How to Copy Warren Buffet’s Biggest Investment of 2020

Some of the links in this post are from our sponsors. We provide you with accurate, reliable information. Learn more about how we make money and select our advertising partners.

Warren Buffett is notoriously a good investor. Sure, he’s made some mistakes along the way (who hasn’t?), but whatever move he makes, you can bet he’s thought it through, and it will pay off — big time.

Which is why when Mr. Buffett made his biggest stock purchase of the year into Apple, we thought, “Isn’t it too late to do that?” Apple is already trading at the highest price it ever has. It feels out of reach for us non-billionaires.

But it turns out, that’s not the case. While we don’t have the ability to own $111 billion (yes, billion with a B) in AAPL shares, we can still get our hands on some — and reap the rewards as the market goes up.

One of our favorite ways to get into the stock market and be a part of infamous big-tech returns, without risking billions is through a free app called Stash.

It lets you be a part of something that’s normally exclusive to the richest of the rich — on Stash you can buy pieces of other companies — including Buffett’s choices — for as little as $1.

That’s right — you can invest in pieces of well-known companies, such as Amazon, Google, Apple and more for as little as $1. The best part? If these companies profit, so can you. Some companies even send you a check every quarter for your share of the profits, called dividends.1

It takes two minutes to sign up, and it’s totally secure. With Stash, all your investments are protected by the Securities Investor Protection Corporation (SIPC) — that’s industry talk for, “Your money’s safe.”2

Plus, when you use the link above, Stash will give you a $5 sign-up bonus once you deposit $5 into your account.*

Kari Faber is a staff writer at The Penny Hoarder.

1Not all stocks pay out dividends, and there is no guarantee that dividends will be paid each year.

2To note, SIPC coverage does not insure against the potential loss of market value.

For Securities priced over $1,000, purchase of fractional shares starts at $0.05.

*Offer is subject to Promotion Terms and Conditions. To be eligible to participate in this Promotion and receive the bonus, you must successfully open an individual brokerage account in good standing, link a funding account to your Invest account AND deposit $5.00 into your Invest account.

The Penny Hoarder is a Paid Affiliate/partner of Stash. 

Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk. 

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

What Causes of Death are not Covered by Life Insurance?

The death of a loved one is hard to take and while a life insurance payout can ease the burden and allow you to continue leaving comfortably, it won’t take the grief or the heartbreak away. What’s more, if that life insurance policy refuses to payout, it can make the situation even worse, adding more stress, anxiety, anger, and frustration to an already emotional period.

But why would a life insurance claim be refused; what are the causes of death that may cause your life insurance coverage to become null and void? If you or a loved one has a life policy, this article could provide some essential information as we look at the reasons a death claim may be refused.

What Causes of Death are Not Covered?

The extent of your life insurance coverage will depend on your specific policy and this is something you should check when filing your life insurance application. Speak with your insurance agent, ask questions, and always do your due diligence so that you know what you’re buying into and what sort of deaths it will provide cover for.

Life insurance policies have something known as a contestability period, which typically lasts for 1 to 2 years and begins as soon as the policy starts. If the policyholder dies during this time, they will investigate and contest the death. 

This is generally true whether her you die of a heart attack, cancer or suicide. However, if this period has passed, they may only contest the death if it results from one of the following.

Suicide

Suicide is a contentious issue where life insurance is concerned. On the one hand, it’s a very serious issue and one that’s often the result of mental health problems, so there are those who believe it is deserving of the same respect as any other illness. 

On the other hand, the life insurance companies are concerned that allowing such coverage will encourage desperate people to kill themselves so their loved ones will be financially secure.

It’s a touchy subject, and that’s why many companies refuse to go anywhere near it. Some will outright refuse to pay out for suicide, but the majority have a suicide clause, whereby they only payout if the death occurs after a specific period of time.

If it occurs before this time, they may return the premiums or pay nothing at all. And if they have reason to believe that the policyholder took their own life just for financial gain, they will almost certainly investigate and may refuse to pay.

Dangerous Hobbies and Driving

If you die in a car accident and it is deemed that you were driving drunk, your policy may not payout. Car accident deaths are common, and this is a cause of death that policies do generally cover, but only when you weren’t doing something illegal or driving recklessly.

Deaths from extreme activities like bungee jumping or skydiving may be questioned, especially if these hobbies were not reported during the application. 

Illegal Acts

Your claim can be denied if you are committing an illegal act at the time of your death. This can include everything from being chased by the police to trespassing. A benefit may also be refused if you die for an intentional drug overdose using non-prescription drugs. 

Smoking or Pre-existing Health Issue

Honesty is key, and if you lie during the application or “forget” to tell them about your smoking status or pre-existing medical conditions, they may refuse to payout. It doesn’t matter if they performed a medical exam or not; the onus is not on them to spot your lie, it’s on you not to tell it in the first place.

This is one of the most common reasons for an insurance contract to be declared void, as applicants go in search of the cheapest premiums they can get and do everything they can to bring those costs down. They may also believe they will get away with their lies, either because they will give up smoking in a few months or years or because they will die from something other than their preexisting condition.

But lying in this manner is risky. You have to ask yourself whether it’s worth paying $100 a month for a valid policy that will payout without issue or $50 for a policy that will likely be refused and will cause endless stress for your beneficiaries.

War

Life insurance benefits generally don’t extend to the battlefield. If you’re a solider on the front line, your risk of death increases significantly, and many insurance policies won’t cover you for this. This is true even if you’re not in active duty at the time you take out the policy. More importantly, it also applies to correspondents and journalists.

You don’t invalidate your policy by going to a war-torn country and reporting, but if you die resulting from that trip, your policy will not payout.

Dismemberment

Your life insurance policy likely won’t pay for dismemberment or critical illness, but there are additional policies and add-ons that will provide cover. You can get these alongside permanent life insurance and term life insurance to provide you with more cover and peace of mind. 

They will come at a significant extra cost, but unlike traditional life insurance, they will payout when you are still alive and may make life easier after experiencing a tragic accident or serious illness.

We recommend focusing on getting life insurance first, securing the amount of coverage you need from a permanent or term life policy, and only then seeing if there is room in your budget for these additional options.

How Often Do Life Insurance Policies Payout?

We have recommended life insurance many times at PocketYourDollars and will continue to do so. We often state that it is essential if you have dependents and want to ensure they’re cared for when you die. But as much as we recommend it and as simple as the process of applying often is, there is one simple fact that we often overlook:

Life insurance companies rarely payout.

It’s a stat you may have seen elsewhere and it’s 100% true. However, contrary to what you might have heard or assumed; this is not the result of a refusal to pay the death benefit when the policyholder passes away. Sure, this accounts for some of those non-payments, but for the most part, it’s down to one of the following:

The Policyholder Survives the Term

The majority of life insurance policies are set to fixed terms, such as 10, 20 or 30 years. If anything happens during this period of time, your loved ones collect your death benefit, but if you survive, the policy ends, no money is paid out, and if you want another policy you will need to pay a larger sum.

The Policyholder Accepts the Cash Value

Whole life insurance policies are like investments crossed with life insurance. Your loved ones get a death benefit if you die, but it also accrues interest and can be cashed out. When this happens, the insurer collects, you get a sum of money, and it feels like a win-win, but in reality, the insurer has just dodged a bullet.

The Policyholder Stops Making Payments

As soon as you stop making your premium payments, you lose cover and you run the risk of your policy being canceled. This is true for pretty much any type of policy and it happens regardless of the policy term. 

Unlike a credit card company, which may chase you for payments, a life insurance company will place the burden of responsibility on you. After all, a creditor loses money when you don’t pay, whereas a life insurance company comes out on top.

This often happens when individuals take out substantial life insurance policies at a young age, only to suffer drastically changing circumstances. Imagine, for instance, that you’re 20-years-old and you buy a house with your spouse-to-be, with a view to settling down and starting a family. You assume that you’ll need it for a long time, so you take out a 30-year-term.

But 10 years down the line, your spouse leaves you, the family you wanted didn’t happen, and you’re all alone with no dependents, and with growing debts, bills, and obligations. At that point, life insurance becomes a burden, so you may stop making payments, thus allowing the insurance company to profit from 10 years of insurance premiums.

Summary: It’s Not That Cut-Throat

You don’t have to look far to find consumers who feel they have been wronged by life insurance companies, consumers who will expend a great deal of time and effort into calling out these companies for their perceived wrongdoings. But they often exaggerate the situation due to their extreme anger and this creates unrealistic anxieties and expectations.

The truth is, while there are people who have been genuinely wronged, they are in the extreme minority. The vast majority of family members who were refused a death benefit were let down by the policyholder and by the lies they told on their policy.

Policyholders lie about their weight, smoking status, and medical conditions, and when caught up in this lie, they often claim they made an honest mistake. But the truth is, most life insurance companies will overlook simple mistakes and only really care when it’s obvious that the policyholder lied. 

And let’s be honest, it doesn’t matter how forgetful you are, you’re not going to forget that you’re a chain smoker, alcoholic, drug user, extreme sports fan or that you recently had a medical crisis!

If the policy was filed honestly, you shouldn’t have an issue when you collect, even if it’s still in the contestability period. As discussed above, life insurance companies stack the dice in their favor. They use statistics and probability to carefully set the premiums and benefits, and they rely on policyholders forgetting to pay and outliving the term. They don’t need to “rob” you in order to make a profit. So, be honest when applying and you won’t have anything to fear.

What Causes of Death are not Covered by Life Insurance? is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

Should You Keep Investing At All-Time Highs?

A note from a dedicated reader inspired today’s article. It’s a question about the stock market and investing at all-time highs. It reads:

Hey Jesse. So, back in March you said that you were going to keep on investing despite the major crash. Fair enough, good call!

Note: here and here are the two articles that likely inspired this comment

But now that the market has recovered and is in an obvious bubble (right?), are you still dumping money into the market?

Thanks for the note, and great questions. You might have heard “buy low, sell high.” That’s how you make money when investing. So, if the prices are at all-time highs, you aren’t exactly “buying low,” right?

I’m going to address this question in three different ways.

  1. General ideas about investing
  2. Back-testing historical data
  3. Identifying and timing a bubble

Long story short: yes, I am still “dumping” money into the stock market despite all-time highs. But no, I’m not 100% that I’m right.

General Ideas About Investing

We all know that that investing markets ebb and flow. They goes up and down. But, importantly, the stock market has historically gone up more than it has gone down.

Why does this matter? I’m implementing an investing plan that is going to take decades to fulfill. Over those decades, I have faith that the average—the trend—will present itself. That average goes up. I’m not betting on individual days, weeks, or months. I’m betting on decades.

It feels bad to invest right before the market crashes. I wouldn’t enjoy that. But I’m not worried about the value of my investments one month from now. I’m worried about where they’ll be in 20+ years.

Stock Market Crash GIFs | Tenor

Allowing short-term emotions—e.g. fear of an impending crash—to cloud long-term, math-based thinking is the nadir of result-oriented thinking. Don’t do it.

Don’t believe me? Here’s a fun idea. Google the term “should I invest at all-time highs?”

When I do that, I see articles written in 2016, 2017, 2018…you get it. People have been asking this question for quite a while. All-time highs have happened before, and they beg the question of whether it’s smart to invest. Here’s the S&P 500 data from 2016 to today.

S&P 500 – Past five years. Punctuation my own addition.

So should you have invested in 2016? In 2017? In 2018? While those markets were at or near all-time highs, the resounding answer is YES! Investing in those all-time high markets was a smart thing to do.

Let’s go further back. Here’s the Dow Jones going back to the early 1980s. Was investing at all-time highs back then a good idea?

I’ve cherry-picked some data, but the results would be convincing no matter what historic window I chose. Investing at all-time highs is still a smart thing to do if you have a long-term plan.

Investing at all-time highs isn’t that hard when you have a long outlook.

But let’s look at some hard data and see how the numbers fall out.

Historical Backtest for Investing at All-Time Highs

There’s a well-written article at Of Dollars and Data that models what I’m about to do: Even God Couldn’t Beat Dollar-Cost Averaging.

But if you don’t have the time to crunch all that data, I’m going to describe the results of a simple investing back-test below.

First, I looked at a dollar-cost averager. This is someone who contributes a steady investment at a steady frequency, regardless of whether the market is at an all-time high or not. This is how I invest! And it might be how you invest via your 401(k). The example I’m going to use is someone who invests $100 every week.

Then I looked at an “all-time high avoider.” This is someone who refuses to buy stocks at all-time highs, saving their cash for a time when the stock market dips. They’ll take $100 each week and make a decision: if the market is at an all-time high, they’ll save the money for later. If the market isn’t at an all-time high, they’ll invest all their saved money.

The article from Of Dollars and Data goes one step further, if you’re interested. It presents an omniscient investor who has perfect timing, only investing at the lowest points between two market highs. This person, author Nick Maggiulli comments, invests like God would—they have perfect knowledge of prior and future market values. If they realize that the market will be lower in the future, they save their money for that point in time.

What are the results?

The dollar-cost averager outperformed the all-time high avoider in 82% of all possible 30-year investing periods between 1928 and today. And the dollar-cost averager outperformed “God” in ~70% of the scenarios that Maggiulli analyzed.

How can the dollar-cost averager beat God, since God knows if there will be a better buying opportunity in the future? Simple answer: dividends and compounding returns. Unless you have impeccable—perhaps supernatural—timing, leaving your money on the sidelines is a poor choice.

Investing at all-time highs is where the smart money plays.

Identifying and Timing a Bubble

One of my favorite pieces of finance jargon is the “permabear.” It’s a portmanteau of permanent and bear, as in “this person is always claiming that the market is overvalued and that a bubble is coming.”

Being a permabear has one huge benefit. When a bubble bursts—and they always do, eventually—the permabear feels righteous justification. See?! I called it! Best Interest reader Craig Gingerich jokingly knows bears who have “predicted 16 of the last 3 recessions.”

Source: advisorperspectives.com

Suffice to say, it’s common to look at the financial tea leaves and see portents of calamity. But it’s a lot harder to be correct, and be correct right now. Timing the market is hard.

Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.

Peter Lynch

Predicting market recessions falls somewhere between the Farmers’ Almanac weather forecast and foreseeing the end of the world. It takes neither skill nor accuracy but instead requires a general sense of pattern recognition.

Note: The Farmers’ Almanac thinks that next April will be rainy. Nice work, guys. And I, too, think the world will end—at least at some point in the next few billions of years.

I have neither the skill nor the inclination to identify a market bubble or to predict when it’ll burst. And if someone convinces you they do have that skill, you have two options. They might be skilled. Or they are interested in your bank account. Use Occam’s Razor.

Just remember: some permabears were screaming “SELL!” in late March 2020. I’ve always heard “buy low, sell high.” But maybe selling your portfolio at the absolute market bottom is the new secret technique?

“But…just look at the market”

I get it. I hear you. And I feel it, too. If feels like something funny is going on.

The stock market is 12% higher than it was a year ago. It’s higher than it was before the COVID crash. How is this possible? How can we be in a better place mid-pandemic than before the pandemic?

Crazy Pills GIFs | Tenor

One explanation: the U.S. Federal Reserve has dropped their interest rates to, essentially, zero. Lower interest rates make it easier to borrow money, and borrowing money is what keeps businesses alive. It’s economic life support.

Of course, a side effect of cheap interest rates is that some investors will dump their cheap money into the stock market. The increasing demand for stocks will push the price higher. So, despite no increase (and perhaps even a decrease) in the intrinsic value of the underlying publicly-traded companies, the stock market rises.

Is that a bubble? Quite possibly. But I’m not smart enough to be sure.

The CAPE ratio—also called the Shiller P/E ratio—is another sign of a possible bubble. CAPE stands for cyclically-adjusted price-to-earnings. It measures a stock’s price against that company’s earnings over the previous 10-years (i.e. it’s adjusted for multiple business cycles).

Earnings help measure a company’s true value. When the CAPE is high, it’s because a stock’s price is much greater than its earnings. In other words, the price is too high compared to the company’s true value.

Buying when the CAPE is high is like paying $60K for a Honda Civic. It doesn’t mean that a Civic is a bad car. It’s just that you shoudn’t pay $60,000 for it.

Similarly, nobody is saying that Apple is a bad company, but its current CAPE is 52. Try to find a CAPE of 52 on the chart above. You won’t find it.

So does it make sense to buy total market index funds when the total market is at a CAPE of 31? That’s pretty high, and comparable to historical pre-bubble periods. Is a high CAPE representative of solid fundamentals? Probably not, but I’m not sure.

My Shoeshine Story

There’s an apocryphal tale of New York City shoeshines giving stock-picking advice to their customers…who happened to be stockbrokers. Those stockbrokers took this as a sign of an oncoming financial apocalypse.

The thought process was: if the market was so popular that shoe shines were giving advice, then the market was overbought. The smart money, therefore, should sell.

I recently heard a co-worker talking about his 12-year old son. The kid uses Robin Hood—a smartphone app that boasts free trades to its users. Access to the stock market has never been easier.

According to his dad, the kid bought about $100 worth of Advanced Micro Devices (ticker = AMD). When asked what AMD produces, the kid said, “I don’t know. I just know they’re up 60%!”

This, an expert might opine, is not indicative of market fundamentals.

But then I thought some more. Is this how I invest? What does your index fund hold, Jesse? Well…a lot of companies I’ve never heard of. I just know it averages ~10% gains every year! My answer is eerily similar.

I’d like to believe that I buy index funds based on fundamentals that have been justified by historical precedent. But, what if the entire market’s fundamentals are out of whack? I’m buying a little bit of everything, sure. But what if everything is F’d up?

Closing Thoughts

Have you ever seen a index zealot transmogrify into a permabear?

Not yet. Not today.

I do understand why some warn of a bubble. I see the same omens. But I don’t have the certainty or the confidence to act on omens. It’s like John Bogle said in the face of market volatility:

Don’t do something. Just stand there.

John Bogle

Markets go up and down. The U.S. stock market might crash tomorrow, next week, or next year. Amidst it all, my plan is to keep on investing. Steady amounts, steady frequency. I’ve got 20+ years to wait.

History says investing at all-time highs is still a smart thing. Current events seem crazy, but crazy has happened before. Stay the course, friends.

And, as always, thanks for reading the Best Interest. If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This article—just like every other—is supported by readers like you.

Source: bestinterest.blog

15 Reasons to Invest After Retirement

Working for a company with no retirement plans doesn't mean you can't create your own.

The time has finally come: you’re ready to retire. For many, this means living off savings or social security, but in reality, now that you’re unemployed it’s time you started making real money. Investing after retirement is a great way to continue making income, cover expenses in lieu of a regular paycheck, and stay plugged into the booming American economy.

  1. Social security is drying up

If you plan on retiring any time after the next 20 years, you shouldn’t count on social security funds. A 2014 report estimates that social security will no longer be able to pay full benefits after 2033. This means that those that retire after this demarcation point should expect to supplement federal aid with individual income — such as investments.

  1. Life expectancy is increasing

Clean living, improved healthcare resources, increased social awareness, and many other factors have all contributed to a steady increase in life expectancy over the years. Today, being young at heart means more than ever — retirees can expect to live an additional 15 – 20 years into their twilight years. The average life expectancy today is 80, which is almost a decade older than the to 71 year life expectancy of 1960.

  1. Investing is fun

Many retirees will take up new hobbies to fill the time previously occupied by professional obligations. Why not make your daytime hobby making money? Day trading stocks is the perfect retiree activity because it’s just as complicated as you want it to be. You can trade casually, and pick up some minor gains here or there. Or, go in full bore and make it your new job. After all, investments provide extra money, so have some fun with it.

  1. Delaying social security payments boosts your benefits

Let’s say your investments are performing exceptionally well, and maybe you don’t necessarily need social security yet. Your social security payout increases by 8 percent for every year you delay payments. So if you’ve held off on social security, and it has come time to cash out investments, your federal retirement benefits will be worth far more than usual.

  1. Moving

Want to spend the next chapter of your life in Myrtle Beach? Naples, Florida? Now that you’re retired, you’re free to live anywhere you want — unfettered by professional constraints, the world is your oyster. But there’s one problem: how will you afford it? Your savings account should be preserved for medical expenses, and you already checked the couch cushions for loose change. Well, investments with high yield interest rates or dividend payments are a good way to boost your income and gain a little extra cash.

  1. You earned it

What has decades of penny pinching amounted to if you can’t spend your savings during retirement? Part of the reason you budgeted so carefully in your professional years is to ensure security as you grow old. Well, here you are, and it’s time to tap that sacred savings account. As you assess your finances in old age, consider how much savings you’re willing to gamble on the market — what do you have to lose?

  1. There’s no better time to invest than now

This is not to say that the market is particularly ripe for new investors right now — although 2017 saw record high economic numbers — but more so that anytime is a good time to invest. You can guarantee the market will fluctuate in your 15+ years of retirement, but that’s not the point. As long as you build a portfolio that can bear a bear market, you will be in good shape to weather market slumps. As they say, “don’t play with scared money.”

  1. Grandchildren

Your kids are all grown up, but that doesn’t mean you’re off the hook. As a retired grandparent, you’re in charge of vacations, dinners out, movie nights, and other fun activities with the grandkids. And, you guessed it, one of the best ways to bankroll fun money is through thriving investments. In fact, while it might not be the most exciting prospect for the kid, a safe, slow-maturing investment is a great grandkid birthday gift.

  1. Jumpstart a startup

Are you passionate about the future of tech? Small philanthropies? Artisan dog treats? Whatever your calling may be, there is likely a startup that you can help get off the ground. One study found that 100 million startups try to get off the ground every year, and they need your help. Invest in a cause you care about, and in the process make someone’s entrepreneurial dreams come true.

  1. Broaden your horizons

Now that you’re retired it’s time to read those books you never got around to, learn a new skill, travel the world, and, most importantly, diversify your portfolio. Financial experts suggest that retirees pursue many different types of assets to help offsite potential market volatility.

  1. Travel

For most, vacation tops the list of most anticipated retirement activities. It’s easy to get swept up in fantasies of cold beer and catching rays on the beach, but you you need a way to pay for it. Investments are a good way to compound your savings, and make a little extra vacation money.

  1. Health

Studies show that retirees require upwards of $260,000 to cover medical expenses as they age. Maybe, thanks to years of frugality, you have this kind of money in savings, but it never hurts to stash away a little extra cash. The population nearing retirement needs to be able to expect the unexpected, so use the stock market as an opportunity to compound your emergency fund in case of expensive medical bills.

  1. Taxes

Just because you’re retired doesn’t mean you can avoid the taxman — after all, according to Benjamin Franklin, alongside death, taxes are one of the two certainties in life. While you no longer have to pay payroll taxes, you will still pay taxes on social security benefits. Plus, you are required to pay taxes on IRA withdrawals. Tax season can feel extra overwhelming if you are without a reliable source of income, so avoid the April financial crunch and tap investment gains to pay taxes during retirement.

  1. Support a company you care about

If you’re on the verge of retirement you probably had a long, prosperous career. Maybe you jumped around to different positions, or maybe you logged a couple decades at one company. Either way, chances are there is a company you want to be involved with that you never got a chance to work at. Investing in a company is a good way to gain a sense of belonging, and do your part to support a company dear to your heart — even if you never actually worked there.

  1. Stay sharp on market trends

All of the financial benefits of investments aside, investing in the market gives you a reason to care. One of the scariest prospects of retirement is the threat of complacency, so fend off apathy by giving yourself a reason to stay up-to-date. You are far more likely to take a keen interest in economic trends when you have a little skin in the game.
If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Image Portra

The post 15 Reasons to Invest After Retirement appeared first on Credit.com.

Source: credit.com

Things Break. How to Make Sure Your Emergency Fund Can Cover Them

Some of the links in this post are from our sponsors. We provide you with accurate, reliable information. Learn more about how we make money and select our advertising partners.

Your washing machine. Your car. Your front tooth.

If any of those broke right now, would you be able to get it fixed immediately? Or would you have to walk around with a gap in your smile for months until you could get the money together?

If you can’t afford to pay to fix it today, you’re not alone. Most people don’t have $400 saved in case of an emergency either. So before your car breaks down on the side of the road on your way to an interview, make sure you have a solid emergency fund of at least $500.

Don’t know how to get there? Having a budget (that you actually stick to) can help you get there. Here’s one budgeting strategy we recommend, and four other tips that can help you keep your expenses in line.

1. The 50/30/20 Budgeting Rule

The 50/30/20 rule is one of the simplest budgeting methods out there, which is why you’ve probably heard us talk about it before if you’re a regular TPH reader. There are no fancy spreadsheets or pricy apps to download (unless you want to), and it’s very straightforward.

Here’s how it shakes out: 50% of your monthly take home income goes to your essentials — your rent, your groceries, your minimum debt payments, and other necessities. 30% of your cash goes to the fun stuff, and 20% is dedicated to your financial goals. That could be paying more than the minimum on your debts or adding to your investments. And it definitely includes building up your emergency fund!

If you take a look at your budget and realized you don’t have enough leftover to contribute to your emergency fund, here are a few ways to help balance your budget:

2. Cut More Than $500 From One Of Your Must-Have Bills

You’re probably overpaying the bills you have to pay each month. But you can cut those expenses down, without sacrificing anything. Maybe even enough to cover that window your kid just smashed with a ball. Definitely enough to grow your emergency fund a meaningful amount.

So, when’s the last time you checked car insurance prices?

You should shop your options every six months or so — it could save you some serious money. Let’s be real, though. It’s probably not the first thing you think about when you wake up. But it doesn’t have to be.

A website called Insure.com makes it super easy to compare car insurance prices. All you have to do is enter your ZIP code and your age, and it’ll show you your options.

Using Insure.com, people have saved an average of $540 a year.

Yup. That could be $500 back in your pocket just for taking a few minutes to look at your options.

3. Earn Up to $225 in Easy, Extra Cash

If we told you you could get free money just for watching videos on your computer, you’d probably laugh. It’s too good to be true, right? But we’re serious. You can really add up to a few hundred bucks to your emergency savings with some mindless entertainment.

A website called InboxDollars will pay you to watch short video clips online. One minute you might watch someone bake brownies and the next you might get the latest updates on Kardashian drama.

All you have to do is choose which videos you want to watch and answer a few quick questions about them afterward. Brands pay InboxDollars to get these videos in front of viewers, and it passes a cut onto you.

InboxDollars won’t make you rich, but it’s possible to get up to $225 per month watching these videos. It’s already paid its users more than $56 million.

It takes about one minute to sign up, and you’ll immediately earn a $5 bonus to get you started.

4. Ask This Website to Pay Your Credit Card Bill This Month

Just by paying the minimum amount on your credit cards, you are extending the life of your debt exponentially — not to mention the hundreds (or thousands) of dollars you’re wasting on interest payments. You could be using that money to beef up your emergency savings, instead.

The truth is, your credit card company is happy to let you pay just the minimum every month. It’s getting rich by ripping you off with high interest rates — some up to nearly 30%. But a website called AmOne wants to help.

If you owe your credit card companies $50,000 or less, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.

The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster. Plus: No credit card payment this month.

AmOne keeps your information confidential and secure, which is probably why after 20 years in business, it still has an A+ rating with the Better Business Bureau.

It takes two minutes to see if you qualify for up to $50,000 online. You do need to give AmOne a real phone number in order to qualify, but don’t worry — they won’t spam you with phone calls.

5. Get a Side Gig And Make More Money

Let’s face it — if your monthly income is less than what your monthly expenses are (and you’ve run out of things to cut), you need more money.

Well, we all could use more money. And by earning a little bit extra each month, we could make sure we’re never taken by surprise when an ER visit tries to drain our savings.

Luckily, earning money has never been easier with the rise of the “Gig Economy”. Here are 31 simple ways to make money online. Which one could you do to pad your emergency savings?

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

7 Ways to Diversify Your Investments Without Spending a Fortune

This story originally appeared on The Penny Hoarder. You know it’s a bad idea to pour your life’s savings into a single investment. It’s personal finance 101: Invest regularly, and diversify your portfolio. But a lot of times, there isn’t much guidance beyond that. So as an investor, you’re left wondering: How do you know if your portfolio is diversified? How many investments do you need in a…

Source: moneytalksnews.com

Mint Money Audit: Affording Life After Grad School

With a brand new PhD under her belt, our latest Mint audit recruit, Renee, is ready to take on the real world with gusto. The 34-year-old is eager to buy a home and ramp up her retirement savings. She currently lives in San Francisco and has just started a full-time earning $87,000 a year (before taxes).

Renee also received a sizeable inheritance, totaling about $200,000 of which she used $30,000 to pay off her student loans.

So, why does Renee want an audit, exactly? Her finances seem perfectly in order, it seems.

As Renee explains, she wants advice around the best ways to plan for big goals like home ownership and retirement. “I’m especially eager to buy my own apartment, but it is extremely daunting (and expensive) in the Bay area,” she says. As a result, she’s leaning to move to New York City (Brooklyn, specifically, where she thinks may offer more bang for her buck in some neighborhoods.)

She wants to know how much of a down payment she can reasonably afford and how to budget for monthly housing costs.

First, though, I wanted to learn more about Renee’s finances. Here’s what the quick audit revealed:

  • Retirement savings: $40,000 in a 403(b) and Roth IRA. She allocates $200 month from her paycheck to the 403(b).
  • Rent: $1,850 per month
  • Groceries: $400 per month
  • Where is all that savings parked? $100,000 in index and mutual funds, another $50,000 in an 11-month CD earning 1.5%, and remaining $20,000 in checking.

My Advice…

Play Retirement Catch-Up

For a 35-year-old worker, one rule of thumb is that you should have an amount equal to your salary in retirement savings. For Renee, who is nearing age 35, that means $80,000 to $90,000. She’s only about halfway there, so my recommendation is to play some retirement catch up. While it’s not realistic to think that she can invest another $40,000 this year, she can do better.

For starters, what about taking advantage of her company’s 403(b) match? She believes her company offers one, but wasn’t sure about the details. I suggested she learn the specifics and try to capitalize on that offer by contributing at least enough to earn the full match. Allocating closer to 10% of her salary would be ideal. (And PS. that contribution is tax deductible!)

Worried that this would stretch her paycheck too thin, I reminded Renee that she can always adjust her retirement contributions each month, but urged her to give it a try. (My bet is that it won’t be as painful as she suspects.)

Pad the Rainy Day Account?

I wasn’t sure how far her $20,000 in checking would last her. She said it would be about a 6-month reserve, which I feel is adequate. No need to make adjustments there. One thought: She may want to move that $20,000 to a savings account that’s a little less accessible (like an online account without a debit card), so that she isn’t tempted to cash it out on a whim.

Protect Your Down Payment

Renee has $100,000 in a brokerage account, which she plans to use towards a down payment in the near future. But here’s something to consider: What if the market plunges six months before you want to make a bid for a home? And you suddenly lose 15 or 20% of your investments? It would take time to recover, more time than you want.

I would personally never risk money in the stock market if I anticipated needing that money in the next five years. And according to Renee, she hopes to buy a home in the next two years. My advice: Protect the down payment from market fluctuations by moving 50% of that money over to a short-term CD and with the other $50,000 she’s got saved in an 11-month CD, use all that savings towards a future down payment.

Know How Much House You Can Really Afford

To buy in NYC or San Francisco, a 20% down payment is standard. With $100,000 to put down, that means that she’s looking at homes valued at around $500,000. With today’s current mortgage rates nearing 4% for a 30-year fixed-rate mortgage, she’s looking at close to $2,000 a month in payments. But we’ve yet to get to taxes, maintenance and home insurance.

Instead, consider a starter apartment, a studio or junior one-bedroom closer to $400,000. A 20% down payment would be $80,000, leaving her with another $20,000 for closing costs. Her monthly payments would come to around $1,500 per month, close to 30% of her take-home pay, which is a smart cap for housing payments.

 

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at farnoosh@farnoosh.tv (please note “Mint Blog” in the subject line).

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.

The post Mint Money Audit: Affording Life After Grad School appeared first on MintLife Blog.

Source: mint.intuit.com

Why You Need to Open a UGMA/UTMA Account for Your Kids

From the Mint team: As you know, Mint is a free product you can use to help stay on top of your finances. So, how do we make money? We get paid by the advertisers on our site. This compensation may affect how and where products appear on the site (and in what order). Mint.com does not include all products or all available offers. Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

 

Saving and investing for college expenses may seem overwhelming, but setting aside even small amounts can give your child a head start. While many people are aware of tax-efficient investing accounts like 529 plans, you may not know about UGMA/UTMA accounts – another way to save for educational and other expenses.

In this article, we’ll take a look at UGMA and UTMA custodial accounts, what they are, and how to determine the best way to save for your kids’ future, while getting tax advantages.

What are UGMA and UTMA accounts?

UGMA stands for the Uniform Gifts to Minors Act and UTMA stands for Uniform Transfers to Minors Act. Account-holders are “custodians,” and may transfer money into the account to benefit the minor, but the money is managed by the custodian. Typically the money is released to the minor at the age of majority (usually 21 but sometimes 18 or other ages).

How do UGMA and UTMA accounts differ from 529 plans?

529 plans differ from UGMA/UTMA account in a few key areas:

  • 529 plans can only be used for educational expenses, while UGMA/UTMA accounts can be used for anything that benefits the child. .
  • 529 plans are owned and controlled by the person who created the account – with UTMA/UGMA accounts, the funds are transferred to the beneficiary at the age of majority.
  • Unlike 529 plans, custodial accounts are considered the property of the child, which means that it counts for a higher percentage in financial aid calculations.

The two types of plans share some similarities:

  • Both types of accounts are considered custodial accounts that can be used for the benefit of a minor.
  • Anyone can contribute to either type of account — there are no restrictions based on one’s personal income

If you have a medium to long-term horizon, either a UGMA/UTMA account or a 529 account is usually better than just putting your money in a savings account at a low-interest rate. And don’t forget that it is possible to have both a 529 plan AND a UGMA/UTMA account for the same child.

Why You Need to Open a UGMA/UTMA Account for Your Kids

Unlike with a 529 plan, the funds in a custodial account do not have to be used solely for higher-education expenses. The custodian can withdraw money in a UGMA/UTMA custodial account for any expense that benefits the child, like technology, transportation, housing, or any other expense for the child.

The biggest advantage of UGMA/UTMA custodial accounts is their flexibility. Because they can be used for a wide array of expenses, you can use the money in the account even if your child chooses not to go to college. While earnings do not grow completely tax-free like in a 529 plan, earnings in a UGMA/UTMA account are tax-advantaged, but in a different way.

Depending on how you file your tax return, a guardian can choose to include their child’s unearned income with their own tax return. Unearned income is money that doesn’t come from employment, like from interest or investments. In 2020, the first $1,100 of a child’s unearned income can be claimed on the guardians’ tax return tax-free, and the next $1,100 is taxed at the child’s tax rate, which is likely much lower than their parent’s.

Things to watch out for with UGMA or UTMA accounts

If you’re looking to save money or transfer assets to your kids for a variety of expenses beyond education, a UGMA/UTMA custodial account can make a lot of sense. One thing to watch out for is that a UGMA/UTMA account is tied specifically to one named beneficiary. Unlike a 529 plan, where you can transfer the money in an account to a sibling or other beneficiary, with a UGMA/UTMA account, any unused funds must be used or distributed by the time the child reaches their age of majority or their state’s maximum age for custodial accounts.

Apps like Acorns are making it easy to start a UTMA/UGMA account with their new product, Acorns Early. You can start in under a few minutes and set Recurring Investments starting at $5 a day, week, or month. Fun fact: If you invest $5 a day from birth, considering a 7% average annual market return, you could have more than $70,000 by the time the child turns 18. To learn more, visit Acorns.com/Early.


The post Why You Need to Open a UGMA/UTMA Account for Your Kids appeared first on MintLife Blog.

Source: mint.intuit.com