This lack of confidence is exacerbated by current market conditions. Higher interest rates and inflated home prices have deterred many would-be buyers, with 57% of respondents unsure if now is the right time to buy, up from 48% last year. Despite these challenges, the desire for homeownership remains strong. 76% of prospective buyers still plan … [Read more…]
Kitreel – stock.adobe.com
Initiatives that aimed to reduce costs involved with purchasing a home were a key portion of the White House’s activities both before and after President Biden’s State of the Union speech earlier this spring.
But creating affordable housing access has long been a focus of the mortgage lending community, albeit mandated for depositories as part of the Community Reinvestment Act.
For example, prior to gaining notoriety for contributing to the excesses that created the Great Financial Crisis, Countrywide Financial and its CEO Angelo Mozilo were known as being the largest boosters of affordable housing programs.
In 1999, he announced a $30 billion increase in the company’s five-year commitment to serve low-income and minority borrowers, to a total of $80 billion. The first year of the commitment, Countrywide originated $20 billion of these loans.
Here are some of the latest items, both government announcements as well as from within the industry, aimed to aid people who need assistance buying a home:
Source: nationalmortgagenews.com
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Living stingy is easy!
Now, don’t get me wrong – this isn’t for everyone.
It takes a certain type of person to be able to go without and not feel deprived. But if you can handle it, living stingy is the way I recommend going because it has allowed me much more freedom and saved me a lot of money.
Saving money is a skill.
I’m not talking about saving for your retirement, buying a house, or funding the honeymoon of your dreams. I’m talking about making small changes in our day-to-day routine that can add up to big savings each month and over time.
Whether you’re just starting out with these money habits or already living them, read this post and begin to change your daily habits.
Many times we look at living stingy as being a frugal jerk.
However, by living stingy, you are looking at the overall picture – financial, resourceful, and creative with your money.
You will learn all you need to know in order for you to start living stingy today!
In this post, we will explore why living stingy can be better than you could ever imagine and how simple habit change leads to enduring happiness.
Living stingy is a lifestyle that encourages spending less than you earn.
The meaning of living stingy can help people to save more money, achieve financial independence, and have more time to spend with loved ones.
Now, that is something everyone needs in their lives!
In order to live stingily, it is important to focus on delaying instant gratification and staying on a tight budget. This means that you need to set goals in terms of what you want your money spent for in the future.
Understandably, how to live stingily is different for each person. For some, it may mean penny-pinching and for others cutting out non-essential items such as takeaway or eating out too frequently.
In order to live a life of financial freedom and satisfaction, you must find your personal meaning behind sacrifice that works with your lifestyle choices.
The term “living stingy” is a bit of an oxymoron. It’s not about being poor or depriving yourself, but instead, it means cutting out non-essentials such as takeaway and eating out in order to save money for the future.
Living stingy is a lifestyle that promotes frugal living. It is not about denying yourself anything that you want or need, but rather it is about changing your mindset. Speficially, learning that the small things in life are all that counts.
Living stingy is not about being miserly, but rather about living within your means and making financial goals for yourself.
Most people live beyond their means and are in debt which leads to stress, unhappiness, and other problems. Living stingy can help you avoid these issues by bringing balance into your life.
Typically, these are the benefits of living stingy.
For many, living stingy sounds unappealing for these reasons.
The majority of the time, living a stingy life is actually not as bad as it seems.
Although the list of benefits of a stingy life seems like a good idea to live a stingy life, you have to ways the many pros and cons that come along with this type of lifestyle.
By living stingy, it is amazing what living this way will do for your financial success.
That is reason enough to go ahead and explore this type of lifestyle.
It is important to have goals in order for you to know what you are working towards.
Also, it is important that your goals are realistic so that the process of reaching them will be easier.
Goals should be specific and measurable, such as saving $1,000 in a month or getting your house paid off within 10 years.
Possible Financial Goals:
You must identify your financial goals and the time frame to accomplish them. Learn more smart financial goals to accomplish.
When you are starting out, it’s important to have a budget for your lifestyle in order to live comfortably. This can be anything from how much money you need for food and clothes every month to how much you can afford to contribute to your retirement fund.
Making a budget is an important part of achieving your goals.
It keeps you from wasting money on unnecessary items!
It is important to budget for what you need and want in life, as you should spend money on things that align with your values.
To help you achieve this, you can use one of the best budgeting apps to track every dollar of income and expenses. This will help you know how much cash flow you have left at the end of each month.
Cutting unnecessary expenses can help you save money and live your life the way you want to.
You must reevaluate your daily routine by identifying what needs are necessary for each day, then making a budget that accommodates them all. Then, cut out the excess.
There are a lot of ways that you can reduce your bills. You can find what is costing you the most and cut it out, or automate some tasks so that they happen automatically every month.
Below, we will have many living stingy tips to help you out.
The goal of living stingy is to make more money than what you spend. Rather than the flip side (that most people do), which is spending more money and not making any extra cash to cover the difference.
When you spend an unnecessarily large amount of money, many of your funds will be put towards things that do not allow for a wide range of choices.
By living below your means, you will be able to prioritize your money for personal events like anniversaries or birthdays instead of spending excessively on non-essential purchases.
Learn more about living below your means.
There are many things that you can do to increase your income.
Here are some examples:
Start to increase your income by thinking about how you can turn a side hustle into a long-term opportunity.
You can increase your income on the side while maintaining your day job. Find ways to make money now.
Minimalism is the pursuit of existence with the fewest amount of things necessary to achieve the desired result of living with less.
Moreover, the biggest benefit to minimalism is that it is a trendy idea that more people agree with than living stingy.
Minimalists believe that consumption, owning things, and acquiring “stuff” leads to an overabundance of things in one’s life. In addition, you are able to save money quickly.
Saving money on purchases is a popular topic and there are many ways to do it.
One way is to only buy things that you really need and you know they will last.
Another way is to wait until they go on sale or buy them at a discount. Then, wait for things to go on sale again.
Savings on unnecessary purchases is the first step to financial freedom.
If you’re looking to save money in your day-to-day life, apps like Ibotta and Rakuten are a great way to do that. These apps allow you to find the lowest price possible for products or give you cash back just for making a purchase.
Selling items you do not use is a way of getting rid of things that are taking up space in your house or collecting dust. Also, it is helpful for those who want to buy something but can’t afford it.
Plus it is a great way to make some extra money on the side without actually having to work for it.
By selling your unwanted household items rather than disposing of them, you will live a more waste-free life while saving money too!
Not sure you like the idea… Check out Flea Market Flippers making $100k a year!
To be stingy with your time is to be up-to-date on important tasks and not spend too much time on some other, less important task.
Too many times you are always busy and never have time to do what you love. When you are in this situation, it is easy to get caught up in doing things that don’t really matter in the grand scheme of things.
It is important to be mindful of where you spend your time so you can enjoy life more and achieve your financial goals.
You can waste a lot of time by scrolling on the phone or watching Netflix and chilling rather than doing actual work.
While, it is important not to over-commit yourself, but also make sure you’re enjoying life too! Understand the true meaning of time freedom.
An action plan is a list of tasks that are steps to success. It can be as long or short as you want, but it should include things to start living stingy and enjoy your life more.
If you have specific financial goals, ensure you are budgeting appropriately. Even if your goal is to save money with a certain amount of time, it is important that you take the necessary steps in order to achieve this goal.
Create an action plan with milestones so that when each milestone is reached it can be celebrated!
Unfortunately, too many people have grand ideas. But, they never put them into action. Thus, you are left with another month or year that has gone by with no changes.
Living stingy means spending less than you earn and saving your money, but it is not easy to do for some people.
It is important to understand how when living stingy it can mean to take the plunge into financial independence.
Remember, living stingy is a term that describes the act of living with frugality and saving money. There are many ways to live stingy, and these tips will help you start on your journey to achieve financial goals.
The tips in this post are meant to help you live a life of stingy-ness.
If you want to spend less money today to be able to save more later, then living stingy may be your thing. However, if you want to make big changes and achieve a completely different lifestyle, then you may need to be more open-minded.
All in all… it depends on what your goals are and where you’re starting from.
What is it that you want to accomplish in the next 6 months, a year, 5 years, or a lifetime?
Everyone has their own idea of what they’re looking for. Some might be saving up money while others may be trying to make large purchases like cars or houses.
Whatever motivates you and keeps you on your toes, then that is what you want to focus on. Plus, you will save money along the way.
Today, you have learned the basic steps to take to start living stingy as well as specific easy tips to living stingy.
Now, all you have to do is decide that living stingy is a lifestyle you want.
True financial success is a collaborative effort.
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Source: moneybliss.org
With REIT investing, you gain access to income-producing properties without having to own those properties outright. REITs may own several different kinds of properties (e.g. commercial, residential, storage) or focus on just one or two market segments.
Real estate investment trusts or REITs can be a great addition to a portfolio if you’re hoping to diversify. REIT investing might appeal to experienced investors as well as beginners who are looking to move beyond stocks and bonds.
Key Points
• REITs provide a way to invest in income-producing real estate without owning the properties directly.
• REITs must distribute at least 90% of taxable income to shareholders as dividends.
• Types of REITs include equity, mortgage, and hybrid, each with different investment focuses.
• Investing in REITs can be done through shares, mutual funds, or ETFs, available via brokerages.
• Benefits of REITs include potential for high dividends and portfolio diversification, while risks involve liquidity and sensitivity to interest rates.
A REIT is a trust that owns different types of properties that generate income. REITs are considered a type of alternative investment, because they don’t move in sync with traditional stock and bond investments.
Some of the options you might find in a REIT can include:
• Apartment buildings
• Shopping malls or retail centers
• Warehouses
• Self-storage units
• Office buildings
• Hotels
• Healthcare facilities
REITS may focus on a particular geographic area or property market, or only invest in properties that meet a minimum value threshold.
A REIT may be publicly traded, meaning you can buy or sell shares on an exchange the same as you would a stock. They can also be non-traded, or private. Publicly traded and non-traded REITs are required to register with the Securities and Exchange Commission (SEC), but non-traded REITs aren’t available on public stock exchanges.
Private REITs aren’t required to register with the SEC. Most anyone can invest in public REITs while private REITs are typically the domain of high-net-worth or wealthy investors.
With REIT investing individuals gain access to various types of real estate indirectly. The REIT owns and maintains the property, collecting rental income (or mortgage interest).
Investors can buy shares in the REIT, which then pays out a portion of the collected income to them as dividends.
To sum it up: REITs let investors reap the benefits of real estate investing without having to buy property themselves.
Certain guidelines must be met for an entity to qualify as a REIT. The majority of assets must be connected to real estate investment. At least 90% of taxable income must be distributed to shareholders annually as dividend payouts.
Additionally, the REIT must:
• Be organized in a way that would make it taxable as a corporation if not for its REIT status
• Have a board of trustees or directors who oversee its management
• Have shares that are fully transferable
• Have at least 100 shareholders after its first 100 as a REIT
• Allow no more than 50% of its shares to be held by five or fewer individuals during the last half of the taxable year
• Invest at least 75% of assets in real estate and cash
• Generate at least 75% of its gross income from real estate, including rents and mortgage interest
Following these rules allows REITs to avoid having to pay corporate tax. That benefits the REIT but it also creates a secondary boon for investors, since the REIT may be better positioned to grow and pay out larger dividends over time.
The SEC classifies three categories of REITs: equity, mortgage, and hybrid. Each type of REIT may be publicly traded, non-traded, or private. Here’s a quick comparison of each one.
• Equity REITs own properties that produce income. For example, an equity REIT might own several office buildings with units leased to multiple tenants. Those buildings generate income through the rent the tenants pay to the REIT.
• Mortgage REITs don’t own property. Instead, they generate income from the interest on mortgages and mortgage-backed securities. The main thing to know about mortgage REITs is that they can potentially produce higher yields for investors, but they can also be riskier investments.
• Hybrid REITs own income-producing properties as well as commercial mortgages. So you get the best (and potentially, the worst) of both worlds in a single investment vehicle.
Aside from these classifications, REITs can also be viewed in terms of the types of property they invest in. For example, there are storage-unit REITs, office building REITs, retail REITs, healthcare REITS, and more.
Some REITs specialize in owning land instead of property. For example, you might be able to own a stake in timberland or farmland through a real estate investment trust.
REITs make money from the income of the underlying properties they own. Again, those income sources can include:
• Rental income
• Interest from mortgages
• Sale of properties
As far as how much money a REIT can generate, it depends on a mix of factors, including the size of the REIT’s portfolio, its investment strategy, and overall economic conditions.
Reviewing the prospectus of any REIT you’re considering investing in can give you a better idea of how it operates. One thing to keep in mind with REITs or any other type of investment is that past performance is not an indicator of future returns.
There are a few ways to invest in REITs if you’re interested in adding them to your portfolio. You can find them offered through brokerages and it’s easy to open a trading account if you don’t have one yet.
The first option for investing in REITs is to buy shares on an exchange. You can browse the list of REITs available through your brokerage, decide how many shares you want to buy, and execute the trade. When comparing REITs, consider what it owns, the potential risks, and how much you’ll need to invest initially.
You might buy shares of just one REIT or several. If you’re buying multiple REITs that each hold a variety of property types, it’s a good idea to review them carefully. Otherwise, you could end up increasing your risk if you’re overexposed to a particular property sector.
REIT mutual funds allow you to own a collection or basket of investments in a single vehicle. Buying a mutual fund focused on REITs may be preferable if you’d like to diversify with multiple property types.
When researching REIT funds, consider the underlying property investments and also check the expense ratio. The expense ratio represents the annual cost of owning the fund. The lower this fee is, the more of your investment returns you get to keep.
Again, you can find REIT mutual funds offered through a brokerage. It’s also possible to buy them through a 401(k) or similar workplace retirement plan if they’re on your plan’s list of approved investments.
A REIT exchange-traded fund (or ETF) combines features of stocks and mutual funds. An ETF can hold multiple real estate investments while trading on an exchange like a stock.
REIT ETFs may be attractive if you’re looking for an easy way to diversify, or more flexibility when it comes to trading.
In general, ETFs can be more tax-efficient than traditional mutual funds since they have lower turnover. They may also have lower expense ratios.
Are REITs right for every investor? Not necessarily, and it’s important to consider where they might fit into your portfolio before investing. Weighing the pros and cons can help you decide if REITs make sense for you.
• Dividends. REITs are required to pay out dividends to shareholders, which can mean a steady stream of income for you should you decide to invest. Some REITs have earned a reputation for paying out dividends well above what even the best dividend stocks have to offer.
• Diversification. Diversifying your portfolio is helpful for managing risk, and REITs can make that easier to do if you’re specifically interested in property investments. You can get access to dozens of properties or perhaps even more, inside a single investment vehicle.
• Hands-off investing. Managing actual rental properties yourself can be a headache. Investing in REITs lets you reap some of the benefits of property ownership without all the stress or added responsibility.
• Market insulation. Real estate generally has a low correlation with stocks. If the market gets bumpy and volatility picks up, REITs can help to smooth the ride a bit until things calm down again.
💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.
• Liquidity challenges. Buying REIT shares may be easy enough, but selling them can be a different matter. You may need to plan to hold on to your shares for a longer period than you’re used to or run into difficulties when trying to trade shares on an exchange.
• Taxation. REIT investors must pay taxes on the dividends they receive, which are treated as nonqualified for IRS purposes. For that reason, it might make sense to keep REIT investments inside a tax-advantaged IRA to minimize your liability.
• Interest rate sensitivity. When interest rates rise, that can cause REIT prices to drop. That can make them easier to buy if the entry point is lower, but it can make financing new properties more expensive or lower the value of the investments the REIT owns.
• Debt. REITs tend to carry a lot of debt, which isn’t unusual. It can become a problem, however, if the REIT can no longer afford to service the debt. That can lead to dividend cuts, making them less attractive to investors.
REITs can open the door to real estate investment for people who aren’t inclined to go all-in on property ownership. REITs can focus on a single sector, like storage units or retail properties, or a mix. If you’re new to REITs, it’s helpful to research the basics of how they work before diving into the specifics of a particular investment.
Ready to expand your portfolio’s growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi’s easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it’s important to consider your portfolio goals and risk tolerance to determine if they’re right for you.
Invest in alts to take your portfolio beyond stocks and bonds.
You can buy shares of a REIT through a broker if it’s publicly traded on an exchange. If you’re trying to buy shares of a private REIT, you can still go through a broker, but you’ll need to find one that’s participating in the offering. Keep in mind that regardless of how you buy a REIT, you’ll need to meet minimum investment requirements to purchase shares.
It’s possible to find REITs that allow you to invest with as little as $1,000 and some may have a minimum investment that’s even lower. Keep in mind, however, that private or non-traded REITs may require much larger minimum investments of $10,000 or even $50,000 to buy in.
If you own shares in a public REIT you can trade them at any time, the same way you could a stock. If you own a private REIT, however, you’ll typically need to wait for a redemption period to sell your shares. Redemption events may occur quarterly or annually and you may pay a redemption fee to sell your shares.
The 10-year annualized return for the S&P 500 United States REIT index, which tracks the performance of U.S. REITs, was 2.34%. Like any sector, however, REITs have performed better and worse over time. Also, the performance of different types of REITs (self-storage, strip malls, healthcare, apartments, etc.) can vary widely.
Photo credit: iStock/ozgurcoskun
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor’s risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected]. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
SOIN0124113
Source: sofi.com
You can, but we don’t recommend it. In most cases, it’s not advisable to buy a car with a credit card due to limitations on credit card transaction amounts, high-interest rates on credit card balances, and potential merchant fees. However, some dealerships may allow you to use a credit card for a portion of the payment or for a down payment, but weigh the costs and consider alternative financing options before you do.
Are you shopping for a new or used car? If so, there’s a good chance you’ll need to finance this purchase. There are several financing options available, such as an auto loan or personal loan—but what about your credit card? Can you buy a car with a credit card?
The simple answer is yes, you probably could find a car dealership willing to accept a credit card payment. The real question you may want to ask yourself is, “Should I make such a large purchase with a credit card?”
Let’s take a closer look at the advantages and disadvantages of purchasing a car with a credit card so you can decide if it’s the right option for you.
Buying a new car with a credit card is possible, but it’s not going to be easy.
First, not all car dealerships accept credit card payments. This is likely due to the high processing fees credit card payments incur. These fees can range between 1.5% and 3.5%. For example, if you purchase a car for $20,000, these processing fees can range from $300 to $700.
Even if you do find a dealership willing to take a credit card payment, you may be responsible for paying these processing fees. The dealership may also limit the amount you can pay with your credit card. For instance, you may be able to use your credit card for a down payment but not to pay for the full value of the car.
Secondly, not all credit card companies allow cardholders to make a large purchase like this. It’s important to contact your credit card company first to better understand its policies.
Finally, even if the car dealership and credit card company permit this type of purchase, you have to have enough available credit. If you go over your credit limit, you could incur additional fees and higher interest rates—or the credit card company may decide to deny the transaction altogether.
Before you grab your credit card and head to the car dealership, there are a few things you should know about making this type of purchase.
As mentioned above, not all car dealers and credit card companies allow this type of purchase. This could significantly decrease your options when you go looking for a car. You’ll be limited to finding a car at one of these dealerships.
Adding a large purchase, such as a car, to your credit card balance can drastically increase your credit utilization. Because your credit utilization rate accounts for up to 30% of your overall FICO® credit score, any large purchase could cause your credit health to take a hit.
In fact, most experts agree that you should try to keep your credit utilization rate at or below 30%. It’s unlikely that adding a large purchase, such as a car, will keep your credit utilization low enough to meet this recommendation.
Your lower credit could impact your ability to get other credit cards, take out a personal loan, or even secure an apartment. This is why it’s important to understand the risks involved before buying a car with a credit card.
One of the main reasons people get a credit card is to have additional funds available in case of an emergency. Using a majority of these funds to purchase a car means you’ll have less available if you do face an emergency. Be sure to carefully consider this factor and the lasting effects it may have before making a large purchase.
Before you make any financing decisions, you should always compare interest rates. While your specific rates will vary based on your income and credit score, you’ll likely pay higher interest rates when making a credit card purchase than you would with an auto loan.
For instance, the average APR for credit cards is 27.89%, while average car loan rates range from 7.19% to 11.93%. Even if you have bad credit, you’re likely to find better interest rates through a car loan versus a credit card.
Even if your credit card comes with a 0% APR introductory rate, you still need to be careful. If you can’t pay the entire balance within the initial time frame, higher interest rates will be applied to your balance.
No matter what lending option you choose when purchasing a new car, it’s crucial to make sure you can afford the monthly payments. Before you even start shopping for a car, set a realistic budget to determine how much you can afford. Be sure to take the interest rate and any other additional fees and costs into account, such as insurance, registration, and processing fees.
There is a potential advantage of buying a car with a credit card to consider. If you have a rewards card, making such a large purchase could help you earn cash back or travel points quickly. This could be very beneficial, especially if your rewards card has a welcome bonus that requires you to spend a certain amount in a short period of time.
The idea of earning big rewards with just one purchase may sound great, but you have to consider other factors. For instance, does your credit card charge an annual fee? Unless your rewards exceed the annual fee, it may not be worth it. You also need to factor in the higher interest rates.
Before using your credit card to purchase a new car, be sure to explore your other options, including:
Before you use your credit card to buy a car, find out what your credit score is. This can help you determine what lending options are available to you. If your score is too low to secure an auto loan with reasonable interest rates, you can take steps to repair and rebuild your credit.
Use Credit.com’s Free Credit Score to find out your credit score and get started today.
Source: credit.com
For millennia, humans have used precious metals such as silver as a way to barter and exchange value. And even in today’s modern economy, many people believe that there is room for investing in silver and other precious metals as a way to diversify their overall portfolio.
Investing in silver can come in many different ways, from buying stocks or mutual funds focused on precious metals to holding the actual silver metal yourself. Depending on how you are investing in silver, it can be considered a valuable hedge against inflation and one way to diversify your overall investment portfolio.
Key Points
• Investing in silver can help diversify an investment portfolio and act as a hedge against inflation.
• Silver is considered valuable due to its historical use in coins, jewelry, and industrial applications.
• Silver and gold are both precious metals that have been used as currency and for portfolio diversification.
• Investing in silver can offer advantages such as portfolio diversification and lower cost compared to gold.
• However, investing in silver carries risks, including price volatility and the need for secure storage for physical silver holdings.
Silver is a type of alternative investment, in that it’s different from a conventional stock or other type of security. And similar to how those types of securities or investments hold value, silver does as well.
At its most basic, silver is valuable for the same reason that anything is considered “valuable” — because we as a society have decided that it is valuable. Silver has been used for making coins and jewelry since the early days of history, which is one reason that silver is considered valuable. Silver is also quite conductive, which means that it has uses in industry as well.
Silver has many of the same qualities as gold, which is why many investors have similarly looked for different ways to invest in precious metals.
Silver and gold have both been used as currency and jewelry since nearly the beginning of human civilization. They are both considered valuable precious metals and useful for portfolio diversification and as an inflation hedge. Deciding whether to invest in gold or invest in silver is in some ways a personal choice, and many investors decide to invest in both.
💡 Quick Tip: While investing directly in alternative assets often requires high minimum amounts, investing in alts through a mutual fund or ETF generally involves a low minimum requirement, making them accessible to retail investors.
One of the biggest advantages of investing in silver is that it can help diversify your portfolio. The rate of return for silver and other precious metals is not always correlated with that of other investments, which means that it can be a useful form of portfolio diversification. Silver is also cheaper than gold on a per-ounce basis.
Many investors also consider investing in precious metals to be an inflation hedge – it’s commonly believed that precious metals like silver or gold hold their value more efficiently or for a longer-term than cash or other assets.
If you invest in actual physical silver, another advantage is that it is a hard asset — it cannot be hacked or erased. Silver and other precious metals are one of the few investments that you can actually hold in your hand. Unlike other investments, your holdings in silver can also be as private as you want them to be.
One drawback of investing in silver is that its price is considered fairly volatile. That doesn’t make it a great investment if you are only holding for the short-term. Prices for precious metals can fluctuate wildly over the short-term, and even over the long-term, may not provide investors with the type of appreciation they may have seen if they had invested in other assets.
Further, if you hold physical silver, you do run the risk of having it stolen. Unlike digital assets, physical silver may not be recoverable if it is lost or stolen. As such, if you are buying physical silver coins or bars, you will need to find a safe and secure way to store them.
💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.
As noted, investing in precious metals is often considered an inflation hedge.
Inflation is a natural phenomenon that gradually increases the cost of many goods and services. Silver has many uses – it can be used to mint coins, for instance, and be used as an actual currency, or be incorporated into other products. For that reason, it may hold its value more effectively than cash or other assets.
But there’s no guarantee that silver will always be an effective inflation hedge, and it’s important to remember that it’s a volatile asset.
There are a number of different ways to invest in silver, depending on what you’re looking for in your portfolio. One popular way to invest in silver is by buying physical bars or coins of silver. Another possible way to invest in silver is by investing in the stocks of silver mining companies.
It may also be possible to invest in silver using various types of funds, such as exchange traded funds (ETFs) that own silver or silver mining companies. There may also be options for investors to invest in mutual funds with concentrations in the silver industry or market, too – doing a bit of research to see what your options are in relation to silver investments is likely to yield results.
Investing in silver offers investors a way to add an alternative asset to their portfolio, which can help them diversify, and hedge against inflation. There are many ways to invest in silver — including investing in silver mining companies, silver ETFs or owning physical silver like coins or silver bullion.
But investing in silver has its risks, and investing in precious metals typically means investors are okay with adding a relatively volatile asset to their portfolios. As always, if you have questions, it may be a good idea to speak with a financial professional.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Invest in alts to take your portfolio beyond stocks and bonds.
Depending on the composition of your investment portfolio, owning silver can diversify your portfolio. Silver and other precious metals are often considered an inflation hedge, meaning that their price generally holds its value, regardless of the inflation rate. The rate of return on investing in silver and other precious metals is also not often correlated with returns of other types of investments, like the stock market or real estate.
Like all investments, there is no guarantee that the price of silver will always go up. The price of silver can fluctuate wildly, which means that depending on when you buy and/or sell, you may lose money. Before investing in silver, make sure you understand the risks and drawbacks of silver investing.
Probably the most popular alternative precious metal to silver is gold. Like silver, gold has been used in currency and jewelry for most of the length of human civilization. Other options for investing in precious metals if you’d rather not own gold or silver are platinum or titanium.
Photo credit: iStock/oatawa
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Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor’s risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
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[cd_ETFs]
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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Purchasing a home is a journey filled with complexities and legalities. The process that can seem bewildering, particularly for first-time homebuyers. Among the many terms you’ll encounter in your home buying process, “escrow” is one that plays a pivotal role but is frequently misunderstood.
To understand the home buying process fully, and to ensure you’re well-equipped for this significant financial decision, it’s vital to grasp the concept of escrow. This guide aims to help you understand escrow, explaining its role in real estate transactions, the purpose of escrow accounts, and the pros and cons of this system.
At its core, escrow serves as a neutral third party in various types of transactions, most commonly in real estate. It’s a financial arrangement where a third party, the escrow agent, holds and regulates payment of the funds required for two parties involved in a given transaction.
This process ensures the transaction is carried out smoothly and everyone fulfills their obligations before the transfer of ownership occurs. Whether it’s earnest money from buyers, the deed from sellers, or the paperwork in between, escrow plays a critical role in safeguarding assets during the transaction period. It’s like a financial safety net, protecting both the buyer and seller from potential complications.
The escrow process can feel like a whirlwind of paperwork, signatures, and deadlines. But when broken down into a series of steps, it’s a structured system designed to safeguard all parties involved in a real estate transaction. Let’s take a closer look at each phase of the escrow process:
The escrow process starts when both the buyer and seller come to a mutual understanding and sign a purchase agreement. This agreement outlines the terms of the transaction, including the purchase price, any contingencies, and the closing date.
The buyer then makes an earnest money deposit, demonstrating their commitment to the transaction. This earnest money is placed into an escrow account, providing security until the final closing day of the home purchase.
Meanwhile, the buyer works with their mortgage lender to secure a mortgage loan for the remaining purchase price. This process includes credit checks, income verification, and property appraisal.
The escrow agent coordinates various administrative tasks. They ensure all necessary documents are signed, and that the mortgage lender releases funds to cover the purchase price, less the buyer’s deposit.
The escrow agent also manages the payment of closing costs. These costs can include real estate agent commissions, title insurance, property tax liens, and the fees for the escrow services.
Once all paperwork is finalized, funds have been disbursed, and all conditions met, the escrow process concludes. The title of the property is then transferred to the buyer.
Escrow accounts are secure, temporary homes for funds during a transaction. Let’s look at how they work in the context of real estate.
During the purchase of a home, the buyer’s earnest money deposit is held in an escrow account until the sale closes. This account secures the down payment, releasing it only when all contractual obligations are met.
Many mortgage lenders set up a mortgage escrow account as part of the home loan process. This account accumulates a portion of the monthly mortgage payments, paying your yearly property taxes and homeowners insurance premiums when they’re due.
In the world of real estate, escrow plays a significant part in ensuring all parties meet their obligations. An escrow company provides escrow services, managing the earnest money deposit and any agreed-upon funds until the sale is finalized.
The real estate agent often helps facilitate the setup of this escrow process, but ultimately, it’s the escrow company that guides the process, ensuring all contract conditions are met before the transfer of funds and property.
Managing an escrow account is typically a job for a neutral third party, such as an escrow agent or an escrow company. In the context of a mortgage, however, the task often falls to mortgage servicers. Let’s examine the role of each:
Escrow agents or escrow companies are neutral third parties that hold on to the funds and documents involved in a transaction until the deal’s conditions are met. In a real estate transaction, they handle tasks like facilitating the closing process, recording deeds, and disbursing funds.
It’s worth noting that sometimes, the escrow agent or company may also be the same as the title company. In such cases, this entity not only manages the escrow process but also oversees the title search, ensuring there are no issues with the property’s title before the sale is finalized. This consolidation of services can streamline the transaction, as you will be working with a single company throughout the process.
Mortgage servicers play a pivotal role in the lifespan of your mortgage, from closing until the day you pay off your loan. They are responsible for various tasks, including collecting your mortgage payments, maintaining the records of payments, and crucially, managing your escrow account.
Your mortgage servicer could be the same as your originating lender. However, this is not always the case, as sometimes lenders sell the servicing rights to your loan. Understanding whether your lender typically services their own loans can be beneficial, as not all mortgage servicers provide the same level of service, and some charge more fees than others.
With a mortgage servicer taking care of your escrow account, your involvement is minimal. You don’t have to send in your tax or insurance bills—your servicer ensures they know who to pay, and when.
The only exception is if you change insurance providers or policies. In such cases, you may need to provide the new policy information to your servicer.
The management of your escrow account, therefore, can fall to different parties depending on the nature of your transaction. Whether it’s an escrow agent, an escrow company, or your mortgage servicer, their role is essential in ensuring a secure, fair, and efficient process.
Just as every coin has two sides, using an escrow account in a real estate transaction comes with both benefits and drawbacks. Here’s a look at the main pros and cons:
The unfortunate reality is that even with systems designed for protection, there can be risks of fraud related to escrow accounts. Just as cybercriminals target banking systems, scammers can also target the escrow process. Let’s look at how you can steer clear of such threats.
In escrow fraud scenarios, scammers pose as legitimate escrow companies or agents, creating a false sense of security. They might set up sophisticated websites and provide convincing, yet fake, contact information. The goal? To trick buyers or sellers into handing over funds or sensitive information.
With the right precautions, you can protect yourself from becoming a victim of escrow fraud:
Remember, vigilance and due diligence are your best defenses against escrow fraud. Always double-check before you send funds or personal information.
Understanding the escrow process can make a world of difference in your real estate transactions. It provides security, aids in financial management, and ensures smooth transitions for both buyers and sellers. Despite its complexities, the benefits of escrow are clear, offering a level of protection and neutrality that’s integral to the success of a transaction.
However, It’s essential to do your homework, ensure the legitimacy of your escrow service, and understand the full scope of your financial commitments.
Whether you’re a first-time homebuyer or an experienced real estate investor, a well-informed approach to escrow can help streamline your buying or selling process. As you move forward, remember to consult professionals and always make decisions in your best financial interest. Here’s to successful real estate transactions and secure, informed decisions. Happy home buying – or selling!
If a real estate deal falls through, what happens to the money in the escrow account usually depends on the reason the deal didn’t close, and the stipulations outlined in the purchase agreement. Both the buyer and seller have certain contingencies that, if not met, could allow them to back out of the deal without forfeiting the earnest money deposit.
If these contingencies are not met and the buyer backs out, the earnest money is typically returned. If the buyer simply changes their mind or cannot secure financing, the seller may keep the earnest money.
In some cases, you may be able to waive escrow. This typically requires a significant down payment or a high level of equity in your home. However, waiving escrow means you’ll be responsible for paying your taxes and insurance premiums directly, which requires discipline to ensure these large bills are paid on time. Some lenders may also charge a fee for waiving escrow.
The length of the escrow process can vary widely, but it typically takes 30 to 60 days for residential real estate transactions. This timeline can be affected by various factors, including loan underwriting times, inspections, and negotiations after inspections.
While escrow accounts are commonly associated with real estate transactions, they can be used in many types of large transactions where the buyer and seller do not fully trust each other to fulfill their obligations. This can include the sale of expensive items like cars, boats, or art, and even online transactions for goods or services.
No, escrow accounts aren’t solely used for real estate transactions. They can be used in many types of contractual agreements where an impartial third party is needed to ensure the terms of the contract are fulfilled. This can include business acquisitions, online sales, and construction projects, to name a few.
E-commerce transactions can benefit from escrow, especially when they involve high-ticket items or international trade. The escrow process protects both the buyer and seller by holding the purchase price until the buyer receives the goods in the agreed condition.
Escrow fees are typically based on the purchase price of the home and can vary widely by region and company. Some escrow companies charge a flat fee, while others charge a percentage of the home’s purchase price. Always ask for a breakdown of the fees and compare costs from different companies before making a decision.
Source: crediful.com
Inside: Learn how much your 65k salary is hourly. Plus find tips to make more money and live the lifestyle you want.
You want to know to look into this… 65k salary is a good hourly wage when you think about it.
When you get your first job and you are making just above minimum wage like $16 an hour, making over $65,000 a year seems like it would provide amazing opportunities for you. Right?
The median household income was $70,084 in 2021 not much different from the previous year (source). Think of it as a bell curve with $70 at the top; the median means half of the population makes less than that and half makes more money.
The average income in the U.S. is $55,350 for a 40-hour workweek; that is an increase of 1.1% from the previous year (source). That means if you take everyone’s income and divide the money out evenly between all of the people.
But, the question remains… Can you truly live off 65,000 per year in today’s society? The question you want to ask all of your friends is $65000 per year a good salary.
In this post, we are going to dive into everything that you need to know about a $65000 salary including hourly pay and a sample budget on how to spend and save your money.
These key facts will help you with money management and learn how much per hour $65k is as well as what you make per month, weekly, and biweekly.
Just like with any paycheck, it seems like money quickly goes out of your account to cover all of your bills and expenses, and you are left with a very small amount remaining. You may be disappointed that you were not able to reach your financial goals and you are left wondering…
Can I make a living on this $65k salary?
When jumping from an hourly job to a salary for the first time, it is helpful to know how much is 65k a year hourly. That way you can decide whether or not the job is worthwhile for you.
For our calculations to figure out how much is 65K salary hourly, we used the average five working days of 40 hours a week.
65000 salary / 2080 hours = $31.25 per hour
$65000 a year is $31.25 per hour
Typically, the average work week is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, divide the yearly salary of $65000 by 2,080 working hours and the result is $31.25 per hour.
Just above $31 an hour.
That number is the gross hourly income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
You must check with your employer on how they plan to pay you. For those on salary, typically companies pay on a monthly, semi-monthly, biweekly, or weekly basis.
Just an interesting note… if you were to increase your annual salary by $8K to $73000 a year, it would increase your hourly wage by $3.85 per hour.
To break it down – 73k a year is how much an hour = $35.10
That makes a sizable difference to have your hourly wage over $35 an hour.
On average, the monthly amount would be $5,416.67.
Annual Salary of $65000 ÷ 12 months = $5416.67 per month
This is how much you make a month if you get paid 65000 a year.
This is a great number to know! How much do I make each week? When I roll out of bed and do my job of $65k salary a year, how much can I expect to make at the end of the week for my effort?
Once again, the assumption is 40 hours worked.
Annual Salary of $65000/52 weeks = $1,250 per week.
For this calculation, take the average weekly pay of $1,250 and double it.
$1,250 per week x 2 = $2,500
Also, the other way to calculate this is:
Annual Salary of $65000 / 26 weeks = $2,500 biweekly.
Get your copy of a biweekly budget template.
This depends on how many hours you work in a day. For this example, we are going to use an eight hour work day.
8 hours x 52 weeks = 260 working days
Annual Salary of $65000 / 260 working days = $250 per day
If you work a 10 hour day on 208 days throughout the year, you make $312 per day.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
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| $65000 – Full Time | Total Income |
|---|---|
| Yearly Salary (52 weeks) | $65,000 |
| Monthly Salary | $5,416.67 |
| Weekly Wage (40 Hours) | $1,250 |
| Bi-Weekly Salary (80 Hours) | $2,500 |
| Daily Wage (8 Hours) | $250 |
| Daily Wage (10 Hours) | $312 |
| Hourly Wage | $31.25 |
| Net Estimated Monthly Income | $4,135 |
| Net Estimated Hourly Income | $23.86 |
Income taxes is one of the biggest culprits of reducing your take-home pay as well as FICA and Social Security. This is a true fact across the board with a salary range of up to $160,200.
When you start getting into a higher salary range, the more you make, the more money that you have to pay in taxes.
Every single tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
So, how much an hour is 65000 a year after taxes?
Gross Annual Salary: $65,000
$65k Per Year After Taxes is $49,627.50.
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$49,627.50 ÷ 2,080 hours = $23.86 per hour
After estimated taxes and FICA, you are netting $49,627 per year, which is $15,373 per year less than what you expect.
***This is a very high-level example and can vary greatly depending on your personal situation and potential deductions. Therefore, here is a great tool to help you figure out how much your net paycheck would be.***
In addition, if you live in a heavily taxed state like California or New York, then you have to pay way more money than somebody who lives in a no-tax state like Texas or Florida. This is the debate of HCOL vs LCOL.
Thus, your yearly gross $65000 income can range from $44,427 to $52,227 depending on your state income taxes.
That is why it is important to realize the impact income taxes can have on your take-home pay. It is one of those things that you should acknowledge and obviously, you need to pay taxes. But, it can also put a huge dent in your ability to live the lifestyle you want on a $65,000 income.
More than likely, your salary is not a flat 65k, here is a tool to convert your salary to hourly calculator.
Many of the best paying jobs in real estate investment trusts start in this range.
Every person reading this post has a different upbringing and a different belief system about money. Therefore, what would be a lavish lifestyle to one person, maybe a frugal lifestyle to another person? And there’s no wrong or right, it is what works best for you.
One of the biggest factors to consider is your cost of living.
In another post, we detailed the differences between living in an HCOL vs LCOL vs MCOL area. When you live in big cities, trying to maintain your lifestyle of $65,000 a year is going to be much more difficult because your basic expenses, housing, transportation, food, and clothing are going to be much more expensive than you would find in a lower cost area.
To stretch your dollar further in the high cost of living area, you would have to probably live cheap and prioritize where you want to spend money and where you do not. Whereas, if you live in a low cost of living area, you can live a much more lavish lifestyle because the cost of living is less. Thus, you have more fun spending left in your account each month.
As we noted earlier in the post, $65,000 a year is just below the median income that you would find in the United States. Thus, you are able to live a modest lifestyle here in America.
If you are debt free and utilize smart money management skills, then you are able to enjoy the lifestyle you want.
However, if you are riddled with debt or unable to break the paycheck to paycheck cycle, then living off of 65k a year is going to be pretty darn difficult.
There are two factors that will keep holding you back:
It is possible to get ahead with money!
It just comes with proper money management skills and a desire to have less stress around money. That is a winning combination regardless of your income level.
As always, here at Money Bliss, we focus on covering our basic expenses plus saving and giving first, and then our goal is to eliminate debt. The rest of the money is left for fun spending.
If you want to know how to manage a 65k salary the best, then this is a prime example for you to compare your spending.
You can compare your budget to the ideal household budget percentages.
| Category | Ideal Percentages | Sample Monthly Budget |
|---|---|---|
| Giving | 10% | $341 |
| Savings | 15-25% | $1002 |
| Housing | 20-30% | $1354 |
| Utilities | 4-7% | $217 |
| Groceries | 5-12% | $406 |
| Clothing | 1-4% | $41 |
| Transportation | 4-10% | $217 |
| Medical | 5-12% | $271 |
| Life Insurance | 1% | $16 |
| Education | 1-4% | $27 |
| Personal | 2-7% | $81 |
| Recreation / Entertainment | 3-8% | $163 |
| Debts | 0% – Goal | $0 |
| Government Tax (including Income Taxes, Social Security & Medicare) | 15-25% | $1281 |
| Total Gross Income | $5,417 |
As we stated earlier if you are able to make $65,000 a year, that is a good salary. You are making more money than the average American and slightly less on the bell curve on the median income.
You shouldn’t be questioning yourself is 65000 a good salary.
However, too many times people get stuck in the lifestyle trap of trying to keep up with the Joneses, and their lifestyle desires get out of hand compared to their salary. And what they thought used to be a great salary actually is not making ends meet at this time.
This $65k salary would be considered a middle class salary. This salary is something that you can live on very comfortably.
Check: Are you in the middle class?
In fact, this income level in the United States has enough buying power to put you in the top 91 percentile globally for per person income (source).
The question you need to ask yourself with your 65k salary is:
In the future years and with possible inflation, in some expensive cities, 65000 a year is not a good salary because the cost of living is so high, whereas these are some of the cities where you can make a comfortable living at 65,000 per year.
If you are looking for a career change, you want to find jobs paying at least $80,000 a year.
Simply put, yes.
You can stretch your salary much further because you are only worried about your own expenses. A single person will spend much less than if you need to provide for someone else.
Your living expenses and ideal budget are much less. Thus, you can live extremely comfortably on $65000 per year.
And… most of us probably regret how much money wasted when we were single. Oh well, lesson learned.
Many of the same principles apply above on whether $65000 is a good salary. The main difference with a family, you have more people to provide for than when you are single or have just one other person in your household.
The costs of raising children are high and will steeply cut into your income. As you can tell this is a huge dent in your income, specifically $12,980 annually per child.
That means that amount of money is coming out of the income that you earned.
So, the question really remains can you provide a good life for your family making $65,000 a year? This is the hardest part because each family has different choices, priorities, and values.
More or less, it comes down to two things:
You can live comfortably as a family on this salary, but you will not be able to afford everything you want.
Many times when raising a family, it is helpful to have a dual-income household. That way you are able to provide the necessary expenses if both parties were making 65,000 per year, then the combined income for the household would be $130,000. Thus making your combined salary a very good income.
Learn how much money a family of 4 needs in each state.
As we outlined earlier in the post, $65,000 a year:
Next up is making $70000 a year.
Like anything else in life, you get to decide how to spend, save and give your money.
That is the difference for each person on whether or not you can live a middle-class lifestyle depends on many potential factors. If you live in California or New Jersey you are gonna have a tougher time than Oklahoma or even Texas.
In addition, if you are early in your career, starting out around 43000 a year, that is a great place to be getting your career. However, if you have been in your career for over 20 years and making $65K, then you probably need to look at asking for pay increases, pick up a second job, or find a different career path.
Regardless of the wage that you make, if you are not able to live the lifestyle that you want, then you have to find ways to make it work for you. Everybody has choices to make.
But one of the things that can help you the most is to stick to our ideal household budget percentages to make sure you stay on track.
Learn exactly how much do I make per year…
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Source: moneybliss.org
Commodity exchange-traded funds are ETFs that invest in hard and soft commodities. Commodities are raw materials — e.g. grain, precious metals, livestock, energy products — used for direct consumption or to produce other goods. Crude oil, corn, and copper are examples of commonly traded commodities.
Investing in a commodity ETF can offer exposure to one or more types of commodities within a single vehicle. There are different types of commodity ETFs to choose when building a diversified portfolio.
A commodity ETF is an exchange-traded fund that specifically invests in commodities or companies involved in the extraction or production processing of commodities.
An ETF or exchange-traded fund combines features of mutual funds and stocks, in that they offer exposure to an underlying group of assets (e.g. stocks, bonds, derivatives). But unlike mutual funds, ETFs trade on an exchange.Whether you have broad or narrow exposure to commodities within a single ETF can depend on how it’s managed and its objectives.
Like other exchange-traded funds, commodity ETFs can be bought and sold inside a brokerage account. Each fund can have an expense ratio, which determines the cost of owning it annually, and brokerages may charge transaction fees when you buy or sell shares.
Commodity ETFs fall under the rubric of alternative investments, which also applies to private equity and hedge funds.
💡 Quick Tip: Alternative investments provide exposure to sectors outside traditional asset classes like stocks, bonds, and cash. Some of the most common types of alternative investments include commodities, real estate, foreign currency, private credit, private equity, collectibles, and hedge funds.
Commodity ETFs are pooled investments, with multiple investors owning shares. The fund manager determines which commodities the fund will hold and when to buy or sell holdings within the fund. When you buy shares of a commodity ETF, you invest in everything that’s held within the fund.
In many cases, that includes commodities futures contracts. A commodity futures contract is an agreement to buy or sell a set amount of a commodity at a future date for a specified price. That’s an advantage for investors who may be interested in trading futures but lack the know-how to do so.
A commodity ETF may follow an active or passive management strategy. Many commodity ETFs are structured as index funds. An index fund aims to track and match the performance of an underlying benchmark. These types of commodity ETFs are passively managed.
Actively-managed funds, by comparison, typically aim to outstrip market returns but may entail more risk to investors.
Commodity ETFs aren’t all designed with the same objectives in mind. There are different types of commodity ETFs you might invest in, depending on your goals, diversification needs, and risk tolerance.
Here are some of the most common ETF options commodities investors may choose from.
A physically backed ETF physically holds the commodity or commodities it trades. For example, a physically backed ETF that invests in precious metals may store gold, silver, platinum, or palladium bars in a secure vault at a bank.
It’s more common for physically backed ETFs to hold hard commodities like precious metals, since these are relatively easy to transport and don’t have a shelf life expiration date. It’s less likely to see physically backed ETFs that invest in agricultural goods like wheat or corn, as they cannot be stored for extended periods.
Futures-based ETFs invest in commodities futures contracts, rather than holding or storing physical commodities. That can reduce the overall management costs, resulting in lower expense ratios for investors.
A futures-based ETF may hold commodities contracts that are close to expiration, then roll them into new contracts before the expiration date. Depending on the price of the new futures contract, this strategy may result in a cost or gain for investors.
Commodity company ETFs invest in companies that produce or process commodities. For example, this type of ETF may invest in oil and gas companies, cattle farming operations, or companies that operate palm oil plantations.
These types of commodity ETFs are similar to equity ETFs, since the investment is in the company rather than the commodity itself.
Commodity ETFs are not always easily identifiable for investors who are new to this asset class. Here are some of the largest commodity ETF options with a focus on mitigating inflation.
• SPDR Gold Trust (GLD). SPDR Gold Trust is the largest physically backed gold ETF in the world. The ETF trades on multiple stock exchanges globally, including the New York Stock Exchange (NYSE) and the Tokyo Stock Exchange.
• Energy Select Sector SPDR Fund (XLE). This commodity ETF invests in companies in the energy industry, including oil and gas companies, pipeline companies, and oilfield services providers.
• Invesco DB Agriculture Fund (DBA). The Invesco DB Agriculture Fund tracks changes in the DBIQ Diversified Agriculture Index Return, plus the interest income from the fund’s holdings. The index itself is composed of agricultural commodity futures.
• First Trust Global Tactical Commodity Strategy Fund (FTGC). This commodity ETF is an actively managed fund that offers exposure to energy commodities futures.
• Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC). PDBC is another actively managed ETF that invests in commodity-linked futures and other financial instruments offering exposure to the most in-demand commodities worldwide.
Commodity ETFs have pros and cons like any other investment. It’s helpful to weigh both sides when deciding whether this type of alternative investment aligns with your overall wealth-building strategy.
• Diversification. Commodity ETFs can offer a very different risk/return profile than traditional stocks or bonds. Commodities in general tend to have a low correlation with stocks, which can help spread out and manage risk in a portfolio.
• Inflationary protection. Commodities and inflation typically move in tandem. As the prices of consumer goods and services rise, commodity prices also rise. That can offer investors a hedge of sorts against the impacts of inflation.
• Access. Direct investment in commodities is generally out of reach for the everyday investor, as it may be quite difficult to hold large quantities of physical goods or raw materials. Commodity ETFs offer a simple and convenient package for investing in commodities without taking physical possession of underlying assets.
• Volatility. Compared with other investments, commodities can be much more susceptible to pricing fluctuations as supply and demand wax and wane. Unexpected events, such as a global drought or a war that threatens crop yields, can also catch investors off guard.
• No dividends. While some ETFs may generate current income for investors in the form of dividends, commodity ETFs typically do not. That could make them less attractive if you’re looking for an additional stream of passive income or are interested in reinvesting dividends to buy more shares.
• Cost. Physically backed ETFs may pay storage fees to hold underlying commodities. Those costs may be folded into the expense ratio, making the ETF more expensive for investors to own.
Commodity ETFs can be worth investing in for those who wish to hedge against inflation or generate positive returns when stocks appear to be faltering. They also represent a more accessible alternative to direct investment in commodities, which may be difficult for an individual investor to manage.
Investors who are already trading futures contracts or are learning how to do so may appreciate the accessibility that commodity ETFs can offer. Commodity ETFs tend to be highly liquid, meaning it’s relatively easy to buy and sell shares on an exchange, a feature other alternative investments don’t always share.
A commodity ETF may be less suitable for an investor who has a lower risk tolerance or isn’t knowledgeable about the commodities market or futures trading. Talking to a financial advisor can help you determine whether commodities are something you should be pursuing as part of your broader investment plan.
💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).
The type of commodity ETF you invest in can determine their tax treatment. Futures-based ETFs, for example, may experience losses or gains as contracts that are approaching expiration are replaced with new ones. Additionally, commodity ETFs that hold gold, silver, platinum, or palladium may be subject to a higher capital gains tax rate as the IRS considers precious metals to be collectibles.
Furthermore, the IRS 60/40 rule specifies that 60% of commodity capital gains or losses will be treated as long-term, while 40% are treated as short-term capital gains or losses for tax purposes. This rule does not consider how long you hold the investments, which could make commodity ETFs less favorable for investors who hold assets for one year or more.
It’s also important to be aware of how a commodity ETF is structured legally. Many operate as limited partnerships (LPs), which means they pass on annual income and gains or losses as a return of capital. Investors bear the responsibility of reporting their portion of fund profits and losses on Schedule K-1. If you’re not familiar with how to do so, that could add another wrinkle to your year-end tax prep.
Adding a commodity ETF or two to your portfolio may appeal to you if you’re hoping to add some diversification to your holdings, and are comfortable with a potentially more volatile investment. When deciding which commodity ETFs to invest in, it’s wise to consider the underlying investments and the fund’s overall management strategy, as well as the fees you’ll pay to own it.
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Commodities can be volatile. Commodity prices depend on supply and demand, which can change dramatically owing to weather patterns, technological innovations, supply chain issues, and more.
Commodity ETFs typically don’t pay dividends to investors, regardless of which type of ETF you have. The goal of investing in commodity ETFs is more often capital appreciation rather than current income.
For most investors, trading raw material commodities simply isn’t feasible. There are issues of transport, storage, insurance, and liquidity. For that reason, commodity ETFs have emerged to give investors exposure to desired commodities without the physical demands.
Photo credit: iStock/Nastassia Samal
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If you’re in the market for an affordable house to own, you might be debating whether it’s cheaper to build your own home or buy an existing home.
For those who have attempted a large-scale renovation on an older home, it may feel as if it would have been more cost-effective to start from scratch with new construction. But many costs go into building your own house that you must factor into the decision of whether to build or buy.
Let’s look at some aspects of building vs. buying an existing home. The outlook may vary depending on where you live and the type of house you want. You’ll also need to consider how you plan to pay for the home, and even if you are willing to consider off-grid living to reduce costs.
What’s the price of land in the area where you want to live? How much would it cost to purchase a fully constructed house (called “existing construction”) with the features you need and the size you want? Are empty lots available to build where you would like to live?
If you live in or are moving to a major metropolitan area or a suburb of a large U.S. city, it may be harder to find land and, if you do, the land will cost more.
On the other hand, if you move to a less populated area, you may be able to find several acres or more for under $20,000 or less.
Finding affordable land represents the first step toward being able to build a home for less than it would cost to buy. But if land goes for a premium in the area you wish to buy, it may be cheaper to buy an existing home.
Larger homes, obviously, cost more to build than smaller homes. If your main goal is to secure a house of your own for the lowest possible price, you can save money building a home in a less congested area where land is cheap.
It’s unlikely you’ll find a house for sale anywhere that doesn’t need a lot of work for less than $100,000. However, you may be able to pick up a plot of land and build a starter home like an A-Frame or a prefab, or even a tiny house under 400 square feet.
The cost of your house construction project depends on the house you choose. Here are some affordable examples.
Tiny houses – Tiny houses are typically under 400 square feet. They simply cost less to build than any other style of conventional home. They require less land, fewer materials, and take less time to construct.
Tiny houses may start at $10,000 and go up to $120,000 or more, which is the price of some regular homes. The average price for a tiny house is around $30,000 to $40,000.
Consider jumping on the tiny home trend to build your starter or retirement home.
A-Frame houses – A-frame houses represent a basic style of construction with slanted roofs. They have a loft bedroom rather than a full-fledged second story.
Prefab Homes – You can buy the parts for a pre-fab home and have it put together, or assemble it yourself, on your property. Some pre-fab homes, called modular homes, come as individual rooms and pieces that connect. Each module includes plumbing, electrical, and everything else you need to build a house already installed.
Some pre-fab home kits come as individual panels, and you’ll need to add the rest of the components. You can purchase pre-fab homes for as little as $50,000 or less on eBay.
Unless you have cash reserves lying around, you’ll likely need financing to purchase your land or home.
If you do have the cash saved, once you do the math, you’ll probably realize it’s smarter to take out a mortgage or loan at a low interest rate. Then, you can invest your money at a higher rate of return.
That leaves you with several options to pay for your house or its construction.
A construction loan acts as a line-of-credit rather than a conventional loan. The loan term usually lasts one year. In that time, you borrow the money you need as you need it. When you make your loan payments, you only pay interest on the money you borrowed.
Even though you only pay interest on the money you use, construction loans typically have higher interest rates than home mortgages. That’s because the land purchase is the only collateral available until the house is complete.
A construction loan can fund the land, building materials, and even provide funds to pay contractors to build your home. Your lender will want to see your construction documents and budget for the project. They’ll want to approve each step of the building process to ensure construction stays on track.
Once the home construction is complete, you can take out a conventional mortgage, which you can use to pay off the high-interest loan.
If you’d rather not deal with the hassles of a construction loan, showing documentation to your lender, and taking out a mortgage after a year, consider a personal loan. The better your credit score, the lower your interest rate on an unsecured personal loan will be.
Personal loan terms tend to range from two to 10 years.
If you have cash reserves or assets that would cover the cost of the loan, you may want to take out a secured personal loan, using your cash or investments as collateral. You may be able to get approved for a secured personal loan at a much lower interest rate.
If you want to purchase land that doesn’t have power lines or public water running to the property, you may consider a land loan. Most lenders expect you to put at least 50% down on this type of purchase because it’s considered a high-risk investment.
Once you use the land loan to purchase the land, you may be able to finance construction through a personal loan. Or you can wait until you pay off the land loan, have utilities installed, and then get a construction loan.
The best way to finance the purchase of an existing house is usually through a mortgage loan. These loans tend to have very low interest rates, especially compared to the loan options listed above. You may even be able to secure an FHA loan with as little as 3.5% down if you’re a first-time homebuyer.
There are a few more choices to make when it comes to building your own house or buying an existing home: What kind of utilities will you need?
Existing construction, of course, comes already connected to sewer systems (or may include a cesspool septic system) and electricity. It already has home heating and cooling systems. And it’s probably fairly easy to run a cable television and broadband internet connection from the street to your house. At the very least, you can connect to satellite TV and internet services.
At most, it will cost a small connection fee to turn on the electricity and internet service to your home. Sewer service typically costs less than $100 per year.
On the other hand, new construction has none of these things. You’ll need an electrician to run all the wiring. Then, you’ll need to connect to “the grid,” which means you’ll be getting electricity from your utility provider.
Even if you decide to install solar panels, which cost an average of $13,142 (after tax credits), you’ll need to pay to have them connected to your electric company. Your electric company monitors usage and charges you if your solar panels don’t produce all the energy your household uses.
Septic systems can cost from $3,000 up to $10,000, according to HomeAdvisor. Heating and cooling systems vary widely, too, depending on the type of system you prefer.
If you think you can save money by living off the grid, you might be surprised. You’ll still need to invest in some sort of energy source, whether solar panels or wind turbines.
You can build a well for water and use composting toilets to avoid being connected to city water. But, unless you want to dramatically change your lifestyle, off-grid living may not be the best way to save money on your new house.
Some areas don’t permit off-grid living, so it may be harder to finance your new house if you can’t show plans for utility hook-ups.
With so much to consider when deciding whether to buy or build a house, it can help to get a clear idea of the major pros and cons of each. We’ve listed some of the details below to help you make your decision.
Ultimately, you can save money building a home, especially if you choose a simple home style and are willing to do most of the work yourself. Plus, you’ll get the satisfaction of knowing the creative role you played in your home—and that everything in the house is brand new.
But if you’re not considering a small house in a rural area where land is cheap, you may find it’s more cost-effective to buy an existing house. Then, you can spend time and money over the years to turn it into your dream home.
Source: crediful.com