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Encompass is ready-built with powerful technology to automate any task, process or service within a matter of clicks. By automating previously manual and time-consuming tasks, lenders and investors can acquire, originate, close and sell significantly more loans in less time, all while delivering a best-in-class borrower experience. Encompass also offers a task-based workflow that enables operations managers to easily create, assign, manage and track loan tasks all within their unified, single system of record.
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The mortgage industry has its own language, and in order to understand it, homebuyers need to learn different acronyms and jargon when shopping for a home loan. A typical home loan payment or mortgage payment involves a single payment, which is the sum of four different line items: the loan principal, interest, taxes, and insurance – also referred to as PITI.
Before you set your sights on a home, know if you can afford the costs by learning what PITI is and how it impacts your monthly mortgage payments.
What does PITI stand for?
PITI stands for the loan principal, interest amount, taxes, and insurance on your home – the four major elements that make up mortgage payments.
Homebuyers often underestimate the true cost of homeownership by failing to take into account property taxes and homeowners insurance. It’s crucial that you budget for all the components of your mortgage payment before purchasing a home.
What is PITI? The four components
Now that we know what PITI stands for, let’s break down each of the four components and analyze the individual elements that make up your monthly mortgage payment.
1) Principal
The mortgage principal is the loan amount before any interest is calculated. This is the base amount of your home purchase price minus any down payment you make.
We’ll use a hypothetical home purchase for reference; if you buy a home for $450,000 with a 20% down payment ($90,000), your mortgage principal amount will be $360,000.
Over your mortgage term, you pay substantially more than the original $360,000 to the lender in the form of loan interest. The principal is the base amount used for loan calculations to determine if they will extend a loan to you.
2) Interest
Your mortgage interest rate is what you pay the lender as part of your monthly mortgage payment to borrow the funds to purchase your home. The mortgage lender calculates interest as a percentage of your outstanding principal. If your principal loan is for $360,000 and your lender charges you an interest rate of 6%, this means that you will pay $21,600 (6% of $360,000) in interest for the first year of your mortgage.
Your mortgage interest and principal payments are itemized on a mortgage amortization table. The amortization charts show how much each mortgage payment pays down your principal and interest. When you first start making mortgage payments, most of your monthly payment goes toward interest instead of the principal.
This split shifts over time, and eventually, the amount you pay toward interest decreases, and more is paid toward the principal. As the principal amount of your loan decreases, you start to earn equity on your home. Equity is the portion of your home that you own outright. Your interest decreases as well, as you only pay interest on the principal amount you have not paid off.
For our example, you will pay $21,600 in interest over the first year of your $360,000 mortgage. By the time you have paid down $260,000 of that principal, your principal amount will be $100,000; at that point, you’ll pay interest of $6,000 annually (6% of $100,000).
3) Taxes
When you own your house, you pay taxes on the property to your local government to maintain roads, emergency services, police, firefighters, schools, and more. Buyers often overlook property taxes when estimating homeownership costs, but it is important to consider this recurring annual cost when you’re searching for your new home. Property taxes vary by location and are the most expensive tax homeowners pay. Taxes may be higher in a newer neighborhood or an area coveted by many homeowners. They are often less if you live just outside coveted neighborhoods and in rural areas.
The amount of property tax you pay is determined by the local property tax rate and the value of your home. A general guideline to estimate property taxes is to allocate approximately $1 for every $1,000 of your home’s value, paid on a monthly basis.For example, if your home is worth $450,000, you can expect to pay around $450 per month in property taxes or $5,400 per year.
As part of the home purchase process, most states require that you get an unbiased, official appraisal to estimate your taxes accurately. Your lender usually orders the home appraisal and includes the cost in their list of closing costs. After you close on your home purchase, keep in mind that your local government will regularly reassess properties every few years for tax purposes, which could lead to a change in your tax bill.
4) Insurance
The “insurance” component of PITI refers to homeowner’s insurance and, when it’s required, private mortgage insurance (PMI). Let’s discuss each of these concepts in more detail.
Private mortgage insurance (PMI)
Your PMI rates depend on how much of a down payment you made and your credit score. If you’re putting down less than 20% on a conventional loan, you’re required to pay for private mortgage insurance (PMI), which protects the lender if you default on your mortgage payments. Once you build at least 20% equity in your home — and your loan-to-value (LTV) ratio is 80% or less — you can get rid of PMI. For FHA loans, a similar mortgage insurance premium has to be paid throughout the life of the loan on any FHA-backed mortgage loan.
If your PMI comes in at a rate of 1%, here’s how you’d calculate a mortgage of $360,000: $360,000 x 1% = $3,600 per year; $3,600 ÷ 12 monthly payments = $300 per month.
Homeowners insurance
Most mortgage lenders require a homebuyer to purchase and maintain homeowners insurance over the entire loan term. Homeowners insurance covers you and the lender if something catastrophic happens to the home, and you need to rebuild or move. Most homeowners insurance policies cover your home in the event of a break-in, fire, or storm damage.
Most insurance companies require you to buy additional coverage for damage from earthquakes or flooding. You can also purchase insurance riders to cover items of significant value, such as an expensive musical instrument, art, or jewelry. If you buy a condominium, you’ll also pay a homeowners association fee. Your lender may consider your HOA fee your insurance as the HOA carries its own insurance that covers the building, and thus you may not need another policy.
Property insurance amounts can vary among different insurances. It’s wise to shop around after the seller accepts your purchase contract, and before you close on the property, to get a good idea of reasonable rates. Insurance companies consider these factors when calculating an insurance premium:
The home’s value
Whether you live in an urban area or a rural area
Whether you live in an area with high climate risk
How close your home is near a fire department or fire hydrant
Whether you have an insurance risk on your property, i.e., something could injure children, such as a trampoline, pool, or specific dog breed
How many insurance claims you make each year for other types of insurance
When estimating your homeowner’s insurance costs, it’s helpful to keep a general rule of thumb in mind. On average, you can anticipate paying approximately $3.50 per every $1,000 of your home’s value in annual homeowner’s insurance premiums. For instance, if your property is valued at $450,000, you can expect to pay around $1,575 per year for insurance coverage, which translates to roughly $131 per month.
How to calculate PITI
Before you start your search for a house, it’s a good idea to calculate PITI to determine your price range and help you find a mortgage option that will fit your budget. The exercise will make you a more rational home buyer and keep you from falling in love with a house outside your price range.
The simplest way to calculate PITI is by using an online monthly mortgage calculator. Redfin’s mortgage calculator includes the principal and interest, taxes, insurance, HOA, and PMI. You can also add in your location for more accurate estimates.
PITI and the 28% Rule
Your PITI gives you a rough idea of what purchase price range you can afford. One way to identify a purchase price within manageable limits is to use the housing expense ratio. To ensure your ongoing ability to make your mortgage payments, home finance experts typically recommend that your housing costs should be equal to or below 28% of your monthly household budget. If your PITI is more than 28% of your monthly budget, your lender may require you to pay for additional mortgage insurance.
In our example, you can estimate your housing expense ratio by dividing your PITI by your total monthly income. If your household income is $10,000 a month, your PITI will make up about 28% of your monthly budget, well within recommended guidelines. ($2,800/$10,000 = 28%.)
Keep in mind that PITI may just account for just some of your monthly expenses when owning a home. Depending on where you live and how you are paying for your home, there may be additional costs to consider. Additionally, the components that make up PITI are broadly defined here; there is often more complexity that goes into each part of PITI.
How PITI impacts loan approval
During the home buying process, it can be easy to trick yourself into thinking you can afford a more expensive home if you only look at your mortgage’s principal and interest cost without considering the total PITI with taxes and insurance.
For instance, let’s take a 30-year mortgage on a $450,000 property, assuming a property tax rate of 1.25% ($5,625 per year) and an annual homeowners insurance premium of $3,600. In this scenario, your monthly financial commitment would go beyond just the principal and interest amount, as you would need to allocate an additional $581 to cover taxes and insurance. Understanding and accounting for these factors will provide you with a comprehensive understanding of the actual costs involved in homeownership.
Here is a breakdown of the example discussed above.
Principal and Interest
PITI
Interest rate
7%
7%
20% down payment
$90,000
$90,000
Property taxes
N/A
$450
Homeowners insurance
N/A
$131
Private mortgage insurance
N/A
N/A
Monthly payment
$1,800
$2,381
How DTI factors in
The principal balance will factor into your debt-to-income (DTI) ratio. Your DTI ratio gives lenders an idea of how capable you are of managing money and the likelihood that you will consistently make your monthly payments. To determine your DTI, the lender uses your total minimum monthly debt obligation and divides it by your gross monthly income to arrive at a percentage. This calculation also includes payments on credit card accounts, auto loans, student loans, and other recurring debt payments. Lenders consider you a higher risk if your DTI ratio exceeds 43%, some lenders will allow a DTI as high as 50%.
Don’t overlook other housing costs
PITI is just one fundamental concept to understand before applying for a mortgage. As you consider how much house you can afford, you’ll also need to plan for additional costs typically associated with homeownership. These include HOA or condo fees, which can range from $100 to $1,000 per month, with an average of $200 to $300. Additionally, budgeting for repairs and maintenance is crucial, with a general guideline of saving 1% to 5% of your home’s value annually. For a newer $450,000 home, this would mean setting aside $4,500 to $22,500 per year. Utility bills for electricity, water, gas, sewer, cable, trash, and internet should also be factored in, and contacting the utility company or asking the seller or neighbors can help estimate these costs.
The bottom line on PITI
Buying a home is very exciting, but before signing your mortgage contract, know what payment amount you can afford based on PITI and other monthly costs. The more you understand the home buying and mortgage process and the total cost of homeownership, the easier it will be to finalize your purchase decision. Your home purchase represents an important milestone in your life – avoid confusion and uncertainty by gaining a solid understanding of PITI and the cost of homeownership.
The insurance provider promises to cover certain expenses and losses in exchange for a monthly premium payment. The contract covers a specific period of time and the rates are locked in during the life of the contract.
At the end of the contract, the policyholder may renew the policy and enter into a new contract or simply allow the policy to expire. If you renew the policy, the monthly premium payment will be updated and locked in for the life of the new contract.
Many term life policies can be written to automatically renew with adjustments in premium payments while the amount of coverage remains the same. These plans are usually the most affordable of the different types of life insurance policies.
Life insurance is the best purchase you can make for the financial protection of your family. You’ll sleep better knowing that no matter what happens, your family will be taken care of.
Best Companies for $500k Term Policies
Getting Life Insurance
If you have never bought life insurance before, the process can be confusing, frustrating, and sometimes ever daunting. Don’t worry, buying a life insurance policy is much easier than it sounds. The first thing you have to do is decide which type of policy you want. There are several types: term, whole life, and no exam. Each of these has different advantages and disadvantages.
A term policy is the cheapest of the options, but is only effective for a certain time period. After that time is up, the policy is no longer in force. It’s pretty much like an expiration date.
After you decide which type of policy you’re going to get, you’ll need to calculate how large of a policy you are going to purchase. There is no “magic number” for life insurance plans, but there are a few things to consider.
The first is how much debt would you leave behind if something tragic were to happen? Do you have a mortgage payment? Student loans? Will your kids have student loans? All of your unpaid expenses can add up and leave your loved ones with more debt than you would have realized. Make sure your insurance policy will at least cover all of your final expenses.
The other factor to consider is your annual salary. One of the main purposes of these plans is to replace lost income if you were to pass away. The more people relying on your income, the larger policy you’ll need to purchase. While there are differing opinions, most financial experts agree that ten times your annual salary is a good target.
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How Much Does a $500,000 Term Life Policy Cost?
Term life insurance premiums are based on the length of the term and the health and age of the person covered by the policy. While term life insurance becomes more expensive with age, it still remains a viable and one of the cheapest forms of insurance even for the elderly.
Even as you age, the premiums remain relatively low. If you’re still at a younger age, it could be wise to purchase a longer policy so you lock in those lower rates for a longer time before you have to renew your policy and have the premiums recalculated. Even purchasing life insurance at 50 is cheaper than waiting another 10 years.
$500,000 Term Life Rates Men
Sex
Age
$500,000 20 year Term
Male
30
$20.88/mo
Male
40
$30.45/mo
Male
50
$81.35/mo
Male
60
$218.48/mo
Male
70
$830.81/mo
$500,000 Term Life Rates Women
Sex
Age
$500,000 20 year Term
Female
30
$18.71/mo
Female
40
$26.54/mo
Female
50
$59.08/mo
Female
60
$149.16/mo
Female
70
$532.88/mo
Term life insurance policies are good for people that don’t have a lot of money to invest and need a way to protect their families from the financial burdens of a funeral and loss of income due to a sudden death.
Health and Age Considerations
Insurance providers that issue life insurance policies will review your medical history for serious medical conditions and might require a medical examination if a condition is questionable.
With a medical exam, the insurance company will send a paramedic to your house to take simple vital signs and basic health information. The medical exam will consist of getting your weight, taking a blood sample, urine sample, and blood pressure, and answering questions about your health and family health history, such as if your family has a history of diabetes.
The insurance company then analyzes any medical condition to determine its possible influence on your death.
If you have a medical condition that seriously impacts your health and is potentially shortening your life expectancy, your policy application might be denied or higher premiums may be required.
This is typically referred to as high-risk life insurance.
High-Risk Conditions
If you’re considered “high-risk,” you need to find a company offering cheaper high-risk coverage. Being listed as a “smoker” on your life insurance policy will double or triple your monthly premiums, regardless if you’re in perfect physical health. You can also see here for one of these types of high-risk conditions.
If you have a condition that can be controlled by treatments or medication and is not potentially shortening your life expectancy, your policy should be accepted and there should be no huge impact on your premium payments. If you want to get the lowest rates, it’s important that you focus on your health.
On that note, consider losing weight, lowering blood pressure, lowering cholesterol, etc. The medical exam determines the premiums and chances of being accepted. A healthy diet and regular exercise can work wonders for your body, energy levels, and even your wallet.
The more excess weight you carry, the higher the risk you’ll pose to the insurance company. Losing the extra weight will put extra money in your wallet. It’s a win-win scenario.
The key is being upfront with your agent and letting them know everything about your health. Just because you don’t disclose it upfront, doesn’t mean the life insurance company won’t find out about it. Every one of the top 10 life insurance companies will find out a condition and will adjust your quotes accordingly.
Do I Really Need a $500,000 Policy?
Everyone has different needs, but a term life insurance policy with enough coverage to cover the funeral, pay off debt and have enough left over to live on for a while is always a good idea. It’s especially a good idea if you have children.
If you’re wondering how much to buy, please use our free term life insurance calculator to see the amount your family deserves. Don’t buy ANY plan before you do some number crunching. All you have to do is add your debts and your salary together.
Another way to save money on your $500,000 life insurance company is to shop around with different companies. If you already have different insurance policies, you can save money by bundling your policies with one company. However, don’t automatically go with the company you are already using.
Because every company is different, they all have different ratings and will look at your application through different eyes. You could end up with drastically different rates from one company versus another. If you want to make sure you get the most insurance for your money, get quotes from several different companies before you pick one of them.
A good $500,000 dollar term life policy will provide the security your family needs as it adjusts to the loss of a loved one and learns to make it without your income.
Why You Need Life Insurance
After you use the calculator you may realize that you actually need a bigger policy. A lot of applicants are surprised at just how large of a policy they should purchase. Before you ever purchase a plan though, you should realize the importance of one of these policies.
Your debt is going straight to your family if you die. There is no way around this fact. Do you want to leave that kind of inheritance?
These policies give your family members the resources they need to pay off any debt you would leave behind. They won’t have to worry about covering those expenses. They won’t have to worry about finding money to pay off your credit card bills or have to force themselves back to work because of finances.
Every year there are countless families suffering from the loss of a family member. While going through all of their sufferings, they find themselves under a mountain of debt they have no way to pay for. Don’t let your family become one of these stories.
Getting life insurance coverage is extremely important, but you want to get the best rates available for your age. Having life insurance coverage shouldn’t cost a fortune every month. When you’re shopping around for a $500,000 policy, you’ll notice the premiums are affordable, but some are cheaper than others.
Fill out the quote form and the best rates from the highest rated companies will come to you. We will provide you with quotes matching your specific situation and preferences.
Not only can we give you the best rates, but we can also answer any questions you have about life insurance. Understanding all of the rules, policy types, and terms can be quite confusing. We understand, and we are here to help.
Two years and some change into his presidency, Biden busted out his first veto. On March 20th, 2023, the president shut down an attempt to overturn a retirement investing rule that allows fund managers to factor environmental, social, and governance (ESG) considerations into their decision-making processes.
You’re reading about this here because this veto may have a direct impact on countless investors. That is, if it sticks.
We’re here to unpack what went down, why, and what it might mean for you.
What’s Ahead:
Wait, what is ESG investing?
Before we dig into the timeline leading up to this veto, let’s cover what ESG actually means.
ESG stands for Environmental, Social, and Governance and ESG investing focuses on companies that have clear initiatives and policies in place within these areas.
Examples of environmental factors include:
Energy
Waste
Emissions and pollution
Water usage
Natural resource usage
Examples of social factors include:
Equal pay and opportunity
Ethical sourcing
Sexual harassment
Health and safety
Social justice training
Examples of governance factors include:
Leadership diversity
Information transparency
Business ethics
Board structure
Anti-corruption measures
For instance, a company committed to going carbon-negative that uses renewable energy sources for power might score high marks in the Environmental category.
ESG factors are non-financial in nature but can often affect a company’s performance. Historically, fund managers have been able to use these factors to analyze investment opportunities, though the Trump administration put rules in place to discourage this. The Biden administration reversed these.
When members of Congress wanted to go back to restricting the use of ESG, Biden flexed his executive veto power.
What happened
Let’s break it down, starting with the rule being disputed.
✔️ December 1, 2022: The U.S. Department of Labor issues a final revision of the “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” rule. It clarifies a point of confusion about the use of material ESG factors by investment fund managers.
This final rule permits fiduciaries to consider climate change and environmental, social, and governance factors when making investment decisions or exercising shareholder rights under the Employee Retirement Income Security Act (ERISA).
Under the first version of this rule, proposed in October 2021, a fiduciary’s duty was to choose investments based solely on “pecuniary considerations.” These were defined as economic factors that directly affect an investment’s risk/return.
Many people wondered whether this included ESG factors. These can have objectives that aren’t strictly financial but effects that definitely are, and it wasn’t clear how fiduciaries were supposed to — or allowed — to handle this. Use ESG? Ignore it?
The rule was revised to allow ESG considerations to be included as a relevant risk factor as long as fiduciaries act in accordance with their plan’s objectives (i.e. prudently) and keep their plan holders’ best interest in mind (i.e. loyally).
❗ February 7, 2023: H. J .Res. 30 is introduced to the House, sponsored by Representative Andy Barr, by the House Education and the Workforce committee. The committee seeks to nullify the Department of Labor rule.
This bill is decidedly anti-ESG. Supporters want to put the kibosh on the DOL rule because they feel that fund managers should not use ESG factors in their decision-making and that doing so could be harmful to investors.
✔️ February 28, 2023: H.J.Res. 30 passes the House.
✔️ March 1, 2023: H.J. Res. 30 passes the Senate.
❌ March 20, 2023: Biden vetoes this resolution. The bill does not move forward and the rule remains in place.
Why it happened
Regardless of how you personally feel about ESG investing and whether it’s a positive or negative practice, this veto may impact you.
Essentially, Biden’s veto was in defense of ESG investing, and the message that accompanied his decision expanded on this. The president stated the following:
“There is extensive evidence showing that environmental, social, and governance factors can have a material impact on markets, industries, and businesses. But the Republican-led resolution would force retirement managers to ignore these relevant risk factors, disregarding the principles of free markets and jeopardizing the life savings of working families and retirees.”
His reasoning was that ESG investing is beneficial to investors because it’s realistic. It pays attention to outside factors such as climate change that could have very real impacts on returns for a variety of asset classes. This ultimately provides protection from risk, not increased exposure to it.
Biden’s argument is that allowing managers to make selections more holistically benefits investors. It’s a safer long-term approach to retirement investing since many companies are likely to be impacted by climate change and ESG factors at some point.
Why it matters
Environmental, social, and governance initiatives are unlikely to go away any time soon. In fact, more and more companies are joining the cause with new initiatives and increased transparency.
When it comes to long-term investing, the goal is to think big picture and reduce risks. But there are two sides to this argument.
The controversy
Supporters of the “Prudence and Loyalty” rule, and now of Biden’s veto, argue that the “big picture” should include ESG factors even though these aren’t exclusively financial because they can have financial impacts. For instance, companies with policies in place to drive social change might garner more business than those that don’t and outperform them.
Opponents of the rule argue that ESG is too politically-charged and pushes an anti-capitalist agenda. Favoring ESG companies in investing could squeeze out other corporations and tilt the market, and this side is concerned that fiduciaries would put too much emphasis on causes rather than numbers (i.e. beliefs > money).
What the veto really means
Fiduciaries are obligated to protect their plan holders’ money. By vetoing this bill, Biden is arguing that ESG investing can help to accomplish this.
Can the bill still pass?
Technically, this isn’t over. There’s still a chance, however slim, that the GOP manages to reverse the rule after all.
But overriding a veto requires a two-thirds majority in Congress, and this is unlikely to happen considering the bill trying to squash the rule was hotly contested.
The takeaway
We’ll be keeping an eye on how this situation unfolds. We’re curious to see if Biden has any other plans for that veto pen, but making political predictions isn’t really what we do here.
Will Biden support ESG initiatives in the future? Maybe, maybe not. Right now, it doesn’t seem like the president is championing anything as much as he is just trying to protect investors.
It’s time to give yourself a 10-second financial check-up: are all of your hard-earned dollars earning interest? Even your short-term savings that you’ll need in two years or so?
Savvy investors know that every dollar deposited at a bank, brokerage, or financial institution should be making money — and that includes your short-term savings, cash investment balances, even your checking account. If not, you should be looking for somewhere else to store your dollars.
Let’s look at where best to stash your short-term savings.
What’s Ahead:
High-yield savings accounts
High-yield savings accounts pay up to 5x the national average savings rate and are convenient to open and manage. You can transfer money in and out electronically from your checking account or other bank accounts — a process that rarely takes more than two business days.
Most high-yield savings accounts have no fees or minimum balance requirements, so there’s no excuse for not using one for short-term cash reserves.
You can check out our full list of the best high-yield savings accounts, but here are three of our favorites that you may want to consider for short-term savings:
Aspiration Bank
Aspiration Bank is a great bank if you love earning rewards. And, because this bank plants trees for you with your rounded-up change, you can pride yourself on taking care of the environment through your banking.
You only need a minimum balance of $10 in the account and can earn up to 5.00% APR, depending on the account you have — they have a free account and a subscription account (Aspiration Plus) that gives you access to more of their products as well as a higher APY.
Given these easy terms and high returns, the Aspiration Plus Savings Account can be a very lucrative place to stash your short-term savings.
Learn more/apply or read our full Aspiration Bank review.
Citi Accelerate® Savings
The Citi Accelerate® Savings has one of the highest APYs when it comes to high-interest savings accounts, coming in at 2.20% APY. And their monthly fee is waived if you have at least $500 in your account, so it’s a great option if you have a larger short-term savings goal in mind.
And since there’s no minimum opening deposit, they’re great for just about anyone who wants to start socking away money every month.
Unfortunately, the Citi Accelerate® Savings is only available in certain U.S. markets. If you live in California, Connecticut, Maryland, Nevada, New Jersey, New York, Virginia, Washington, DC, or select markets in Florida or Illinois, you’ll need to go with an alternate account option.
Learn more/apply.
Capital One 360 Performance Savings
If you’re looking for a more full-service experience with your high-interest online savings account, consider Capital One 360 Performance Savings. They have plenty of services to help you out with your savings, and an APY of 3.00%. Plus, there are no minimums or monthly fees.
It’s a great option if you’re starting out with a low balance and you want to increase it until your short-term savings project is completed.
Read our full Capital One 360 Savings review.
Cash management accounts
A cash management account is an account that’s held by a robo-investor. It’s not a checking, savings, or investment account. Instead, the brokerage firm holds your money for you to use. They issue debit cards just like a checking account, but they have higher interest rates than those types of accounts.
These are a great option if you’re already using a robo-advisor for your long-term investments. You can find them at companies like Wealthfront, which has a cash account.
Short-term bonds
Short-term bonds are issued either by corporations or by the government. Each bond has different terms, so you’ll want to research what you’re signing up for before you make a purchase. But they’re overall low-risk investments.
But what is a bond? Good question. Bonds are basically IOUs that a company or government gives you on a debt. These groups are trying to fund something, but need capital, so they sell off bonds and tell you that after X amount of years, they’ll pay you Y in interest.
Read more: How does a bond work? A simple (and informative) guide
T-bills
Treasury bills, or T-bills, are another great short-term savings storage plan. They work similarly to bonds — you buy them from the treasury, and then you wait until they mature. Once they mature, you sell them and receive your money back, plus any interest.
You can buy them in intervals of 1, 4, 8, 13, 26, and 52 weeks, so they’re great for short-term projects that take about a year for you to save for.
Money market accounts
Money market accounts, also known as MMAs, are similar to both checking accounts and savings accounts.
How does that work? Well, you have interest rates that are higher than checking accounts and more on par with savings accounts, but you’re able to get a debit card to access your funds like a checking account. However, there is a limit to how many transactions you can make a month.
Money market accounts are good for short-term savings because they have higher accessibility than a savings account, but are low-risk. As long as you keep money in the account — and stay below the monthly withdrawals limit — you’ll earn interest on the account.
Read more: Best money market accounts
Certificates of deposit
Savers who are looking for the best return on their money on a slightly longer-term basis (minimum three months) should take a look at a certificate of deposit. CDs have terms that typically run from a period of three months to five years. Rates increase as the CD term gets longer.
You can get the best rate on a CD by shopping online, as these tend to change quite often. Most CDs will have minimum deposits of $500 or more, and patient investors can get a higher rate the longer their term.
Browse today’s best CD rates.
To reap the benefits of long-term CD rates with short-term savings, check out this article on CD laddering, which explains how to build your own.
Should you invest your short-term savings?
When you save money in an FDIC-insured bank account, your money is guaranteed not to lose value. When you invest money, you’re taking on risk for the chance at a greater return. You might very well earn a much better return on your money than you could with a bank, but you could also end up with less money than you put in.
In general, you want to save money you’ll need in the short term and invest money you won’t need for a long, long time. That’s because the risk of losing money on an investment diminishes the longer you’re able to hold that investment. We all know the stock market is volatile. If you put your money in the day before a crash, you could lose a big chunk of value overnight. If you leave that money invested for 30 years, however, you’ll likely come out way ahead (despite the initial crash!)
Risk tolerance is a personal thing, but my philosophy is that I never invest money I’ll need in the next two years. If don’t need the money in the next two years but will need it in the next five years (for example, money I’m saving for a future car purchase), I might invest the money, but very conservatively.
If you’re looking for a simple way to save money for a short-term goal, but you’d rather take your chances investing it rather than parking it at a bank, check out the Acorns app. You just download the app, link a bank account, answer a few questions, and you’re an investor. You can connect the app to any number of debit or credit cards, and Acorns automatically rounds up each of your purchases and invests that amount on your behalf. While this won’t make you rich, it can help any first-time investor make a little extra cash.
The bottom line
For most people, the best place to put short-term savings is an online savings account that pays a fair interest rate.
But other options, like certificates of deposits, money market accounts, short-term bonds, T-bills, and cash management accounts are all good alternatives you may not have considered for saving up for a short-term goal.
Featured image: Julia Sudnitskaya/Shutterstock.com
[Note from editor: The “Mastermind Showcase” highlights companies and news from members of the GEM. Today’s showcase: StreetText.]
StreetText’s flagship product Lead Magnet gives agents access to ready-to-use Facebook ads that come with lead capture pages, text messaging A.I., integrated social information, and drip emails. The software has been used to launch more than 47,000 ads and generate over 3.3 million leads. Its dashboard provides a detailed breakdown of the effectiveness of each ad, as well as providing a place to track and manage new leads.
Direct Zapier connection means agents can integrate StreetText into the tools they already use.
Co-founder Stephen Whiting started StreetText in 2010, with LeadMagnet launching in 2014.
What we like: As a dedicated ad play focused on the single largest audience on the internet, what’s not to like?
If you want more financial discipline you are probably looking to curb impulsive spending, save money, or maybe just achieve financial stability.
Building self discipline your financial decisions is an important part of building wealth over the long run.
What’s Ahead:
Why is self discipline the key to becoming a good saver
Being a good saver requires self discipline since there is so much fun stuff to do and buy. You are exposed to more advertising than anyone in the history of the world, and the marketing companies know a lot about psychology and exactly how to get you to part with your money.
So it takes a lot of self discipline in order to fight those tactics and stay on course to meet your goals. You have to have a clear goal and know that meeting that goal is more important than anything you can buy.
It requires a lot of self discipline to overcome the temptation to delay gratification of spending money and to save it instead.
Steps to develop self discipline
Step 1: Set a goal – then break it down into regularly recurring actions
What exactly do you want to achieve? It could be to build a fully funded emergency fund, start investing, pay off your debt, or even achieve financial independence – or anything in between.
Write down exactly what your goal is and the date by which you want to achieve it. For example, you may want to pay off your credit card debt within one year.
Then break down exactly what actions you need to take on a regular basis. Make these actions as small and as regular as possible. A small daily action is better than a larger monthly action.
For example, if you owe $10,000 on your credit card you’ll need to pay $833.33 off each month. Is that doable? If your budget allows for that, great. If not, you’ll need to figure out what exactly you need to do make up the difference.
If your regular payment is $150 and you can pull an extra $200 per month from your monthly budget that means you’ll need to come up with an additional $484 per month. If you have time to walk dogs after work you may decide to pick up a dog walking client for a few walks per week. At $25 per walk you’d have to walk the dog 20 times per month to make up the $484 you need. If you picked up a client that needed the dog walked everyday after work, you’d have the full amount.
You now have a goal and an action plan to make that goal happen.
Here are a few examples of short, mid, and long-term goals, but feel free to fill in the blanks with your own personal financial goals.
Short-term goals
Saving money each month towards your emergency fund
Going out to dinner with friends twice a month
Small household projects (planting a small indoor garden, painting a room, etc.)
Mid-term goals
Saving for a weekend getaway
Paying cash for your next car
Paying off your credit card debt
Long-term goals
Down payment on a house
Paying off your student loans
Putting money away for retirement
Read more: How to prioritize and save for multiple goals at once
Step 2: Track your progress
You’ll want some way to visualize and track your progress. A lot of people find this extremely motivating.
Using the example of paying off your car above, you could make a thermostat and color in a section each time you make a payment, representing the amount of money you’ve paid off (or is left on the loan). Or cover a piece of paper with stars (or anything else) and color in a star every time you send in your payment, each star representing one payment or a set amount of money.
Hang your tracker on the fridge so you can see it every day to remind you of what you are working towards. Make it a little celebration each time you get to fill in more of your tracker.
You can also go digital with your goal tracking. Apps like Empower offer a few different services for investing and checking up on your financial health. But, in this instance, I’m referring to the free tools they offer to keep track of your net worth.
You can create an account with them without opening an investment account. The wealth management and planning tools are the ones that you will probably be most interested in to help determine where you are at currently.
You can connect all of your financial accounts within the tool. These will be things, such as:
Checking account
Savings account(s)
Investment account(s)
Student loan account(s)
Auto loan account
Mortgage account
Credit card(s)
Medical debt account(s)
Sometimes, it can be pretty scary to see what your actual net worth is vs. where you want to be.
But, I use this as a driving force to work harder every month to increase my overall net worth. Because the faster I can get my net worth up, the faster I can get to my long-term goals.
Step 3: Find your tribe
Find people in your life who are working towards similar goals. This will help build self discipline because you’ll have a community that is embodying the new behaviors you want to build.
If you meet regularly with others who are paying off debt, you’ll have more discipline to follow that same path. You’ll have someone to share your successes with and a friend who can help when you are struggling.
Contrast that to when your friends regularly encourage overspending. Just going out to have a meal or a drink with friends can end up costing $100 or more in some instances. Something that sounded so innocuous, has now completely derailed your goal.
This isn’t to say you need to replace your entire friend group – not at all. But it will be up to you set a budget for having fun and then stick to it.
For example, instead of having two-three drinks, only have one. Go out for lunch instead of dinner, or a matinee instead of a night movie.
All of these options still give you the freedom to hang out with your friends and enjoy your life, but it won’t cost you nearly as much. And when you stick to your budget, your future self will thank you for your discipline.
Read More: The Cost Of Friendship – How Your Friends Affect The Way
Tips to meet your financial goals
Determine your needs vs. your wants
Setting up your financial goals and a way to track them are the first steps. But staying on track can get tricky when life happens. This is where needs vs. wants come into play. There are things that all of us want to have. But these are the things that can throw us off track so fast it will make your head spin.
So keeping in mind if the item/service is a need or a want can help you have more financial disciplined. Just remember to think long and hard about any purchases before you pull the trigger. If it is a need, then go ahead and do it. But if the item is actually something you want instead, it’s usually best to hold off even for a bit to make sure you still really want it as much as you think you do.
Reduce, reuse, recycle
When it comes to purchasing wants, you have a few other options that can save you a ton of money. If there is an item that you are wanting to purchase, but it simply isn’t in the budget, what might be some other ways to achieve the same goal?
Reduce, reuse or recycle may just be the best option here. If you have things in your house that you can get rid of (and maybe even make some money off of their sale), then that is one way to get the potential want. Sell your old stuff and then use the proceeds to purchase the new want item.
Or, if you can reuse an item you have in your house already, paired with something else, in order to create a similar item, then why not do that? Sometimes, all a table or chair needs is a fresh coat of paint in order to feel like a completely new item. So get creative and think outside the box about things you already have at your disposal.
And if all else fails, recycle your old items. You may not make any money off of them, but you could potentially get a tax write-off. Plus, it declutters your space, which can make it feel like a completely new room. Sometimes, that is really all you need.
Make it automatic
No matter what you goal is you can probably automate at least some of it.
If you want to save more, schedule automatic transfers from your checking to your savings. If you want to pay off a certain amount of debt each month, set automatic payments to your accounts.
Having these transactions happen automatically will remove the friction that can be caused when you have to manually make that extra payment, or save that extra money. You can always go in and stop or change the automatic payment if you can’t swing it one month, but making it the default will cause it to happen more often than not.
Of course, don’t set yourself up for failure. Setting an automatic payment without a plan to make sure the money is available will cause more harm than good. Create a feasible plan and realistic goal, then set it up to run without any extra effort from you.
Read more: Put your money on autopilot
Put your emergency fund in a high yield savings account
If you are working on building your emergency fund – or already have a solid savings account – you’ll want to make sure you are getting the most interest possible. This will help grow your savings rate since you’ll be earning a little extra interest each month.
Interest rates on high-yield savings accounts are higher than they’ve been in years, and the difference between online accounts and those at your local bank are huge. So, while these high yield savings account rates may not be anywhere close to the average return you will get on investing your money, it’s still nice to make some interest on your savings.
The best high yield savings account, in my opinion, is the CIT Savings Builder.
Read more: How Much Should You Save Every Month?
CIT Bank Savings Builder
CIT Bank Savings Builder has a very competitive APY – compared to the pennies you get from a credit union account.
You only need $100 to open an account and they charge no maintenance fees. To earn the highest APY, you need to get your account up to $25,000, or you need to deposit at least $100 monthly. See details here.
The CIT Savings Builder has a completely online platform, so everything can be done directly from your smartphone, just to make life simpler. They are also FDIC insured up to $250,000 per account type.
CIT Bank. Member FDIC.
Summary
Overall, it is extremely easy for our money to flow through our fingers like water. This is why you have to be cognizant of what you have and where you want to be with your finances.
If you want to avoid debt, save more money, or invest for your future then it’s important to develop self discipline in your finances.
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.
We are going to under the cover and discover $13 an hour is how much per year.
For most Americans, this is hovering near minimum wage.
Let’s get this straight… This is not a livable wage.
If you are in high school or college and have support from your parents, then this is great spending money for you.
However, if you are making it on your own, $13 per hour will not make ends meet each month.
For most people, being at minimum wage is common and the goal is to make your way up the payscale and quickly!
In this post, we’re going to detail exactly what $13 an hour is how much a year. Also, we are going to break it down to know how much is made per month, bi-weekly, per week, and daily.
That will help you immensely with how you spend your money. Because too many times the hard-earned cash is brought home, but there is no actual plan for how to spend that money.
When living close to minimum wage, you must be know how to manage money wisely.
More than likely, you are living paycheck to paycheck and struggling to survive to the next paycheck. Take a deep breath and make this minimum wage just a season.
The ultimate goal is to make the most of your hourly wage with inspirations to make more money.
If that is something you want too, then keep reading. You are in the right place.
$13 an Hour is How Much a Year?
When we ran all of our numbers to figure out how much is $13 per hour is an annual salary, we used the average working day of 40 hours a week.
40 hours x 52 weeks x $13 = $27,040
$27040 is the gross annual salary with a $13 per hour wage.
Breakdown of 13 Dollars an hour is how much a year
Typically, the average workweek 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, multiple the hourly salary of $13 times 2,080 working hours, and the result is $27,040.
That number is the gross income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
Work Part Time?
But you may think, oh wait, I’m only working part time. So if you’re working part time, the assumption is working 20 hours a week at $13 an hour.
Only 20 hours per week. Then, take 20 hours times 52 weeks and that equals 1,040 working hours. Then, multiple the hourly salary of $13 times 1,040 working hours, and the result is $13,520.
How Much is $13 Per Month?
On average, the monthly amount would average $2253.
Annual Amount of $27,040 ÷ 12 months = $2,253 per month
Since some months have more days and fewer days like February, you can expect months with more days to have a bigger paycheck. Also, this can be heavily influenced by how often you are paid and on which days you get paid.
Work Part Time?
Only 20 hours per week. Then, the monthly amount would average $1,127.
How Much is $13 per Hour Per Week
This is a great number to know! How much do I make each week? When I roll out of bed and do my job, what can I expect to make at the end of the week?
Once again, the assumption is 40 hours worked.
40 hours x $13 = $520 per week.
Work Part Time?
Only 20 hours per week. Then, the weekly amount would be $260.
How Much is $13 per Hour Bi-Weekly
For this calculation, take the average weekly pay of $520 and double it.
$520 per week x 2 = $1040
Also, the other way to calculate this is:
40 hours x 2 weeks x $13 an hour = $1040
Work Part Time?
Only 20 hours per week. Then, the bi-weekly amount would be $520.
How Much is $13 Per Hour Per Day
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x $13 per hour = $104 per day.
If you work 10 hours a day for four days, then you would make $130 per day. (10 hours x $13 per hour)
Work Part Time?
Only 4 hours per day. Then, the daily amount would be $52.
$13 Per Hour is…
$13 per Hour – Full Time
Total Income
Yearly Salary (52 weeks)
$27,040
Yearly Wage (50 weeks)
$26,000
Monthly Wage (173 hours)
$2,253
Weekly Wage (40 Hours)
$520
Bi-Weekly Wage (80 Hours)
$1040
Daily Wage (8 Hours)
$104
Net Estimated Monthly Income
$1,720
**These are assumptions based on simple scenarios.
Paid Time Off Earning 13 Dollars an Hour
Does your employer offer paid time off?
As an hourly, close to minimum wage employee, more than likely you will not get paid time off.
So, here are the scenarios for both cases.
For general purposes, we are going to assume you work 40 hours per week over the course of the year.
Case # 1 – With Paid Time Off
Most hourly employees, get two weeks of paid time off which is equivalent to 2 weeks of paid time off.
In this case, you would make $27,040 per year.
This is the same as the example above for an annual salary making $13 per hour.
Case #2 – No Paid Time Off
Unfortunately, not all employers offer paid time off to their hourly employees. While that is unfortunate, it is best to plan for less income.
Life happens. There will be times you need to take time off for numerous reasons – sick time, handling an emergency, or even vacation.
So, let’s assume you take 2 weeks off without paid time off.
That means you would only work 50 weeks of the year instead of all 52 weeks. Take 40 hours times 50 weeks and that equals 2,000 working hours. Then, multiple the hourly salary of $13 times 2,000 working hours, and the result is $26,000.
40 hours x 50 weeks x $13 = $26000
You would average $104 per working day and nothing when you don’t work.
$13 an Hour is How Much a year After Taxes
Let’s be honest… Taxes can take up a big chunk of your paycheck. Thus, you need to know how taxes can affect your hourly wage.
This is why you always wondering why your take-home pay is so much less.
Also, every single person’s 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%.
Gross Annual Salary: $27,040
Federal Taxes of 12%: $3,245
State Taxes of 4%: $1,082
Social Security and Medicare of 7.65%: $2,069
$13 an Hour per Year after Taxes: $20,645
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$20645 ÷ 2080 hours = $9.93 per hour
After estimated taxes and FICA, you are netting $9.93 an hour. That is $3.07 an hour less than what you planned.
This is a very highlighted example and can vary greatly depending on your personal situation. Therefore, here is a great tool to help you figure out how much your net paycheck would be.
$13 an Hour Budget – Example
You are probably wondering can I live on my own making 13 dollars an hour? How much rent can you afford at 13 an hour?
Using our Cents Plan Formula, this is the best case scenario on how to budget your $13 per hour paycheck.
When using these percentages, it is best to use net income because taxes must be paid.
In this example, above we calculated that $13 an hour was $9.93 after taxes. That would average $1720 per month.
According to the Cents Plan Formula, here is the high level view of a $13 per hour budget:
Basic Expenses of 50% = $860
Save Money of 20% = $344
Give Money of 10% = $172
Fun Spending of 20% = $344
Debt of 0% = $0
Obviously, that is not doable when living so close to minimum wage. So, you have to be strategic on ways to decrease your basic expenses and debt. Then, it will allow you more money to save and fun spending.
To further break down an example budget of $13 per hour, then using the ideal household percentages is extremely helpful.
recommended budget percentages based on $13 per hour wage:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$68
Savings
15-25%
$135
Housing
20-30%
$676
Utilities
4-7%
$135
Groceries
5-12%
$203
Clothing
1-4%
$23
Transportation
4-10%
$135
Medical
5-12%
$225
Life Insurance
1%
$19
Education
1-4%
$11
Personal
2-7%
$35
Recreation / Entertainment
3-8%
$56
Debts
0% – Goal
$0
Government Tax (including Income Tatumx, Social Security & Medicare)
15-25%
$533
Total Gross Income
$2253
**In this budget, prioritization was given to basic expenses. Thus, some categories like giving and saving were less.
$13 An Hour Salary Calculator
Now, you get to figure out how much you make based on your hours worked or if you make a wage between $13.01-13.99.
This is super helpful if you make $13.12, $13.35, or $13.77.
Living on $13 Per Hour
Living close to minimum wage can be a very difficult situation.
Is it doable? Probably not for long.
You just have to be wiser (or frugal) with your money and how you spend the hard-earned cash you have been blessed with.
A lot of times when people are making under near the minimum wage mark, they feel like they are in this constant cycle that they can never keep up (which completely makes sense it is hard!).
When your thoughts are constantly focused on how you are struggling to keep up with bills and expenses, that is all you focus on.
You need to do is change your money mindset.
This is what you say to yourself… Okay, I am making near minimum wage for now. I have aspirations and goals to increase how much I make. For now, I am going to make sure that I am able to live on my 13 dollars per hour. I’m going to try and avoid debt and payday loans at all costs.
Other Tips to Help You:
Check your minimum wage for your state and city. You might find a higher minimum wage in a nearby city.
Look to living in a lower cost of living area to stretch your money.
Find ways to minizine your basic expenses.
Thrive with a minimalist lifestyle.
Decide if a roommate or moving back with your parents would help.
Bike or walk to work.
In the next section, we will dig into ways to increase your income, but for now, you must focus on living on $13 an hour.
5 Ways to Increase Your Hourly Wage
This right here is the most important section of this post.
You need to figure out ways to increase your hourly income because I’m going to tell you…you deserve more. You do a good job and your value is higher than what your employers pay you.
Even an increase of 50 cents to $13.50 will add up over the year. Even better $15 an hour!
1. Ask for a Raise
The first thing to do is ask for a raise. Walk right in and ask for a raise because you never know what the answer will be until you ask.
If you want the best tips on how specifically to ask for a raise and what the average wage is for somebody doing your job, then check out this book. In this book, the author gives you the exact way to increase your income. The purchase is worth it or go down to the library and check that book out.
2. Look for A New Job
Another way to increase your hourly wage is to look for a new job. Maybe a completely new industry.
It might be a total change for you, but many times, if you want to change your financial situation, then that starts with a career change. Maybe you’re stressed out at work. Making $13 an hour is too much for you and you’re not able to enjoy life, maybe changing jobs and finding another job may increase your pay, but it will also increase your quality of life.
3. Find a New Career
Because of student loans, too many employees feel like they are stuck in the career field they chose. They feel sucked into the job that they don’t like or have the potential they thought it would.
For many years, I was in the same situation until I decided to do a complete career change. I am glad I did. I have the flexibility that I needed in my life to do what I wanted when I needed to do it. Plus I am able to enjoy my entrepreneurial spirit.
4. Find Alternative Ways to Make Money
In today’s society, you need to find ways to make more money. Period.
There is no way to get around it. You need to find additional income outside a traditional nine-to-five position or typical 40 hour a week job. You will reach a point where you are maxed on what you can make in your current position or title. There may be some advancement to move forward, but in many cases, there just is not much room for growth.
So, you need to find a side hustle – another way to make money.
Do something that you enjoy, turn your hobby into a way to make money, turn something that you naturally do, and help others into a service business. In today’s society, the sky is the limit on how you can earn a freelancing income.
5. Earn Passive Income
The last way to increase your hourly wage is to start earning passive income.
This can be from a variety of ways including the stock market, real estate, online courses, book sales, etc. This is where the differentiation between struggling financially and being financially sound happens.
By earning money passively, you are able to do the things that you enjoy doing and not be loaded down, with having a job that you need to work, and a place that you have to go to. And you still make money doing nothing.
Here is an example:
You can start a brokerage account and start trading stocks for $50. You need to learn and take the one and only investing class I recommend. Learn how the market works, watch videos, and practice in a simulator before you start using your own money.
One gentleman started with $5,000 in his trading account and now has well over $36,000 in a year. Just from practice and being consistent, he has learned that passive income is the way for him to increase his income and also not be a slave to his job.
Tips to Live on $13 an Hour
In this last section, grasp these tips on how to live on $13 an hour. On our site, you can find lots of money saving tips to help stretch your income further.
Here are the most important tips to live on $13 an hour. Highlight these!
1. Spend Less Than you Make
First, you must learn to spend less than you make.
If not you will be caught in the debt cycle and that is not where you want to be. You will be consistently living paycheck to paycheck.
In order to break that dreadful cycle, it means your expenses must be less than your income.
And when I say income, it’s not the $13 an hour. As we talked about earlier in the post, there are taxes. The amount of taxes taken out of your paycheck is called your net income which is your home $13 an hour minus all the taxes, FICA, social security, and medicare are taken out. That is your net income.
So, your net income has to be less than your net income.
2. Living Below Your Means
You need to be happy. And living on less can actually make you happier. Studies prove that less is better.
Finding contentment in life is one thing that is a struggle for most.
We are driven to want the new shiny toy, the thing next door, the stuff your friend or family member got. Our society has trained you that you need these things as well.
Have you ever taken a step back and looked at what you really need?
Once you are able to find contentment with life, then you are going to be set for the long term with your finances.
Here is our story on owning less stuff. We have been happier since.
3. Make Saving Money Fun
You need to make saving money fun. Period.
It could be participating in a no spend challenge for the month.
Check out the 200 envelope challenge (which is doable on your income)
It could be challenging friends not to go to Target for a week.
Maybe changing your habits and not picking up takeout and planning meals.
Whatever it is challenge yourself.
Find new ways of saving money and have fun with it.
Even better, get your family and kids involved in the challenge to save money. Tell them the reason why you are saving money and this is what you are doing.
Here are 101 things to do with no money. Free activities without costing you a dime. That is an amazing resource for you and you will never be bored.
And you will learn a lot of things in life you can do for free. Personally, some of the best ones are getting outside and enjoying some fresh air.
4. Make More Money
If you want if you do not settle for less, then find ways to make more money. If you want more out of life, then increase your income.
You need to be an advocate for yourself.
Find ways to make more money.
It could be a side hustle, a second job, asking for a raise, going to school to change careers, or picking up extra hours.
Whatever path you take, that’s fine. Just find ways to make more money. Period.
5. No State Taxes
Paying taxes is one option to increase what you take home in each paycheck.
These are the states that don’t pay state income taxes on wages:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
It is very interesting if you take into account the amount of state taxes paid compared to a state with income taxes.
Also, if you live in one of the higher taxed states, then you may want to reconsider moving to a lower cost of living area. The higher taxes income tax states include California, Hawaii, New Jersey, Oregon, Minnesota, the District of Columbia, New York, Vermont, Iowa, and Wisconsin. These states tax income somewhere between 7.65% – 13.3%.
6. Stick to a Budget
You need to learn how to start a budget. We have tons budgeting resources for you.
While creating a budget is great, you need to learn how to use one.
You do not have to budget down to every last penny.
You need to make sure your expenses are less than your income and you are creating sinking funds for those irregular expenses.
Budget Help:
7. Pay Off Debt Quickly
The amount that you pay interest on debt is absolutely absurd.
Unfortunately, that is how many of these companies make their money is from the interest you pay on debt.
If you are paying 5% to even 20-21% or higher, you need to find ways to lower that debt quickly.
Here’s a debt calculator to help you. Figure out your debt free date.
Make that paying off debt fast is your target and main focus. I can tell you from personal experience, it was not until week paid off our debt that we finally rounded the corner financially. Once our debt was paid off, we could finally be able to save money. Set money aside in separate bank accounts and pay for cash for things.
It took us working hard to pay off debt. We needed persistence and patience while we had setbacks in our debt free journey.
Jobs that Pay $13 an Hour
You can always find jobs that pay $13 per hour. Polish up that smile, fill out the application, and be prepared with your interview skills.
Job Search Hint: Always send a written follow-up thank you note for your interview. That will help you get noticed and remembered.
First, look at the cities that require a minimum wage in their cities. That is the best place to start to find jobs that are going to pay higher than the federal minimum wage rate. Many of the cities are moving towards this model so, target and look for jobs in those areas.
Possible Ideas:
Cashiers
Back of the house restaurant staff
Landscape Laborer
Retail jobs
Paraeducators at schools
Janitors
Farm help
Warehouse workers
Fast Food Restaurants workers
$13 Per Hour Annual Salary
In this post, we detailed 13 an hour is how much a year. Plus all of the variables that can impact your net income. This is something that you can live off.
How much is 13 dollars an hour annually…
$27,040
This is under $30000 per year and you need to make at least $45k a year.
In this post, we highlighted ways to increase your income as well as tips for living off your wage.
Use the sample budget as a starting point with your expenses.
You will have to be savvy and wise with your hard-earned income. But, with a plan, anything is possible!
Learn exactly how much do I make per year…
Know someone else that needs this, too? Then, please share!!
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.
Investing in stocks can seem like a daunting task.
There are so many things to consider when it comes to investing, and the stock market is constantly moving.
Stock market investing is a popular option to increase net worth and make money.
Many people are looking for ways to invest their money, with the number of individual investors increasing rapidly in recent years.
This guide covers many important factors for how to invest in stocks for beginners.
Starting out as a newbie trader can be scary and overwhelming… don’t worry, all seasoned traders had to start at the beginning too!
Let’s take away that quell those thoughts and focus on why you want to learn to invest in stocks.
This guide will give you everything you need to know about how to invest in stocks as a beginner investor!
What Are Stocks?
In the most basic form, stocks are a form of investment. When you own a stock, you have a piece of ownership in the company’s equity.
The stock market is a real-time financial market in which investors buy and sell stocks and other securites. The stock market is made up of many companies and individuals who are actively investing in stocks.
Stocks are an excellent way for companies and individuals to invest in a company and receive a share of the company’s profits.
Many of the growth stocks (FAANG stocks) are those who investors want their stock price to increase over time. Thus, increasing their overall portfolio’s net worth.
FAANG Stocks is an acronym for: Meta (formerly known as Facebook), Amazon, Apple, Netflix, and Alphabet (formerly known as Google).
Some companies like Chevron (CVX) pay out a dividend each quarter to their investors.
There are thousands of stocks available to trade.
What Can You Invest In The Stock Market?
There are many investment opportunities in the financial market, so it is important to be informed about what you can invest in. Below are some of the places where you can invest your money:
Stocks
Bonds
Mutual funds
ETFs
Commodities
Futures
Options
Now, we are going to look at the most common.
Individual stocks
Individual stocks are a type of investment that you can make yourself.
You can choose how many shares of a certain company you want to purchase.
For example, you like Tesla for how they are innovative in the electric car space. You can choose to invest 20 shares of their stock.
As a long-term investor, you want to hold a portfolio of 10-25 stocks. Find a list of beginning stocks to build your portfolio.
Individual stocks can be bought or sold as a way to dip your toe into the stock-trading waters.
As a short-term investor, you are looking to make money as the stock price increases or decreases.
Mutual Funds
Mutual funds are managed portfolios of stocks.
As a result, mutual funds typically have load fees equal to 1% to 3% of the value of the fund.
One of the most popular mutual funds is VTSAX because of its expense ratio is .04%
Mutual funds are a clear choice for most investors because of the simplicity to invest in the market. This can be a good investment for both novice and experienced investors, as they offer decent returns with lower risk.
They tend to rise more slowly than individual stocks and have less potential for high returns. Mutual funds are a great way to diversify your portfolio and gain exposure to a variety of different securities.
All mutual funds must disclose their fees and performance information so that you can make an informed decision about whether or not to invest.
Exchange traded funds (ETFs)
Exchange traded funds (ETFs) are a type of exchange-traded investment product that must register with the SEC and allows investors to pool money and invest in stocks, bonds, or assets that are traded on the US stock exchange.
They are inherently diversified, which reduces your risk.
This is a good option for beginner investors because they offer a large selection of stocks in one go.
ETFs have a lower minimum to start investing, which is a draw for many investors starting out with little funds. Plus there are many different types of ETFs to choose from.
ETFs are similar to mutual funds, but trade more similarly to individual stocks. With ETFs and Index Funds, you can purchase them yourself and may have lower fees.
Why Stock Prices Fluctuate
Stock prices fluctuate because the financial markets are a complex system. There are many factors that can affect the price of a stock,
There are a number of factors that can influence stock prices, including:
Economic indicators like GDP growth, inflation, and unemployment rates
Company earnings reports
The overall health of the economy
Political and social instability
Changes in interest rates
War or natural disasters
Supply and demand,
Actions of the company’s management
Short squeezings like what happened with GME or AMC
The volatility in the stock market is the #1 reason most people stay out of investments. However, on average, the stock market has moved up 8-10% a year.
What is the best thing to invest in as a beginner?
The best thing to invest in as a beginner is your time.
You need to learn how the stock market works. Just like you would get a certification or degree, you should highly consider an investing course.
Learn and devote as much time as you can to investing in stocks.
How To Invest In Stocks For Beginners?
Investing in the stock market can be a great way to make money! If you’re looking for ways to make money or grow net worth, investing in a stock is a smart choice.
With online access and trading being easier now than ever, it can be easier than ever to start buying stocks.
Let’s dig into how to invest in stocks like a pro.
FYI…You should do your own research before investing.
Step #1: Figure out your goals
Figure out your goals to help with setting an investing strategy.
What are you trying to achieve with stock market investing? Is it supplemental income? A certain level of wealth for retirement? Are you looking for short-term or long-term gains?
Once you know what you’re aiming for, it will be easier to find the right stocks and make wise investment decisions.
Your reason to invest in stocks will be different than everyone around you.
Some people want to supplement their weekly income.
Others want to invest in companies for the long term.
My goal is to make weekly income from the stock market. That is my investment strategy for non-retirement accounts.
You need to spend time understanding WHY you want to buy stocks.
Knowing this answer will help you define what type of trader you will be.
Step #2. Decide how you want to invest in the stock market
When you decide to invest in the stock market, you need to choose what you want to invest in.
You can invest in stocks, which are shares of ownership in a company, or you can invest in bonds, which are loans that a company makes. There are also other options like mutual funds and exchange-traded funds (ETFs), which are collections of stocks or bonds.
Also, you can expand this to what types of investments will you have in various retirement or brokerage accounts. For example, you may invest in mutual funds with your 401k, ETFs with your Roth IRA, and stick with individual stocks for your taxable account.
This is a personal decision.
Many people when they are first starting to trade stocks choose to limit purchasing stocks with a limited percentage of their overall portfolio.
Step #3. Are you invest in stocks for the short term or long term?
The buy and hold investor is more comfortable with taking a long-term approach, while the short-term speculator is more focused on the day-to-day price fluctuations.
Once again, this is a personal preference.
One of the most common themes of many investing gurus is, “Remember that stock prices can go down as well as up, so it’s important to stay invested for the long term.”
However, this full-time trader wants to make money on those highs and lows.
Knowing your overall investment horizon will help you decide how much time you plan to hold onto your investments to reach your financial goal.
Also, you can choose different time horizons for different accounts.
Step #4: Determine your investing approach
Passive and active investing are two main approaches to stock market investing.
Passive investing does not involve significant trading and is associated with index funds.
Passive investing is a way to DIY your investments for maximum efficiency over time.
Thus, you would contribute to your investment account on the xx day of the month with $xx amount of money.
This happens with consistency regardless of where the market stands on that day.
You are less warry of where the stock market will go and focused on overtime it will continue to go up.
Active investing takes the opposite approach, hoping to maximize gains by buying and selling more frequently and at specific times.
Active investing is when an investor is actively acquiring, selling, or holding bought stocks.
This could be with day trading or swing trading.
You may hold stocks for less than a day, a few days, or a couple of weeks.
The purpose of having active investing is to make profits.
In the stock market, investors make efforts to increase their net worth over time or to make income off the market.
Step #5: Define your investment strategy
When it comes to investing in the stock market, there are a few key factors you need to take into account: your time horizon, financial goals, risk tolerance, and tax bracket.
Do you want to be an active trader or stick with passive investing? What kind of investor am I?
There is no right or wrong answer as this is a personal preference.
Ultimately, you want returns to be greater than the overall S&P 500 index for the year.
Once you’ve figured these out, you can start focusing on specific investment strategies that will work best for you.
Be aware of any fees or related costs when investing. Fees can take a bite out of your investments, so compare costs and fees.
Step #6: Determine the amount of money willing to lose on stocks.
Trading stocks online is inherently risky.
You want to consider what your “risk tolerance” is. Simply put, how much are you willing to lose in stocks before you want to quit?
The biggest reason most people quit trading stocks is that they do not know their risk tolerance and fail with risk management.
You will lose on trading stocks. The goal is to lose a small amount on some of the trades and gain a greater amount of more of your trades.
How much risk you can reasonably take on given your financial situation?
What are your feelings about risk?
What happens when your favorite stock drops 25%?
Understanding your risk tolerance and how much you are willing to lose will help you keep your losses small.
Start with a small amount of money when investing in stocks. Also, make sure you have enough money saved up so you can handle any losses that may occur.
How to Start Investing in Stocks
There are a variety of ways to start investing in stocks. Some methods include getting a small account balance and then buying shares, creating an investing club with friends, or researching the companies you want to invest in.
Now, that you have determined how and why you want to invest in stocks. Let’s dig into the nitty gritty of how to manage a stock portfolio.
On the other hand, if you don’t invest enough, you could miss out on potential profits. Try starting with an amount you’re comfortable losing if the stock market does go down.
1. Open an investment account
There are a few things you need to do in order to start investing in the stock market.
The first is to open an investment account with a broker or an online brokerage firm.
There are different types of accounts you can open:
Taxable accounts like an individual or joint brokerage
Retirement accounts like IRA or Roth IRA
These are the most basic investment accounts, here is a list of types of investment accounts.
If you plan to hold EFTs or mutual funds, Vanguard is a great place to start.
If you plan to be an active trader, I would look at TD Ameritrade or Fidelity. Be wary of Robinhood or WeBull.
2. Saturate yourself in Stock Market Knowledge
On the simplest level, it can be incredibly easy to begin your investing career with little-to-no knowledge, research, and expertise.
If you have even a remote understanding of stocks, then learn what you need from an easy-to-find YouTube video, followed by watching some of your favorite TV shows to learn more about the market and its secrets.
With that said, you need to be digesting the basics from start to end of getting your first investment started.
As the title reveals, investing can seem intimidating and complicated. Thus, stock market knowledge is invaluable.
3. Consider an Investing Course
A typical investing course would teach how to invest in stocks (and possibly other investments).
As a beginner trader, it is unlikely you will know the full extent of how the stock market works. There are many intricacies you must learn and understand.
Beginners should learn about stock investing basics, such as diversification and investment criteria.
Many investing courses offer a platform on how to make money by trading stocks.
Personally, I highly recommend buying this investing course.
If you choose not to follow my advice, that is fine. Come back when you have lost more money in the stock market than the price of the courses.
I CAN NOT STRESS ENOUGH… how important it is to have a solid foundation and practice in a simulated account before you use your real money.
4. Research the companies you want to invest in
When you’re ready to start investing in stocks, it is important that you do your due diligence and research the companies you want to invest in.
Look for trends and for companies that are in positions to benefit you.
Consider stocks across a wide range of industries, from technology to health care. It’s also important to remember that stock prices can go up or down, so always consider this before making any investment decisions.
5. Choose your stocks, ETFs, or mutual funds
Next, you have to decide what fits your investing strategy. Are you looking to buy:
Stocks
ETFs
Mutual Funds
Regardless of which type of investment you make, you must look for companies that have attractive valuations and growth prospects. In the case of index funds or ETFs, which fund has the companies you find attractive.
Most importantly, you should also take into account the company’s financial health and its prospects for future growth.
Make sure you understand the risks associated with holding a particular stock, including possible price fluctuations and loss of value.
7. Take the Trade
This is the hardest step for most people is to take their first trade.
Thus, why learning to trade stocks is great to learn a simulated account using fake money. Then, move to a LIVE account using your real money.
At some point, in your investing in stocks journey, you must press the buy button.
For many the investment platform may be overwhelming to use, so check out your brokerage’s YouTube videos to help you out.
8: Manage your portfolio
Managing your portfolio is important to keep your investments in good shape.
If you are a long-term investor, diversify your portfolio by investing in different types of investment vehicles and industries.
If you prefer to swing trade or day trade, then you want to make sure you always have cash on hand and are rotating your portfolio to take profit.
Investing can be difficult for beginners who often lack knowledge about the stock market.
It is important to remember to keep investing money and rebalance your portfolio on a regular basis. This will help ensure that you stay on top of your investments and achieve the desired result.
9. Selling Stocks
For most investors, it is harder to sell their stocks than to purchase them. There are a variety of factors for that. But, you must sell your stocks at some time to realize your gain.
Don’t panic if the market crashes or corrects – these events usually don’t last very long and history has shown that the market will eventually rebound. Most people tend to panic sell when stocks are low and FOMO buy when the market is at highs.
When you are ready to sell, aim to achieve a percentage return on your investment.
This will require some focus on your time horizon and the stocks you want to invest in.
Also, you need to consider any taxes that may be owed on the sale of stock.
If you’re new to stock investing, consider using index funds instead of individual stocks to gain broad market exposure.
10. Journal & Analyze your Trades
Journaling is a way of recording the important decisions you make during trading to help yourself remember what happened in your trades. It can be used as a tool for reflection, learning from mistakes, and reviewing your strategy.
Analyzing your trades means looking back on your trading history with the goal of improving it.
This is the most overlooked step of the investing process.
When it comes to buying and selling stocks, journalling what is happening in the market is an important part of being a successful investor.
Stock Market Investing Tips for Beginners
Ask any seasoned trader, and they will have a list of investing tips for beginners.
They have made plenty of trading mistakes they do not want to see newbies do the same thing.
When starting to invest in the stock market, beginner investors often seek out consistent and reliable investments.
This allows them to slowly learn about the stock market and take calculated risks while also earning a return on their investment. Over time, as they gain experience, they can expand their portfolio to include riskier but potentially more rewarding stocks.
1. Invest in Companies That You Understand
An investor should know the company they are investing in and have an idea of what type of return they expect.
When you are starting out, it is best to invest in stocks of companies that are easy to understand and have a proven track record.
Do NOT invest in stocks based on the advice of friends, what you read in the news, or on a whim – these can be risky moves. Be wary of the popular stocks you can find on the Reddit Personal Finance threads.
2. Don’t Time the Market
In the world of investing, there is one rule that no investors should ever break: do not time the market.
By following this rule, you will always be on top of your investments and will be able to reap the rewards.
There are times to buy stocks and sell stocks. This is something you will learn when investing in a high-quality investing course.
As an average investor, trying to time the market will leave you frustrated by your minimal returns or great losses.
3. Avoid Penny Stocks
Penny stocks are the lowest-priced securities on the market, and they don’t offer any significant upside potential to their investors. While you may hit a home run return on some, many penny stocks tend to trend sideways.
The risk is not worth the return.
If you plan to invest in stocks, avoid penny stocks and focus on healthy companies.
4. Consider Buying Fractional Shares
Fractional share investing lets investors buy less than a full share at one time. Many times, you may not be able to afford the price of a full share.
For example, buying a share of Amazon (AMZN) may cost you upwards of $2800 or more. Thus, you can invest a smaller amount with a fractional share.
You would have to check if your brokerage company allows the purchase of fractional shares.
5. Stay the Course
In order to be successful, a trader must stay the course and maintain their focus. By staying focused, they will have less chance of making mistakes that may lead to big losses or overtrading.
When you’re starting out in the stock market, it’s important to be disciplined with your buying. Don’t try to time the market, because you’re likely to fail. Instead, buy shares over time and stay the course.
That way, you’ll be more likely to see a profit in the long run.
6. Avoid Emotional Trading
In order to be successful in the stock market, you have to maintain a level head.
Responding emotionally will only lead to bad decision making. Instead, stay the course and trust your research and analysis.
Know your weaknesses as well as your strengths.
7. Do Your Research
When you’re ready to start investing in the stock market, it is important to do your research so you can make informed decisions.
There are a lot of stocks to choose from, and it can be tempting to invest in them all.
But remember, you don’t want to spread yourself too thin. Invest in stocks that you believe in and that have a good chance of making you money.
8. Build Wealth
Stock market investing is one of the best ways to grow your money over time.
For long-term investing, you buy stocks in companies and hold them for a period of time, typically years. Over time, as the company grows and makes more money, so does your stock. This is one of the most common ways to build wealth over time.
The other way with short-term investing is to consistently take profit and grow your account over time.
Stock investing FAQs
Here is a list of the most common questions and answers on stock investing.
Q: What is the difference between investing and trading?
Trading is buying or selling financial products with the goal of making a profit. This is normally a day trader or swing trader.
Investing, on the other hand, refers to the process of putting money into an investment with the hope that it will grow. Someone who is focused on the long-term.
Q: Do you have to live in the U.S. to open a stock brokerage account?
No, you do not have to live in the U.S. to open a stock brokerage account. You must find a brokerage company in your area of residence abroad.
Q: How much money do I need to start investing?
The very common question of, “How much should you invest in stocks first time?”
It is recommended to start investing with $500 or more. However, you can start with Acorns with as little as $5.
Check out this investor’s story by starting with a small account of $500 and growing it over $35k in less than 6 months.
It is best to grow your account with your growth or profit.
Q: Do I have to pay taxes on the money I earn from stocks?
Yes, you will be required to pay taxes on the money you earn from stocks.
Q: What are the best stocks for beginners to invest in?
The best stocks for beginners to invest in are those that have a history of staying consistently on an uptrend. These companies’ stock prices have typically risen over the course of the year.
Find a list of beginning stocks to build your portfolio.
Q: How do beginners buy stocks?
Above, we outlined this in detail. In order to buy stocks, there are a few different steps that you should follow in order to maximize your chances of success.
The first step is making sure you have an account. Once you have an account, the next step is to decide which stocks you want to invest in. Then, you must buy your stock. Finally, you must decide when you want to sell your stock for a realized gain or loss.
Q: How many stocks should you own?
The best answer is it depends on your investing strategy.
As a short-term investor, you can only manage a smaller number of trades.
As a long-term investor, you need a more well-rounded portfolio. of15-25 stocks.
More likely than not, the short answer is “as many as you can afford.”
Q: What is the best thing to invest in as a beginner?
The best thing to invest in as a beginner is an index fund.
Indexes are great because they diversify across many different types of investments and don’t require much effort on the part of the investor to maintain. Index funds are also less risky than other investments, especially in the beginning stages of an individual’s investing career.
Q: How do we make money?
Traders make money in many ways. They can trade stocks, bonds, futures, and options on equities. They can go long when the market goes up and short when the market goes down.
Traders also use trading systems that are usually automated to manage the trades they make to maximize profit.
Trading is a risky investment and it’s not uncommon for traders to lose money. In order to keep losses small, many traders use the trading strategy based on minimizing risk in order to get the desired return.
Learn how fast you can make money in stocks.
Q: Why is Youtube Option Trading So Popular?
Video on how to trade options is very popular on Youtube. This is because of the high volume of interest on this topic.
For many people, learning options is an advanced strategy that takes more time and knowledge to learn.
This is my favorite youtube option trading channel as well as an overall investing strategy.
Additionally, traders are able to get a much higher return on motion trading versus going long or short on stocks.
Q: What is volume in stocks?
Volume is a measure of the number of shares traded in a given period, usually trading days.
This is an important metric if you plan to exit your trade to know there are enough buyers to buy your stock.
Q: How to invest in penny stocks for beginners?
Penny stocks are shares of a company that typically trade for less than $5 per share, which is also known as penny stock trading.
Investing in penny stocks can be a lot of fun and the highest risk, and there are many ways to get involved. For anyone who is new to the world of investing in penny stocks, it can be intimidating to know where to start.
However, there are a few things that you should keep in mind before diving into the world of penny stocks. One of these is researching what types of companies you want to invest in. Many of these penny stocks are not healthy companies and burning through cash.
It is important to always be careful when investing in penny stocks. Keep in mind that the risk of losing money is high and you should invest only what you are willing to lose.
Q: How to invest in stocks for beginners robinhood?
Robinhood is a stock brokerage company that allows users to invest in stocks without paying any fees. It also provides real-time quotes and charts. To invest, the user must have an account with Robinhood that holds at least $0.
Most major brokerage companies have zero commission fees on trading stocks as well.
Beware, Robinhood is known for stopping to trade various stocks during times of volatility whereas other’s brokers do not.
Q: What is a good price to buy at?
This is a hotly debated question as every investor sees the market from their view.
More often than not, people wonder the best time to buy stocks.
As such, you can read is now a good time to buy stocks?
Ready for Stock Market Investing?
If you are new to investing in stocks, there are a few things you take into consideration before diving into the market.
For starters, it is important to understand how stock markets work. You should also know the difference between a stock and an investment.
Investing in stocks can be a bit complicated, but this guide walked you through the basics of how to invest.
Before you invest in stocks, it is important that you understand your investment strategy. That way, you can make informed decisions about where to put your money and how much risk you are willing to take on.
Most people shy away from learning how to actively trade stocks because of the movies about Wall Street they have watched.
You will get a deeper understanding of investing in stocks the longer you educate yourself on the concept.
Overall, it is wise to diversify your portfolio and don’t put all your eggs in one basket.
So, what is your next move to start investing?
One of the best ways to improve your personal finance situation is to increase your income.
Here are the best investing courses to guide your path. With time and effort, you can start enjoying the lifestyle you want.
Learn how to supplement your daily, weekly, or monthly income with trading so that you can live your best life! This is a lifestyle trading style you need to learn.
Honestly, this course is a must for anyone who invests. You will lose more in the market than you will spend this quality education – guaranteed.
Read my Invest with Teri Review.
Photo Credit:
studentloanplannercourse.com
Learn how to reach a six figure net worth in 5 to 10 years, even if you have a massive amount of student loans.
This beginning investment course will help you pay off debt and start your path to six figures.
After taking a second job as a driver for Amazon to make ends meet, this former teacher pivoted to be a successful stock trader.
Leaving behind the stress of teaching, now he sets his own schedule and makes more money than he ever imagined. He grew his account from $500 to $38000 in 8 months.
Check out this interview.
Know someone else that needs this, too? Then, please share!!
Millions of Americans struggle to pay off their student loan balance, and our collective educational debt has now reached an officially-out-of-control $1.75 trillion. Yikes. But if you have a solid credit history and a consistent income, a good student loan refinance could cut down your debt stress in a major way. Student loan refinancing consolidates … [Read more…]