations, and it can be done more often as well. Many plasma centers will allow three donations per week, paying up to $50 per trip, with bonuses for those that are new to donating.

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Career & Education Education Financial Loans

How Student Loans Affect Credit

How Student Loans Affect Credit

How Do They Affect Your Credit?

Student loans can have a major effect on your credit score. Taking out loans and paying them back will vastly improve your credit score, but it is detrimental when you so much as miss a payment—in fact, it can drop your score by more than 100 points!

The credit score affected is the one of the person who took the loan out; sometimes by parents and others by co-sign with parent and child. For example, if your parent took out a loan to help you pay for school, it would only affect their credit, not yours.

When You Are Missing or Behind on Payments

Most student loans are installments, which means that you pay a certain amount for an allotted time period. The good news is that your score won’t start to decrease until after the missed payment has been reported by the lender:

  • Federal student loan servicers can wait up to 90 days to report
  • Private student loan servicers can wait up to 30 days
  • They still have the option of charging immediately, however

Another consequence of missing/late payments is that it can increase your debt-to-income ratio (DTI):

  • It represents the amount of your monthly income that goes towards paying off debts (higher is worse)
  • Since the amount of debt you owe accounts for a large portion of your credit score, the DTI is a good reflection of your debt repayment status, though it does not directly change your credit score
  • Too much installment debt (ie. student loan debt), can impact your ability to take out more loans in the future because it determines whether or not you can afford their payments

In the worst-case scenario, you could end up in default:

  • Federal student loans usually consider this to begin at 270 days behind, and private at 120 days
  • This stays on your credit report for seven years
  • You will likely face collection and legal action in order to collect on the debt

If your student loan payments become unfeasible and you are becoming concerned about going into default, there are several options:

  • You may contact the lender to see if there is an alternative payment plan available. For example, extended deferment period or income-driven repayment.
    • This is based off of your current income
  • See if you are eligible for a student loan forgiveness program—this can get rid of your student loan debt
  • Look into refinancing your student loans (replacing existing debt with another lower-costing loan through a private lender)
  • This may decrease your monthly payments, but it can also extend your payment period by a number of years, which then adds to your interest costs

Student Loans and Improving Credit

Though there are many negative consequences to neglecting your student loans, there is also the potential for achieving greatness within your credit. Because most college students haven’t yet had many credit cards or loans taken out—if any—they could serve as the foundation for your credit history. Granted they are paid regularly and on time:

  • Student loans can be add to your credit mix (types of credit used) to increase eligibility for future loans—lenders like to see diversity in credit history
  • They can also add to positive payment history, which is the bulk of your credit score
    • Some lenders even allow for small payments during deferment, which is when you are not required to make payments yet
    • This is usually when you are enrolled in school and the subsequent grace period
    • However, if you choose to start paying these installments during deferment, they still show up as payments in your credit history, thus raising your score

Conclusion

As long as you make sure to pay your student loans off on time and in full, they can be an extremely beneficial asset when building a line of credit. If you neglect them, however, it will take years to recover from the damage. Making a solid plan for your future payments or reallocating your finances are the best ways to assure that your student loans work in your favor rather than against you.

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Career & Education Debt Education Financial Loans

Student Loans for Bad Credit

student loans for bad credit

When you are figuring out how you will be funding your education for the next several years, having bad credit can really impact your options. Federal student loans are a great option to start with, but they only go so far, and many still have a tuition gap to fill. If there is a concern with the credit history and score for the student applying, there are still some viable methods for getting the funding needed to get the education they are aiming for.

The federal loans do not require any credit history and they have a wide variety of flexible repayment options. However, borrowing limits are often too low for many state or private universities, and so there are still significant costs due from the student before term. Often private lenders will require student borrowers to have a credit score minimum of 690, which can exclude many potential students. Here are some tips for those with bad credit, or simply limited credit history:

1.   Always Start With Federal Loans

No matter what the credit condition of the applicant, they should always start with the FAFSA and federal student loan programs. This will also put the student through an eligibility check for additional funding sources such as grants and scholarships, as well as work-study programs. The interest rates of federal loans are often fixed and below 5%. One of the additional bonuses is the flexible repayment options, like income-based repayment.

2.   Do Everything You Can To Get A Co-Signer

This will dramatically improve the overall interest rates and terms of all loans that the student will qualify for, and will often allow them to qualify for additional loans their credit alone would not allow. The big caveat with this is that it is frequently difficult to find anyone other than perhaps a parent or grandparent to be your cosigner. This is because the cosigner will become responsible for the debt as well if the primary signer defaults.

3.   Compare The Basic Features And Interest

Many of the independent companies will have a wide variety of interest rates and terms that will largely be dependant on the applicant’s credit specifics. Providers such as Ascent have interest rates that range from below 7% to over 14% on fixed rates, and 5.8% to 12.9% on a variable, while other popular bad credit student loan providers A.M. Money Private Student Loan and MPOWER Private Student Loan both strictly offer fixed-rate loans only.

A.M. Money Private Student Loan, MPOWER Private Student Loan, and Funding U Private Student Loan are all providers that will be able to service loans for without requiring a minimum credit score. They offer a variety of fixed interest rates as well as terms for their student loans. They will each use slightly different criteria to gauge loan approval, such as GPA, and some students with special status like DACA. Limitations often include availability limited by state or by the school.

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Credit Financial

Credit Cards: Best Low-Interest Cards of 2021

credit cards with low interest rates

When you qualify for a low credit card interest rate, you qualify to reduce the overall cost of your debt over a longer period. When you borrow money or use credit, you usually have to pay a premium on that borrowed money in the form of interest.

Citi Diamond Preferred Card

This is a card with a 0% introductory rate, but the great part about the introductory rate is that it lasts for a year and a half. A full 18 months of zero interest can be a goldmine if you have some debt to catch up on. Once the intro period is over the interest rate will revert to the rate stated in the terms, generally a 14%-27% variable APR. To qualify for this card the applicant will need excellent credit and a FICO of between 720 and 850.

Discover Cash Back

Discover has reinvented itself in recent years as a very competitive card company, and this card is another reason why. The $0 annual fee and 0% APR intro period for a robust 14 months make this an attractive card that you do not need to have nearly-perfect credit to qualify for. They will accept applicants with a credit score as low as 690 with improving terms for scores up to 850.

Chase Freedom Unlimited

The Chase Freedom Unlimited card is another great card with a 0% APR for 15 months on purchases. It also has an entry point for consumers with credit scores from 850 down to just 690, so if you have faced some credit challenges this card might be a great match to get caught up.

In the first 3 months, spending $500 on purchases earns a $200 bonus, a legitimately nice return. The customer also earns 5% on travel purchases, 3% at restaurants, other dining, and drugstores. There is no minimum to redeem the cashback, like on some other cards.

Blue Cash Everyday Card

For a card with a great 0% APR intro period, and nice cash back benefits beyond that, the Blue Cash Everyday card is an enticing option. The intro period is a leisurely 15 months, and the APR after that can range from 13.99% up to 23.99%.

If you spend $1,000 in the first 3 months, you get $200 back. Additionally, you 3% back at grocery stores, up to $6,000 in a year, 2% back from gas stations and select department stores, and 1% back on other purchases.

U.S. Bank Visa Platinum Card

If you are one of the few who can qualify for the U.S. Bank Visa Platinum card, you should certainly consider having one. They provide a 0% intro APR for a massive 20 months, and a variable APR of between 14.49% and 24.49% after that. You’ll need a credit score of 720-850 to get in the door. Additionally, paying with the card provides up to $600 to protect against cellphone damage and theft.

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Financial Loans

What Are The Best Car Loans

best car loans

When purchasing a car, one major obstacle for many people is the cost. Even inexpensive cars can cost thousands of dollars. Many people don’t have thousands of dollars to spend at once, especially if they need a new car as soon as possible. Getting a car loan can help you cover the cost of the car while offering easy ways to repay.

When shopping for a vehicle, one of the steps that shouldn’t be neglected is looking for auto loans. Finding the right loan can help you save money while repaying the loan and negotiating with dealerships. Having a car can help you negotiate a lower rate, or even decrease monthly payments.

PenFed Credit Union

PenFed Credit Union offers low rates for new and used auto loans. They even offer to refinance loans. They offer loans from $500 up to $100,000 so that no car is out of reach. Depending on what kind of loan you are applying for, rates can start as low as 1.39% for a new car. To get a loan from PenFed, you will need to join the credit union, but those standards are easy to meet.

LightStream

LightStream is an auto loan company where the application can be completed entirely online with money often coming in the next day. They offer a variety of loan types, including new and used cars and classic car loans. The loan rates range from 2.49% to 9.49%, with applicants with the best credit getting the lowest rates.

Bank of America

Bank of America is a familiar financial institution to many, making them a welcome choice for many people. They also offer rates as low as 2.59% with a maximum of $7,500 for a loan. They do not give out loans for cars older than ten years or with more than 125,000 miles. Borrowers can choose from a 48, 60, or 72-month long loan after completing the quick application process.

Consumers Credit Union

Consumers Credit Union offers auto loans as low as 2.69% for up to 60 months. They also don’t have a minimum or maximum loan amount, loans are approved based on your credit history and the car report. Borrowers must also be a member of the credit union, which requires a payment of $5.

myAutoLoan

myAutoLoan is the best choice for people with a poor credit score. This is a marketplace option where borrowers can compare multiple offers and choose the loan best for them. The application process is quick and borrowers can compare four lenders. Loans are as low as 2.49% for new, used, and refinancing loan options.

Summary

Buying a car is expensive and many people can struggle to cover the expensive costs. Having a loan will help you buy off the car without a high-interest rate. Even if you have a history of bad or low credit, it is possible to find a lender that will help you. Get the car of your dreams with an auto loan.