This is a guest post from Sierra Black, a long-time GRS reader. She writes about frugality, sustainable living, and getting her kids to eat kale at Childwild.com.
When my husband and I first got married, we bought a house in the suburbs and promptly had a baby. Buying that house meant buying a piece of the American Dream — but we both figured out pretty quickly that it wasn’t our dream.
I will never forget coming home from the hospital with that precious little girl and looking around my huge suburban home with a sense of confused dread. “What happened to my apartment?” I said. “What happened to my life?”
Big problems I stayed home with our baby for a year, living on savings, and then went back to work full time. The baby went to daycare for ten hours a day, and most of my salary went there with her.
I was driving 40 miles north every day to work at a newspaper, while my husband drove 40 miles south to his research job at a major university. He’d leave the house at 8 a.m. and often come home after midnight. On a “good day” he could get home for dinner with me around 8 p.m.
Meanwhile, I’d come home exhausted with a cranky kid, only to have my boss call during our late dinner to tell me that something on my beat was on fire (sometimes literally) and I had to go cover it. On the weekends, instead of hanging out with friends or having adventures, we got to mow our lawn, clean the ten rooms of our lovely home and try to balance our finances.
We were exhausted, miserable, lonely and broke.
We lived like this for two years, and then things started to fall apart. First I left my job to have a second child. Having become a stay-at-home mom, I was starting to get serious about cutting the fat from our budget. I started with the small things:
canceling our Netflix subscriptions
scaling back on dining out
buying store brand groceries
It felt like I was bailing out a leaky boat with a teaspoon. Something bigger would have to change.
Big decisions We started talking seriously about moving. The housing market was starting to head south, but an opportunity popped up to buy a house near his office from a friend who’d moved to California.
We decided to go for it.
The move has saved us over $1000 a month. We sold one of our cars, and drive the other one only about 10% of what we used to. Our mortgage is slightly lower, and since the new place is a little smaller, the utility bills are less. It’s also much easier to clean than the huge, drafty house we had before.
We save money in less tangible ways too. We live in a vibrant neighborhood now, where people create and share a lot of community resources. We’re able to barter or swap for everything from clothing to childcare to soup, something we could never do in our sterile suburban neighborhood. This network of community resources saves us at least $200 a month.
Even more precious than money, this move saved us time. My husband spends more time with his children now. He walks to work, and comes home every day for lunch with the family. The reduction in our expenses also bought us the ability to live on one income indefinitely, giving me the gift of time with our girls. That in turn allowed us to choose homeschooling for our children.
Our financial picture is far from perfect. We still have large debts, and I pinch pennies to afford small treats like a paperback book or an ice cream outing. But for the first time, I have a clear plan to achieve our financial goals. I’m seeing our debt go down every month while our savings go up. And I’m enjoying every day of it as I get more time with my family, and spend less time maintaining a suburban home and lifestyle.
Big returns Moving is not for everyone. Many people love their homes and make huge sacrifices to stay in them. But if you’re trying to get your finances under control, I encourage you to look at your life and consider the big stuff as well as the small.
Making big changes is difficult. Staging our house for sale, selling it in a down market and then moving with two small kids was a series of daunting, painful tasks. The move was financially counter-intuitive: we sold our house at a loss and took on new debt to pay for our moving costs. But the rewards matched the effort. We’re getting a huge return on the investment we made in this change, one that far outpaces the savings we saw from cutting every magazine subscription we had.
Just in case you’re inspired to follow my particular example, here’s a recent guide to how to downsize your home.
J.D.’s note: Sierra’s experience reminds me of the advice that Elizabeth Warren gives in her book, All Your Worth. She urges readers to get the big stuff right so that the little stuff matters less.
CPAs, financial advisors, and financial coaches all share similar money-themed responsibilities, but their goals, education, and fees are vastly different.
Financial coaches do a lot more than show you how to build a budget or slap your wrist when you want to eat out five times a week; they teach you how to have a healthy relationship with money, so you and your family can work towards a brighter financial future.
Read on to learn what financial coaches do and whether or not you need one!
What’s Ahead:
What is a financial coach?
Financial coaches take you back to the basics of money management. Personal Finance 101.
Their goal is to evaluate your personal finance habits, identify patterns in your spending and saving, and suggest new boundaries and budget methods to help you reach your financial goals. They also act as accountability partners; so the next time you’re tempted to splurge on a new pair of shoes or the latest iPhone, your financial coach will help set you straight.
Their job is to educate you on ways to manage your money well, so you can recover from debts, save for major financial goals, and achieve a lifestyle where you control your finances — not the other way around.
What do financial coaches actually do?
Financial coaches provide instruction and advice to help people eliminate unhealthy habits and establish better budget practices; but before they get started, they take a little time to understand their client’s unique routines and aspirations.
Assess the client’s financial habits
Generally, financial coaches begin by tracking your current spending and saving patterns, debts, and budget for a short time, likely a few weeks.
As they come to a clearer understanding of your relationship with money, they help you understand which habits are detrimental to your financial wellbeing and how to implement new, healthy practices. They also learn what emotional ties you may have to money and how those connections influence your finances.
Discuss the client’s financial goals
Next, financial coaches will review their client’s short- and long-term goals.
Would you like to save for a down payment on a house? Address your current debts? When would you like to retire?
For many of us, this list can be quite long, and it may be challenging to know which goals to prioritize. A financial coach can help you get organized and teach you how to adjust your spending and saving patterns to tackle each goal.
Build a financial plan that will last
Finally, your financial coach will propose a plan, unique to your needs and desires, to get you back on track.
They’ll help you develop a new budget, eliminate debt, build an emergency fund, save for retirement, and more. They will likely meet with you every week or every other week, generally for a period of six months to a year, to check in and to keep you accountable.
At the end of that time, your financial coach will have taught you how to maintain a lifelong habit of managing your money well!
How do financial coaches differ from financial advisors?
If you need help planning for retirement, understanding your tax situation, or even saving money, both financial coaches and financial advisors can help. However, while these experts do have a lot in common, the reality is they’re quite different, and it’s important to understand why before you hire one.
Services
First of all, the clients that financial coaches and financial advisors take on typically start from different points.
If, for instance, you have minimal savings and perhaps even substantial debts, you need some tips and tricks to restore your finances to a healthy position. A financial coach can provide that level of service! On the other hand, if you’ve already saved a great deal, but don’t know what to do with the cash you’ve accrued, a financial advisor would be a better fit.
When it comes to investments, financial advisors also have the upper hand. One of the key responsibilities of a financial advisor is to manage a client’s investment portfolio, and most require an investment minimum of $100,000 or even $1 million. Financial coaches, however, aren’t licensed to provide investment advice for their clients, so any tips they recommend will likely be limited and non-specific.
While financial advisors can direct budding investors, financial coaches can address deep-seated issues their clients have with money. Whether you’re an avid budgeter or on the brink of bankruptcy, finances are stressful for nearly every American. Financial coaches can address any negative associations — be they emotional, mental, behavioral, or otherwise — and provide practical methods for correcting them.
Credentials
Another key difference between coaches and advisors is education.
Most financial advisors undergo extensive education and possess specific credentials and designations, such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA); Additionally, financial advisors must be licensed and registered with the Financial Industry Regulatory Authority (FINRA).
Financial coaches, however, aren’t required to complete any particular training or certification(s) to provide their services. For this reason, it’s vital that anyone interested in hiring a financial coach be sure to research thoroughly and prioritize those who have achieved some level of education, training, or certification.
Time period
Coaches and advisors also differ in the amount of time they spend with a client.
Since financial coaches aim to help people establish a basic understanding of healthy budget practices, their business relationship is generally for a shorter period of time, such as a year or less. Advisors, however, work with clients for the long haul. They will likely meet once or twice a year to evaluate the client’s assets and manage their investment portfolio.
Cost/rate
One of the most significant differences between coaches and advisors is how much they charge for their expertise.
Since financial coaches aren’t required to have any formal training or licensing, they can be a much more affordable option, accessible to even those who are steeped in debt. However, their rates vary greatly for the same reason. Coaches may charge anywhere from $75-$600 per hour, while others prefer a flat fee per session or for a set number of sessions.
Financial advisors offer a few different types of payment plans, either fee-only, commission-based, or a combination of the two. For fee-only providers, the advisor will charge an hourly rate, such as $150-$300 per hour, or a rate based on the number of assets they manage, typically between 0.5% and 2%. Commission-based advisors receive payment from investment providers, by selling products to their clients.
Who should hire a financial coach?
If you feel stuck in a financial rut, unable to grow your savings, or reach major goals like buying a home, a financial coach may be your ticket forward.
Financial coaches can help their clients eliminate unhealthy money management habits and replace them with positive patterns and routines.
Your issue may be struggling to set aside money for retirement or maintaining a consistent budget. Maybe you’re a textbook shopaholic in need of strict boundaries. No matter your situation, a financial coach can provide some structure and guidance when you need it most.
Once you’ve discarded those negative habits and implemented new norms, they can step aside, leaving you on a new and healthier trajectory.
When do you need a financial coach?
Splurging on an unplanned dinner out or a spontaneous vacation isn’t always bad, but your financial habits can impact your future and even your health if you’re not careful.
When you just don’t know where to start
Let’s say your goal is to buy a house. You’ve opened a savings account and have saved some money over the years, but the progress has been slow and minimal.
Or, maybe you’re living paycheck to paycheck and can’t comprehend how to even begin saving on such a tight budget.
A financial coach can step in and evaluate your spending and saving habits with a fresh set of eyes. They can see opportunities that you can’t and can point out a path to achieving your financial goals.
When your finances are stressing you out
Another serious issue that may require the assistance of a financial coach is when your finances are impacting your health and happiness.
Money is a major stressor for the vast majority of Americans. It can impact everything from your eating habits to your sleep (or lack of). In some cases, the anxiety you feel as a result of finances can even damage your long-term heart health.
If the thought of budgeting, or the weight of financial goals unmet, gives you anxiety or seriously hurts your health and wellbeing, consider contacting a financial coach for help. Don’t assume these issues will sort themselves out. Take action today for the sake of your health and your future.
Why it’s important to find the right financial help
If your finances were a patch of dirt in your backyard, and you wanted to turn it into a beautiful garden that provided tomatoes and carrots for your family, you wouldn’t start with watering. You would pull weeds, plant seeds, and make sure your soil has the proper nutrients to keep plants alive.
A financial coach is like your friendly neighbor with the green thumb who teaches you how to prepare that dirt patch for plants. An advisor is like the nifty irrigation system that provides consistent water to grow your wealth.
If you’re thousands of dollars in debt, a financial coach can help you replace your poor money practices, literally, with healthy ones, or wealthy ones. Or, if you need help building a budget and sticking to it, a financial coach can provide the accountability you need to finally make progress.
But if you’ve got thousands of dollars saved and don’t know what to do with it, you’re probably better off contacting an experienced financial advisor who can help you build and manage a solid investment portfolio and continue to grow your assets.
Where can I find a financial coach or advisor?
If what you need is a financial coach, it’s important that you select a professional with experience in the industry and, ideally, credentials to prove they know what they’re talking about.
Start your search for a financial coach on the Association for Financial Counseling & Planning Education® (AFCPE) website. AFCPE provides two recognized certification programs, equipping coaches with the Accredited Financial Counselor® (AFC®) designation or the Financial Fitness Coach (FFC®) designation. By limiting your selection to professionals who hold AFCPE certifications, you’ll feel confident hiring an expert you can count on to help guide you towards a healthy financial future.
For those in need of wealth management expertise, the Paladin Registry is a great places to shop around.
Their impressive platform begins by collecting some information about your finances and goals and then presenting three qualified professionals from their database for you to consider.
They do the backend research and suggest advisors best suited to your needs, so you can feel comfortable interviewing and eventually selecting one of the experts recommended. Best of all, the Paladin Registry walks you through the entire hiring process for free.
Summary
Financial coaches can provide an invaluable service to folks in need of money management basics, but they’re not right for everyone.
If you’ve accrued substantial savings and aren’t sure how best to maximize your wealth, consider a financial advisor who can manage your investment portfolio and provide a long-term relationship to grow your wealth. However, if what you need is a foundation to build on, a financial coach can teach you how to maintain a budget, eliminate debt, build your savings, and more. They also keep you accountable, to help you adopt a new trajectory towards a healthy financial future.
No matter which type of help you need, be sure to research thoroughly for financial experts who are experienced in the industry and have the education and credentials to prove it.
BlackRock, one of the world’s largest financial firms, says three key moves can sharply boost retirement income. Most people focus on building up their savings when they make retirement plans. However, by also focusing on the drawdown phase, the duration of the nest egg that you have accumulated can be significantly extended, BlackRock says in a recent report.
Consider working with a financial advisor as you develop a long-term retirement plan for yourself.
Add Guaranteed Lifetime Income via an Annuity
Annuities have become a hot topic in recent years, as financial professionals have increasingly debated their pros and cons. On the upside, they hedge against longevity risk. A lifetime annuity can guarantee, aside from catastrophic failure on the part of the insurance company, that you will receive a minimum income for life. On the downside, annuities can sometimes post weaker growth than even the standard S&P 500 index fund.
BlackRock argues that the benefit of hedging against longevity risk, though, is quite powerful. By putting up to 30% of your portfolio savings into a retirement annuity, you can create a strong base for the future of your retirement income. Alongside Social Security, this gives you an income that never draws down and will not fade.
Shift to an Aggressive Asset Allocation
There’s a catch to an annuity plan, though. Perhaps the biggest risk with annuities, as noted, is their low rate of return. In fact, Fidelity says that in recent years annuities often return one-eighth the amount of a simple S&P 500 index fund. That’s a recipe for low, slow growth.
So, BlackRock suggests balancing your annuity investments with a more aggressive market portfolio. In other words, leverage the security that you have with your annuity to rebalance your portfolio toward higher-return assets like stocks, if even just a stock market index fund, like the S&P.
By doing this, you’re more protected against loss by the guaranteed income of the annuity, while also boosting your overall spending power in retirement with the projected growth of the equities. This lets you retain a strong equity portfolio later in life, when many investors would otherwise start shifting their investments in favor of more stable, fixed-income assets, like bonds or CDs.
“Adding guaranteed lifetime income combined with a more aggressive asset allocation generates 29% more annual spending ability from one’s retirement savings (excluding Social Security) and reduces downside risk by 33%,” BlackRock states in the report.
Retire (and Take Benefits) Later in Life
Finally, BlackRock recommends delaying retirement by two years. The firm suggests delaying retirement, along with Social Security benefits and annuity payouts, from age 65 until age 67. This is not, however, a delayed retirement. For anyone born after the year 1960, the goalposts have been moved back and full retirement age is set at 67.
The firm’s basic analysis still stands though. As the firm writes, “[a]mong all retirement decisions, the choice of when to retire and claim Social Security often has the single greatest impact on one’s financial security.”
Putting this off even by just two years can significantly boost your Social Security benefits. It will also give your annuities time to continue growing, making their lifetime benefits stronger, while allowing your portfolio to accumulate extra years of high-value growth as well.
BlackRock finds that pushing back retirement by two years can boost a retiree’s lifetime spending power by 16% and reduce downside risk by an additional 15%. In combination with the 29% retirement increase gained by getting an annuity and having an aggressive, stock market-based asset allocation, retirees can sharply extend the duration of their retirement income.
Bottom Line
For many investors, the good news here is that BlackRock probably recommends a version of what you are already pursuing: diversification. This approach suggests that you should balance high-security assets, in the form of lifetime annuities, against high-return assets, such as stocks. It recommends delaying retirement as a way of boosting your lifetime Social Security benefits and maximizing your late-in-life portfolio returns. For the average investor and saver, this is all very doable.
Retirement Savings Tips
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Longevity risk is the possibility that you will live too long, and that’s a perverse way of looking at life. So start making plans right now to celebrate your hundredth birthday in style.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Wind energy generates almost 10% of U.S. electricity and in a land of endless plains that appears likely to increase. Unlike some emerging technologies, wind energy is also a relatively mature market, so there are several options for public stocks, equity-related investments, materials, bonds and even real estate. Here are a few things to know about investing in the future of wind. To know if it’s right for you, consider working with a financial advisor.
Why Wind Could Be a Good Investment
The economy of the United States and much of the western world is gradually decarbonizing. Since the industrial revolution, every major economy has come to depend on fossil fuels because of one key feature: portability. However, concerns about climate change has led some governments to subsidize alternatives to fossil fuels, and wind is one such alternative.
Power generation is one part of the economy that has been adapted to wind energy, thanks to advances in many fields, from conducting materials to capacitor batteries. It is now possible to build a power grid that can easily and efficiently transfer electricity from where it was generated to where it’s needed. The portability advantage of hydrocarbon-based fuels remains a bottleneck in some industries, most notably in aerospace and vehicles where it is still easier to put gas in a tank than electrons in a battery. However, where the electric grid is concerned fossil fuels increasingly look like the dinosaurs they once were.
How to Invest in Wind
There are multiple ways you can consider investing in wind. Here are a few different options.
1. Stocks
Of the emerging energy sources, wind is currently the largest. If you want to invest in this sector, one of the first places to go is through stocks, funds and related investments. There are several ways to invest in wind energy through stocks. Most notably, you can invest in companies that build turbines and other essential equipment for building wind farms. You can invest in companies that generate and sell wind energy. Or you can invest in an exchange-traded fund (ETF) or mutual fund built around this industry as a whole.
For investing in the companies that build equipment, you can consider looking for major manufacturers like TPI Composites (TPIC), Vestas Wind Systems (VWDRY) or General Electric (GE). All of these firms and many more, build the turbines, engines and other major components necessary to make the large generators that provide wind energy. Note that neither these nor any other assets listed in this article should be taken as specific investment recommendations. These are simply representative companies working in the space.
By contrast, you can look for companies like NextEra Energy (NEE) that actually generate electricity through wind farms. For companies like this, the business model is to produce wind energy and sell this electricity back to public utilities.
Finally, you can invest through equity-based funds and indices. This means either ETFs or mutual funds that focus their investments in and around the wind energy space. While these are rare, ETFs like the Global X Wind Energy ETF (WNDY) are good examples. Or you can look into the ISE Clean Energy Global Wind Energy Index (GWE), which tracks the wind energy market at large, giving you essentially an S&P 500 for the wind.
2. Real Estate
You can also invest in wind energy by investing in the underlying land. Like solar power, a wind farm requires a very large footprint. Some communities will build turbines, even entire farms, and that land has to come from somewhere.
At the same time, the transition to renewable energy sources will require a new and upgraded power grid. This will involve building large transmission towers, substations and other infrastructure across the country, all on land that someone will have to purchase or lease. All of this creates an opportunity for real estate investment and speculation.
While this requires more legwork, occasionally real estate investment firms will coalesce around this investment area through REITS. By researching emerging trends in the real estate market, you can look for real estate investment opportunities that buy mortgages and real estate related to wind farms.
3. Bonds
You can invest in wind projects by investing in the underlying debt. Bonds in this field tend to come in two categories. First, you can invest in the bonds sold by wind energy companies as they grow and expand. As with all corporate debt, this will tend to pay a higher rate of interest than Treasury or municipal bonds.
In addition to the creditworthiness of the company itself, your investment will also be secured by the fact that this is an asset-intensive industry. Even if the company fails, it will still hold large property and real estate assets with which to make debtors hold.
Second, you can invest in government bonds for projects to build wind farms. These will typically be municipal bonds for local governments looking to expand their alternative energy footprint. As a result, they will tend to pay less interest but have significant tax advantages. Bond investments in this space should be pursued on an individual basis.
4. Side Investments
Finally, as with all emerging technologies, you can side-invest in this industry. Side investing refers to investing in the materials and products that technology needs to succeed. As the industry grows, those related fields will profit as well. In the case of wind energy, there are several fields to consider, but perhaps the most important two areas are next-generation power lines and next-generation batteries/capacitors. Like most non-fossil fuel energy sources, to succeed wind energy must solve two problems.
First, it must efficiently transmit energy from the (generally remote) farms where wind energy is produced to the communities where it is needed. This will require companies to build and maintain new high-capacity power lines and it will require next-generation conduction materials to efficiently carry that much electricity without significant loss.
Second, the wind grid must store energy for when the wind isn’t blowing. This means creating large batteries that can store excess energy during times of high generation and consume that energy during low periods.
This is an area that requires research, in part because it is vast. New companies are emerging to develop carbon materials and semi-superconductors for building power lines. Batteries are sometimes built out of cobalt and rare earth capacitors and sometimes they are built out of caves in a mountain. Investors looking to get into this space will need to research exactly what the right investment is at the right time before trying to jump in.
But, for investors looking to make a higher-risk/higher-reward investment, the right choices have the potential to score huge. Alternative energy conversion will require a near-total rebuild of the power grid, making some people very rich.
The Bottom Line
Wind energy is a relatively mature technology, but one that is growing quickly. Investors can get into this field through traditional stocks or funds or by investing in many of the assets and materials that this industry will rely on to succeed.
Alternative Energy Investment Tips
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Don’t just think about what to buy, think about where to buy. Let’s start by reviewing which states are leading the charge when it comes to renewable energy.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Inheriting a house with a mortgage requires making some decisions about what to do with the property. One option is to sell the home and pay off the loan with the sale proceeds. If you keep the home, you can assume the existing mortgage or refinance the loan. If you keep the home, you can live in it or rent it out. Your choices may be limited by the laws where you live. If the ownership of the house is split between one or more other heirs, you’ll have to consider their wishes. A financial advisor can help develop a plan to reach your personal financial goals.
Home Inheritance Basics
After someone passes away, a will can be used to bequeath property such as a private residence to a loved one. In the absence of a will, state laws may dictate where the property goes.
Often property or other assets inherited in this way goes through probate. When that happens, any debts owed by the estate must be paid off before assets are distributed to heirs. This means the mortgage has to be dealt with in some manner before the estate can be settled. State inheritance laws vary, so local requirements may limit your options.
Mortgage Inheritance Options
When you inherit a home with a mortgage, you’ll have two basic choices: sell it or keep it. Here are the pros and cons of each.
If you sell the home, you can use the proceeds to pay off the loan. If there is any money left after satisfying the lender, you can keep the cash as part of your inheritance.
Selling and paying off the loan relieves of you any responsibility to make future mortgage payments and keep up the property. And selling may be the only option if you share ownership of it with another beneficiary who wants cash. Taxes represent a potential complication. You may owe capital gains taxes on the money you receive after paying off the mortgage.
If you keep the home, you can assume the mortgage and start making payments. A federal law called the Garn-St. Germain Act generally requires lenders to let someone who has inherited a house assume an existing mortgage without getting credit approval or paying closing costs on a new loan. This can let you move into a place more desirable than you could buy on your own, in addition to possibly having pleasant memories associated with it.
Keeping the home gives you more options. You can live in the home if its location and other features meet your needs. Alternatively, you can rent it to tenants and, if the rent is more than the mortgage, collect passive income plus potential gains from price appreciation.
A major downside of keeping the property is that you have to make the mortgage payments, in addition to covering the taxes, insurance and other expenses. If you want to and can get approved for a new loan, however, you may be able to refinance the loan. Refinancing can let you take advantage of lower interest rates and possibly reduce the payments or, if you prefer, take cash out of the equity.
Potential Pitfalls
A lot of things can go right if you inherit a house with a mortgage. Some potential pitfalls to be aware of include these:
Negative Equity: If the house is underwater, meaning the outstanding balance of the mortgage is more than the property’s value, you won’t be able to sell it for enough to pay off the loan. Unless you can get the lender to agree to a short sale, you’ll still be responsible for the remaining balance.
Tax liability: Selling an inherited property and realizing a gain on it after settling the mortgage could create a tax obligation. The gain could even push you into a higher tax bracket so you’ll owe more on the other income you generate from work or investments.
Ownership costs: Repairs, maintenance, property taxes and homeowner association fees are some of the costs that can go with owning a home you inherit. Account for these costs before you decide what to do with the property.
Selling costs: Even if you sell the property, you’ll still have to pay a number of costs. These often include real estate agent commissions, closing costs and possibly repairs, among others. These costs will reduce the amount left after the transaction and can make the sale less appealing and worthwhile.
Picking the Right Approach
Deciding what to do when you’ve inherited a house with a mortgage involves balancing several considerations, including:
Your finances: Ask yourself whether you have the resources to keep making mortgage payments and maintaining the property.
Living situation: If you need a place to live and the inherited property suits your needs, it might make sense to assume the mortgage and move in.
Market factors: The real estate market in your area may suggest that it’s better to sell or rent than to keep the property and live in it.
Nostalgia: A family home could have pleasant memories or, for a variety of reasons, be someplace you’d prefer not to live.
Legal issues: If multiple heirs are involved, they might disagree about what to do with the property.
The Bottom Line
Inheriting a house with a mortgage presents options that need careful consideration. Selling the home and paying off the loan can relieve you of mortgage responsibilities. Alternatively, you can keep the home, assume the mortgage and either live in it or rent it out for passive income. State laws and the wishes of other heirs may limit your choices. Your finances, living situation, market conditions, emotions and legal issues will be part of the final decision.
Tips for Investing
Consider talking to a financial advisor before making any decisions about what to do with a home you have inherited. Finding a financial advisor doesn’t need to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you decide to sell an inherited home and pocket the cash, you may wonder what would happen if you invested the funds. SmartAsset’s Investment Return & Growth Calculator can give you an answer. Input the amount you’ll invest, how much and how often you’ll make additional contributions to your initial capital, the anticipated rate of return and your investment time horizon in years. The calculator will tell you what your portfolio will likely be worth at the end of that period.
Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
Inside: Are you looking for ways to make money quickly and easily? This guide has a variety of tips and tricks to help you make 1000 a day.
Making money is something that everyone is interested in. And why wouldn’t we be? Money gives us the ability to buy the things we want, travel, and live a lifestyle that most people can only dream of.
But what if I told you that it was possible to make $1000 a day? Would you believe me?
Well, in this blog post, I’m going to show you some of the best ways to make money really fast.
So if you’re looking to make some quick cash or consistent income, then this is the post for you!
In this post, I will share with your some of the best ways that I know of to make money $1k a day on a regular basis.
So if you’re ready to learn how to make 1000 a day, then let’s get started!
Is it possible to make $1000 a day?
Yes, it is possible to make $1000 a day.
In fact, this is something I regularly do (see picture to prove it).
However, achieving this goal requires commitment, hard work, and a solid plan. Factors that contribute to achieving this goal include finding a method that works for you, sticking with it, and putting in the necessary effort.
Additionally, having a unique skill set and interest in a particular method can increase the chances of success.
How to make $1000 a day?
Making $1000 a day is an appealing goal for many people, whether it’s a one-time need or a consistent source of income. Fortunately, there are several ways to achieve this goal.
Here are the top ways to make $1000 a day:
Start a high-paying job: Some jobs pay over $300k a year, and while they may require advanced degrees and education, there are also a few that don’t require a college degree.
Offer high-value services: You can offer services such as pet-sitting, tutoring, design work, or writing to make money.
Start a business: You can start a business that generates $1000 a day, such as a digital marketing agency, freelancing, or a service-based business.
Sell items you no longer need: You can sell items on eBay, Craigslist, or other online marketplaces to make quick cash.
Let your money work for you: You can invest in stocks and shares, real estate, or property to earn upwards of $1000 a day.
While each method has its own advantages and disadvantages, with the right strategy and dedication, making $1000 a day is achievable.
So, get started today and see how much money you can make.
Are you passionate about words and reading?
If so, proofreading could be a perfect fit for you, just like it’s been for countless of readers! Learn how you can create a freelance business as a proofreader.
Check out this free workshop!
Bookkeeping is the most stable, reliable & simple business to own. This is how to make a realistic income -either part-time or full-time.
Find out TODAY if this is THE business you’ve been looking for.
Best ways to make 1000 a day
We’ve compiled a list of our favorite ways to make money really fast – specifically $1k a day!
Many times, you will have to invest 100 to make 1000 a day.
If you’re looking for ways to make some extra cash, or even earn a full-time income, this post is for you.
1. Freelance Writing
Freelance writing is a great way to make extra money or even replace your full-time job. There are various types of content that freelance writers can specialize in, such as long-form content or shorter direct-response copywriting.
With freelance writing, you can earn over $.50 or even $1 per word, which means that a 1,000-word article could net you $1,000 quickly.
To start, you need to establish a portfolio of your work to pitch to new clients. This portfolio should include links to any relevant articles or copy you’ve written that’s related to the client you’re pitching. If you don’t have a portfolio yet, you might need to do some work at lower rates to get your foot in the door.
Even if you don’t consider yourself a writer, don’t strike it off the list just yet. With the right approach and mindset, anyone can become a successful freelance writer.
2. Crafting
Crafting offers many benefits beyond just making extra cash. It allows for flexibility in your schedule, creativity in your work, and the ability to turn a hobby into a lucrative business.
If you are creative and have a talent for creating handmade items, then starting a crafting business is the perfect way to monetize that skill by doing something you enjoy. There are plenty of crafts to choose from and you may even become an instructor!
The most difficult side is you are trading your time for money and it may be difficult to scale.
3. Day Trading Stocks
Day trading stocks is a high-risk, high-reward investment strategy that involves buying and selling stocks within a single trading day. It requires a great deal of knowledge, discipline, and risk management to be successful.
However, there is a large group of us who have made the $1000 in a day club.
Successful day traders use a combination of technical analysis, risk management, and discipline to make profitable trades.
This choice requires discipline, a proper trading education, knowledge, and risk management.
Trade and Travel with Teri Ijeoma is a popular course that investors can take to learn about trading stocks and options and begin their journey to making $1,000 a day.
4. Trading Options
Trading options can be a lucrative way for seasoned investors to make money.
With options, investors can speculate on different stocks with only a fraction of the investment capital needed to buy the stocks outright.
Investors who are familiar with investing in individual stocks can take the next step in the process by trading options. While options may seem exotic on the surface, they are a common tool used by seasoned investors and are especially valuable during volatile activity in the stock market.
To trade options successfully, investors need research skills, investing knowledge, discipline, and patience.
Trading options can be a high-risk option, especially for those who lack expertise in the area. However, it can be extremely lucrative for those who have experience and knowledge in the stock market.
Investors should consider taking courses to learn more about trading options.
5. Youtube
YouTube can be a great source of income for those who are willing to put in the effort to create quality content. It offers multiple ways to generate revenue, including sponsorships, affiliate marketing, and Google Adsense.
With the right approach, it’s possible to make $1000 or more per day on YouTube.
Remember, success on YouTube takes time and hard work, but the potential rewards are significant.
6. Selling on Amazon
Selling products on Amazon can be a highly profitable business opportunity.
Amazon FBA, or Fulfilled by Amazon, is a business model where you send your inventory to Amazon warehouses and they handle the rest, including storage, shipping, customer service, and returns.
This makes it a great option for digital nomads and those looking to scale their business quickly.
With an average profit margin of $20 per sale, it’s possible to make $1,000 per day by selling just 5 units per day of 10 different products.
7. Sell Printables Online
Selling printables online has become a popular way to make passive income.
With the rise of digital products, creators can sell anything from coloring pages to budget spreadsheets on platforms like Etsy. Thousands of creators make a living selling digital products, and it’s easy to see why.
Learn how these sellers got started.
The key is to pick a topic you’re knowledgeable in and passionate about, so you can create high-quality products that people will want to buy.
8. Dropshipping
Dropshipping is one of the best ways to make $1000 a day, especially for those looking to start a business with minimal initial investment.
This business model allows entrepreneurs to sell products to customers without ever holding a single piece of stock.
Dropshipping is a viable and profitable business model that can generate high profits without the hassle of managing inventory. With the right niche, platform, supplier, and marketing strategy, entrepreneurs can make $1000 a day or more with dropshipping.
9. Consulting
Consulting is one of the best ways to make $1000 a day!
It’s a lucrative career option that allows you to provide expert advice to clients and help them solve problems.
The first step to becoming a consultant is to determine your area of expertise. This could be anything from personal finance to marketing to human resources. Your expertise should be something that you have significant knowledge and experience in.
One of the most important aspects of becoming a consultant is building your network. This includes reaching out to potential clients, attending networking events, and connecting with other professionals in your field.
10. Become a Virtual Assistant
Being a virtual assistant can be a great way to make money while setting your own hours.
As a virtual assistant with no experience, you can work from home and typically on your own schedule. You can choose to work part-time or full-time based on your availability and the workload of your clients.
The tasks that you are asked to perform as a virtual assistant can vary widely, but commonly needed skills include administration, accounting and bookkeeping, marketing, communications, customer service, and many other capacities.
You don’t need special skills or training for this job, as most clients will bring you up to speed on what they need to do. However, having organizational, communication, and time-management skills can be helpful.
Check out the checklist to get started as a virtual assistant.
11. Side Hustles
Side hustles are a great way to earn extra income and supplement your regular income. With a little effort and some creativity, you can make up to $1000 a day with certain side hustles.
Here are some of the best side hustles that can help you achieve this goal:
Deliver food: You can make good money by delivering food with these apps. You can choose your own hours and work as much or as little as you want. DoorDash is a great option.
Drive with ridesharing apps like Uber and Lyft: If you have a car and some free time, you can earn money by driving people around. You can make up to $1000 a day, depending on how much you work.
Pet sit or walk dogs: If you love animals, you can make money by pet sitting or dog walking through Rover.com. You can earn up to $50 per day, depending on the services you offer.
Babysit or tutor: If you have experience with children or are good at a particular subject, you can offer your services as a babysitter or tutor through Care.com. You can make up to $50 per hour, depending on your qualifications.
Side hustles are a great way to make extra money and reach your financial goals.
12. Start a Business
Starting a business is one of the most effective ways to make 1000 dollars a day on a regular basis. However, it requires careful planning and execution to succeed.
The first step is to research the market and identify a profitable business idea and build it to profitability.
Challenges may arise, such as competition, financial setbacks, and marketing difficulties, but with persistence and determination, you can overcome them and achieve financial success.
The potential for significant financial gain from starting a successful business is immense, making it a worthwhile endeavor for anyone willing to put in the effort.
13. Yard Work
Yard work is an excellent way to make $1000 a day, especially if you have some extra time and don’t mind getting dirty.
If you want to get up and running quickly, there is nothing better than a local side hustle to earn extra money such as mowing lawns in your neighborhood.
Mowing lawns is not only a great side hustle for adults but also for teens. For an average size lot, you could expect to make at least $35. If you could line up a few lawns each weekend, you could easily make an extra $1000 each month.
Landscaping, leave pickup, and bush trimming are all simple tasks that you can complete quickly if you have the right equipment. You can choose to set an hourly rate or get paid for the entire job, depending on the task.
You may have to start hiring crews in order to hit $1k a day.
14. AirBnb or VRBO Rentals
Airbnb or VRBO are popular platforms for renting out your property to travelers.
Many successful hosts have earned $1000 or more per day because they have accumulated more than one property.
One tip for success is to garner excellent reviews that people want to come back time and time again.
15. Affiliate Marketing
Affiliate marketing is a lucrative way to make money online and has the potential to earn you $1000 a day.
This works well for influencers who have a reach of thousands of people. Another way is creating a niche website that focuses on a specific product or market segment.
It’s essential to promote products effectively to generate revenue. Successful affiliate marketers have earned six figures or more per year.
16. Flip Products or Retail Arbitrage
Retail arbitrage is a popular business model that can help you make $1,000 per day or more. The premise is simple – buy or find things cheap and resell them for a higher price.
This is a great example of how to flip money.
To be successful, you’ll need to have an eye for the right product and do product research to choose products that will sell.
Here is a list of the most popular items to flip.
17. Pickup Services
Pickup services refer to businesses that provide transportation and delivery services for goods, furniture, or other items. These services are in high demand, especially in urban areas where people are always on the move and need help with moving heavy or bulky items.
Starting a pickup service business requires some equipment, such as a truck or van, and marketing strategies to attract customers.
So, if you are looking for a new side hustle or business opportunity, consider pickup services as a viable option.
18. Casino Gambling
While casino gambling is not a recommended way to make $1000 a day, it is still worth mentioning as a potential option.
However, it is important to note that gambling should always be done responsibly and within one’s means.
If you are considering casino gambling as a way to make quick money, it is essential to understand the most profitable games and their strategies. Here is an ordered list of the best casino games to play to make money:
Blackjack: This game has one of the lowest house edges, making it a popular choice for professional gamblers. The objective of the game is to beat the dealer’s hand without going over 21. The key to winning at blackjack is to use basic strategy, which involves making the mathematically correct decisions based on the dealer’s upcard and your own hand.
Craps: This game has a low house edge and offers a variety of betting options. The objective of the game is to predict the outcome of a roll or series of rolls of the dice. To win at craps, it is essential to understand the different bets and their odds and to follow a betting strategy that suits your playing style.
Baccarat: This game is easy to learn and has a low house edge. The objective of the game is to bet on the hand that will have a total of 9 or closer to 9. The key to winning at baccarat is to understand the different bets and their odds and to follow a betting strategy that suits your playing style.
When playing these games, it is important to practice good bankroll management by setting a budget for yourself and sticking to it. It is also crucial to know when to quit to avoid losing money.
A winning streak can lead to making $1000 a day, but it is important to be cautious and not get carried away.
19. Freelance Graphic Design
Graphic designers create visual concepts using computer software or by hand to communicate ideas that inspire, inform, and captivate consumers. They work on various projects such as branding, marketing materials, website design, and more.
Freelance graphic design is a lucrative option because there is always a demand for graphic design services, and businesses are willing to pay top dollar for high-quality designs.
By building a strong portfolio, staying up-to-date with the latest design trends, and providing excellent service to your clients, you can earn a substantial income as a freelance graphic designer.
20. Make Money Flipping Items
Flea market flipping is a great way to make some extra cash on the side or even turn it into a full-time business. It involves buying items for a low price and reselling them for a profit.
One couple, Rob and Melissa Stephenson, have become full-time flea market flippers and even host their own website, Flea Market Flipper, to help others find success in the venture. They offer several courses to help individuals turn this into a serious side hustle or even a full-time business earning six figures.
Learning from successful flea market flippers like Stephenson’s can be a great way to get started. They have the skills and knowledge to help individuals find valuable items, network, and use social media and photography to their advantage.
21. Photography
Photography is a lucrative career option that has the potential to generate high income or as a side hustle.
There are different types of photography that one can explore to make money, including wedding photography, family photography, real estate photography, and stock photography.
By building a strong portfolio, networking, finding clients, investing in high-quality equipment, and constantly improving your skills, you can become a successful photographer and make a great income. Don’t underestimate your potential in this field.
22. Rental Income
Passive income through rental properties is a great way to generate consistent long-term income. Here are the steps to follow in order to make $1000 a day through rent income:
Find a suitable property: Look for properties that are priced reasonably, require minimal renovations, and are located in areas with high rental demand. You are likely to start making $1000 a month.
However, the earning potential is dependent on the ability to scale multiple properties, keep them occupied, and increase monthly income streams.
Investing in rental properties can be a lucrative and rewarding experience for those willing to put in the effort.
23. Amazon Merch
Amazon Merch is a platform that allows you to create and sell your own merchandise on Amazon. It’s an excellent way to make money because Amazon handles all of the heavy lifting, such as printing, shipping, and customer service.
Using Amazon Merch, you can sell a variety of products from t-shirts to phone cases, and best of all, you don’t need to invest in inventory or equipment.
All you need to do is create the designs.
Successful Amazon Merch sellers include graphic designers, artists, and entrepreneurs who have created unique and appealing designs that resonate with their target audience.
24. Creative Skills like Video Editing
Creative skills can be a valuable asset when it comes to generating income. Video editing is another skill that can be monetized.
With the rise of video content, businesses, and individuals are always in need of skilled video editors. One can offer video editing services for YouTube creators, and businesses, or even edit personal videos for clients.
Freelance platforms like Upwork and Fiverr are great places to find video editing jobs.
25. Fashion Design
Fashion design is one of the most lucrative ways to make money, and it’s an industry that’s always in demand.
Whether you’re interested in starting your own fashion label, working for a fashion house, or becoming a freelance designer, there are plenty of opportunities to make a living in this field.
Marketing yourself is also key to success in fashion design. Use social media platforms like Instagram and Pinterest to showcase your work and build a following.
Networking is also an important part of building a successful career in fashion design. You must stay up-to-date on industry trends, make valuable connections, and potentially land new clients or job opportunities.
Create a website or blog where you can share your designs, offer fashion tips, and connect with potential clients.
Pay attention to industry trends, stay creative and original, and focus on developing your skills and building your brand. Then, there are plenty of opportunities to make a living in this exciting and dynamic industry.
26. Start a Blog
Many people say blogging is dead. But, it’s not.
Starting a blog can be a great way to share your interests, skills, and experiences with others while also creating a new income stream for yourself. The flexibility of blogging allows you to turn your current job or passion into a successful blog.
However, starting a blog can be challenging, and it requires technical knowledge, writing ability, social media skills, and topical expertise.
Once you have started your blog, it’s essential to treat it like a business and monetize your content.
27. Self-Storage Business
Self-storage business is a lucrative venture that involves renting out storage units to customers who need extra space for their belongings. These businesses are in high demand, especially in urban areas where living spaces are often small and cramped.
In fact, the self-storage business is expected to bloom to $64.17 billion by 2026.
Starting a self-storage business can be a profitable venture if done correctly.
28. Invest in Cryptocurrencies
Cryptocurrencies have gained popularity as a potential source of significant income. Bitcoin, Ethereum, and Litecoin are some of the best cryptocurrencies to invest in.
To invest in cryptocurrencies, one must first set up a digital wallet and choose a reputable exchange such as Coinbase or Bitstamp.
It is important to research the market and understand the volatility of cryptocurrency before investing. While the potential for high returns exists, it is important to approach cryptocurrency investing with caution.
29. Invest in Real Estate
Investing in real estate can be a lucrative way of making money.
To make $1000 a day through real estate investing, there are several steps you can take.
First, set aside a few hundred dollars each month to invest in real estate over time.
Second, consider the different types of real estate investments available, such as rental properties, commercial properties, and fix-and-flip properties. Each investment type has its own advantages and disadvantages, so it’s important to research and choose the one that fits your financial goals.
Third, consider investing in real estate investment trusts (REITs) or crowdfunding platforms like Fundrise, which allow you to invest in real estate without purchasing a property.
Remember that investing in real estate carries a degree of risk, so it’s important to do your research and seek advice from successful real estate investors.
30. Make Money on the Internet
Making money online has become a popular option for those looking to earn a substantial income. The internet provides a wealth of opportunities for anyone with an internet connection and a bit of creativity.
You need to learn how to make money online for beginners.
There are so many options today and you never have to leave your house!
When it comes to making $1000 a day online, it’s important to acknowledge that it’s not a quick or easy process. It takes time and effort to build a successful online business or generate significant income through freelance work or other online opportunities.
However, with dedication and hard work, it is possible to achieve your financial goals.
How to make $1,000 really fast?
If you’re in a financial bind and need to make $1,000 quickly, there are several options available to you.
Here are the top ways to make $1,000 a day quickly:
Sell items on eBay or Craigslist: If you have items that you no longer need, consider selling them online. This could include clothes, furniture, or electronics. This is a quick and easy way to make money fast.
Offer freelance services: You can offer services such as tutoring, design work, or writing. If you have a specific skill or talent, you can find customers online who are willing to pay for your services.
Do odd jobs for people in your community: You can offer to mow lawns, rake leaves, or shovel snow for a fee. This is a great way to make money quickly, especially if you live in an area with a lot of homeowners.
Participate in paid focus groups or surveys: This is a great way to make money quickly without leaving your home. Companies are always looking for feedback on their products and services, and they are willing to pay for it.
Rent out a room in your home on Airbnb: If you have a spare room in your home, you can rent it out on Airbnb and make money quickly. This is a great option if you live in a popular tourist destination.
Manage social media accounts: Many businesses need help managing their social media accounts, and they are willing to pay for them. If you have experience with social media, this could be a great way to make money quickly.
Start a blog: If you have a passion for writing or a specific topic, you can start a blog and sell advertising space or products/services to your readers. This takes some time to build up, but it can be a lucrative way to make money in the long run.
Sell handmade crafts or goods online: If you’re crafty, you can make items and sell them online, such as on Etsy. This is a great way to turn your hobby into a money-making opportunity.
Borrow money from friends or family: This is not an ideal option, but if you’re in a bind and need money quickly, consider asking for a loan from someone you trust.
Pawn items for cash: This is a last resort option, but if you have items of value, you can pawn them for cash quickly.
Don’t be afraid to try different methods and see what works best for you.
This is the perfect side hustle if you don’t have much time, experience, or money.
Many earn over $10,000 in a year selling printables on Etsy. Learn how to get started by watching this free workshop.
If you’ve ever wanted to make a full-time income while working from home, you’re in the right place!
This intensive training combines thousands of hours of research, years of experience in growing a virtual assistant business, and the power of a coach who has helped thousands of students launch and grow their own business from scratch.
FAQ
Passive income is a form of earnings that is generated without active involvement.
It is a way to make money while you sleep and can provide financial stability and independence.
This is one of three types of income and the one you want to strive towards building.
Ultimately, the best side hustle for making $1000 a day is one that meets your needs and interests while providing a good return on investment.
Here are several factors to consider before choosing the best option.
Think about your skills, interests, and availability. If you have a full-time job, you may want to consider a side hustle that allows you to work flexible hours.
Next, consider the earning potential of the side hustle you are considering. Some side hustles pay more than others, and you want to choose one that will give you the highest return on investment.
Additionally, consider the start-up costs associated with the side hustle. Some require significant investment, such as buying a car for ride-sharing apps or purchasing an online course.
Most importantly, choose a side hustle that aligns with your passion and expertise. This will make the work more enjoyable and increase your chances of success.
There are many ways to make money from your expertise.
You can start a consulting business, offer services such as coaching or speaking, create and sell information products, or build a following and sell advertising or sponsorships. The possibilities are endless.
What’s important is that you start somewhere and then take action to turn your expertise into cash.
Ready to Make 1000 in a Day?
There are many ways to make money quickly and easily.
The best way to make money fast is to find a way that best suits your skills and interests.
Whether it’s graphic design, content creation, photography, or trading stocks, there are plenty of opportunities to turn your passions into profit. So, start honing your skills and explore the endless possibilities of the gig economy.
Learning how to make quick money in one day is possible. You just need to be determined and disciplined.
So, which method do you choose on how to make $1k a day?
Know someone else that needs this, too? Then, please share!!
Retiring at 40 may sound like a dream come true, but even with $4 million in your bank account, it’s important to have a plan for the future. You’ll need to plan out the next half of your life with a clear financial picture in order to truly retire at such a young age. Here are some of the most important questions to ask yourself before you clock out of work for good. If you’d like individualized help planning for retirement, consider working with a financial advisor.
Is $4 Million Enough to Retire at 40?
As of 2023, the life expectancy for the average American was 76.4 years—73.5 for men and 79.3 for women, according to the CDC. Let’s say that you live to the age of 80. Even if you don’t invest your millions to generate any returns, you can spend $100,000 a year for 40 years before your money runs out.
Of course, you don’t want to run out of money at 80 with years ahead of you. With a well-planned investment portfolio, you may very well be able to live quite comfortably off the returns generated by the principal. This means that your $4 million can sit untouched and you can live off the interest and earnings.
For instance, the stock market’s S&P 500 Index has returned an average of 6.5 to 7% per year after inflation for the past 200 years, according to McKinsey. If you invested your $4 million there, 6.5% returns would mean $260,000 per year—like a comfortable sum for most to live on in retirement.
Of course, stock market crashes, poor budgeting and other issues can decimate millions of dollars quicker than you might think. Here are some of the biggest factors you should consider if you’re planning to retire at 40 with $4 million.
1. Plan Wisely for the First Few Years
If you leave the workforce at 40, there are some things to be aware of in the first several years of retirement. First of all, people often spend more in early retirement, then spend less over time as they age, according to a Fidelity analysis of data from the Bureau of Labor Department.
This period of higher spending coincides with an age when government programs won’t be available to you. The earliest age at which you can begin to receive Social Security benefits is 62 and Medicare won’t kick in until age 65. You’ll need to plan to cover your insurance and medical costs without government assistance for 25 years and plan to live without Social Security income for at least 22 years.
Additionally, many of the most popular retirement savings vehicles will also not be available to you without penalty. Penalty-free withdrawals from 401(k) plans and IRAs are available after the age of 59 ½, meaning you should plan to pay 20 years of expenses without touching those accounts.
2. Prepare for the Unexpected
As mentioned above, stock market returns on average can generate a healthy retirement income, but you’ll want to be prepared for events outside of your control. In a market crash, a large portion of your portfolio may essentially disappear and take a long time to reconstitute itself.
According to Morningstar data, the average time it takes for an asset class to recover can vary widely, with many bouncing back after six months. However, others take much longer, with some taking as many as 13 years to fully recover their value.
This is just one of many market pressures that can create challenges for you in retirement. Inflation can also wreak havoc on your retirement savings. According to an inflation calculator, $50,000 in April 1993 had the same buying power as about $105,000 thirty years later. That means in 30 years, the value of your savings could essentially be halved. This is a good argument to be more conservative than you think might be warranted when planning your retirement.
3. Prioritize Diversification
One straightforward solution to the above challenges is a diversified portfolio. If you only invest your money in stocks, the good times may be very good, but the bad times will likely be very bad. If you invest your money in a wide variety of assets, you can mostly insulate yourself from the vagaries of the market.
Think about your ideal asset allocation. You can use a tool like SmartAsset’s asset allocation calculator to get an idea of what your investment breakdown should be based on your risk tolerance and other factors. You should consider different asset types, such as stocks, bonds and mutual funds and holding onto some cash.
You should also diversify within each type—instead of just one company’s stock, you should own multiple stocks in multiple sectors and regions. Instead of just owning 5-year bonds, you should own bonds of multiple durations. Also consider investing in assets that are more immune to inflation, such as real estate investment trusts or Treasury Inflation-Protected Securities.
The idea is that by spreading your money around, you can mitigate the risks of investing while still generating healthy returns. And when you have enough cash and conservative investments on hand, you will be better able to ride out the ups and downs of the market without having to sell assets at a loss.
4. Budget Well
Perhaps the easiest way you can run out of money far too soon is with flagrant spending. While a wisely-invested $4 million should provide you with a six-figure income for the rest of your life, lavish vacations, expensive hobbies or multiple homes can quickly deplete your savings.
You can use SmartAsset’s budget calculator to make sure you have a sound plan for your spending in retirement. There’s no reason you can’t enjoy the finer things in life, but you’ll need to make sure it fits into the big picture of your financial situation. Make a plan for how you’re going to spend your retirement income and stick to it to ensure the coffers don’t run dry.
The Bottom Line
Retiring early with $4 million is very possible, but requires some planning. Make sure you enter your retirement with a diversified investment portfolio, a smart budget and a plan for how to navigate the years before many traditional retirement benefits are available to you. Consider careful planning with a professional to make sure you’ve thought about everything before retiring early.
Retirement Savings Tips
A financial advisor can help you take care of your finances when you’re retired. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How much do you need to save to fund your eventual retirement lifestyle? If you’re scratching your head at the question, consider using SmartAsset’s retirement calculator.
If you’re considering refinancing some or all of your student loans, you may wonder what comes next on your financial to-do list.
On June 3, President Biden signed the debt ceiling bill into law, ending the three-year federal student payment pause. Payments are expected to resume in October.
Refinancing student loans can often result in a lower monthly student debt payment, either due to a lower interest rate, a longer loan term, or both. A lower monthly payment can be a big relief to borrowers who are still reeling financially from the effects of Covid-19 and higher inflation.
Lower payments can also free up some of your income for other key financial goals. That’s what we’ll look at here.
What Happens When You Refi Student Loans?
Understanding what happens after a refinance is key to planning your next steps.
As mentioned above, when you refinance, you may find a more favorable interest rate or more flexible loan terms that will help reduce your monthly payment. The SoFi Student Loan Refinancing Calculator can help determine how much refinancing could save you.
Keep in mind, when you refinance a federal student loan into a private loan, you lose the benefits and protections that come with a federal loan, like deferment and public service-based loan forgiveness (PSLF).
What Is Your Next Financial Goal?
As you consider refinancing, it’s a good idea to keep your other financial goals in mind. How can refinancing student debt — and perhaps lowering the percentage of income dedicated to repayment — help you achieve those goals? Take a look at the following scenarios that might apply to you.
1. Pay Down High Interest Debt
Once your student loan debt is under control, turn your attention to any high-interest debt you may be carrying on credit cards. There are two common ways people approach paying down debt. Which one you choose depends on your financial situation.
• The Debt Avalanche. With this system, you start by paying your highest interest rate card first, with payments above the monthly minimum. You do this while still keeping up with minimum payments on any other debt. When you eliminate your highest rate debt first, you can more quickly lower your overall debt picture.
• The Debt Snowball. In this scenario, you pay off your debt in order of the smallest to the largest balances, regardless of interest rate. This way you see some of your smallest debts paid off quickly and get a psychological boost from doing so. As you pay off each debt, you assign the amount of the payment you were making on that balance to the next debt. Your debt repayment builds momentum, known as “the snowball effect.”
Recommended: Which Debt to Pay Off First: Student Loan or Credit Card?
2. Start an Emergency Fund
Having money saved for unexpected expenses is a vital part of financial wellness.
But saving for emergencies is a challenge for many Americans. According to Bankrate’s 2023 annual emergency fund report, less than half (43%) of U.S. adults could pay for an unexpected emergency expense from their savings.
Starting or boosting your emergency fund with money saved on student loan payments is a great way to help keep your budget intact and stay out of debt.
How much should you save in your emergency fund? At least three to six months of living expenses (or take-home pay) is the rule of thumb. That way, if you lose your job, have an accident, or get sick, you’re likely to have enough to see you through until your situation improves.
3. Increase Retirement Contributions
Are you putting as much as you can away for retirement? Starting early can pay off big down the line, thanks to the magic of compound interest — and the fact that earnings grow tax-free in most retirement accounts such as IRAs and 401(k)s.
If your employer offers a matching contribution benefit, upping your game may be even more important. This is free money. Whenever possible, contribute the amount necessary to qualify for the full match so you take the best advantage of this key benefit.
4. Save for the Next Stage of Life
Life goes on well after student loans. Now with less student debt burden, you’re probably looking at what’s next. That may mean buying a car, saving for a down payment on a home, starting a family, or expanding a business.
Careful budgeting means you can put the difference between your old student loan payment and your new one toward other important life goals.
Once you establish the goal you’re saving for, consider opening a high-yield savings account dedicated to that purpose. You’ll earn interest while your nest egg accumulates but still have liquidity so your money is available when you’re ready to pursue your goal.
5. Invest
Starting an investment account outside of retirement savings can be an important financial goal in and of itself. The reason? Long-term stock market returns consistently outperform many other types of investments. Over the past decade through March 2022, the average annual return for the Standard & Poor’s 500 Stock Index was 14.5%.
Returns vary, of course, depending on the years you are invested and the economic environment. But over the long haul, investing in stocks early — even small amounts — can pay off in the future.
Mutual funds and exchange traded funds (ETFs) are two easy ways to start investing. A mutual fund is a collective investment which pools funds from many investors to invest in stocks, bonds or other securities. ETFs work much the same way but unlike mutual funds, ETFs can be bought and sold like a stock as the price goes up or down during the day.
How to Pay Off Student Loans Ahead of Schedule
As we’ve seen, a refinance can help lower your monthly payments and perhaps bring some much-needed wiggle room to the rest of your finances.
That may motivate you to keep the momentum going and look at ways you can repay your remaining student debt faster. Here are two tried and true strategies.
Pay More Than the Monthly Amount
Your monthly payment amount isn’t set in stone. You can always pay more than the minimum amount, and in most cases you probably should. Payments over the minimum monthly amount owed are applied directly to the principal. So even a little bit extra can lower the amount of your loan and help you save on interest over the life of the loan.
Recommended: Why Making Minimum Student Loan Payments Isn’t Enough
Dedicate a Windfall to Student Loans
Another strategy for paying student debt faster: Whenever you get a windfall, use some or all of it to make a lump sum payment toward your student loan principal. Think tax refunds, cash gifts, work bonuses, or income from a side gig or inheritance.
What to Avoid After Refinancing Student Loans
After refinancing student loans, be careful not to fall into a common trap: It’s called “lifestyle creep,” and it happens when you spend all of your discretionary income instead of directing some of it to financial goals.
To avoid creep, mindfully adjust your budget to account for any increase in income — such as lower student loan payments. That way the money will be put to good use instead of being frittered away.
Recommended: Living Below Your Means: Tips and Benefits
The Takeaway
Refinancing your student loans may help you lower your monthly payments, freeing up funds to put toward other financial goals. You might choose to pay down high-interest credit card debt, boost your emergency fund or retirement account, or even pay off your student loans faster. With the end of the federal student loan payment pause in sight, now may be a good time to consider refinancing all or part of your student debt.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
Photo credit: iStock/RossHelen
SoFi Student Loan Refinance If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
CLICK HERE for more information.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
With some bank CDs paying more than a 5% APY and some savings and money market accounts yielding around that figure too (as of June 2023), no one can blame investors if they’ve become tempted to keep a healthy chunk of their retirement savings in cash and cash equivalents. But if you’re not careful those high interest rates could end up losing your money in retirement.
Do you have questions about how to allocate the assets in your portfolio according to your goals? Speak with a financial advisor today.
Risks of Holding Cash
Keeping significant cash allocations can make sense to meet your short-term retirement income goals for a year or two, writes Amy Arnott, a certified financial analyst (CFA) and portfolio strategist for Morningstar Research Services. Beyond that time horizon, “Cash can be particularly detrimental to long-term investment goals such as retirement.”
Arnott gives this example: “A retiree who started saving $10,000 per year in 1993 and stashed everything in cash would have ended up with about $380,000 by the end of 2022, compared with about $1.5 million if the savings were invested in an all-equity portfolio or $1 million if invested in a balanced fund.”
One reason to be wary of higher-rate cash accounts is that those interest rates tend to move higher during periods of higher inflation. In today’s case, rates have been pushed up by the Federal Reserve’s decision to hike rates 10 times during the past 16 months to tamp down rising inflation. As the Fed raised its benchmark federal funds rate from 0.25% in early 2022 to 5.25% as of May 2023, it’s important to remember that inflation was running at an annual rate of 8.54% when the Fed got started.
Now that inflation has dropped to about 4%, bank savers can make a small bit of profit on high-yielding accounts – but that won’t last for long. In addition, the rates banks pay typically lag the rates set by the Fed, as they’ve done for most of the post-pandemic period, making any real gains after inflation a brief occurrence, at best. With inflation dropping, one-year CD rates are now higher than five-year rates, an indication that bankers expect the Fed to pause or even cut rates as the cost of living falls.
Reasons for Holding Cash
The reason financial planners advise their clients to invest in the stock market is because it’s nearly impossible to beat long-term inflation with cash. Historically, only stocks have demonstrated the capability to generate gains after inflation over any long period. As rates fall, cash is likely to return to its position as one of the least-loved types of assets in its traditional role as a financial “parking lot.” That is, a vehicle where investors stash cash for immediate or short-term needs. However, cash accounts can shine when used for the right purposes, including:
Emergency Funds
Whether it’s the minimum three-months of spending or a year or more, an emergency fund needs to be safe and readily available. Often CDs, savings and and money market accounts are ideal for this purpose.
Short-Term Needs
In the bucket approach to retirement investing, assets are separated into long-term, medium-term and short-term buckets that align with when retirees will need that money. A year or two of living expenses in cash insulates them from market shocks and allows investors to ride out periods of stock volatility. It also mitigates sequence-of-returns risk, a problem that occurs when a period of poor market performance early in retirement creates larger-than-average portfolio losses, making future retirement withdrawals difficult to sustain.
Anticipated Spending
Savings for the down payment on a home, wedding costs or to pay upcoming college tuition bills shouldn’t be stuck in stocks. This is particularly true if that money will be needed in the next few years, when a market decline could leave money invested in stocks coming up short.
Buying Time to Think
An inheritance, lottery winnings, unexpected bonus or other unexpected windfall can be parked in an FDIC-insured bank CD or money market account. This throws off a bit of interest, while the recipient decides just how to invest or spend their bounty.
Bottom Line
Investors who need to hold some amount of their assets in cash should enjoy the temporarily higher-than-usual rates on bank CDs and money market accounts. Just remember that, as an investment, cash is strictly for covering anticipated short-term needs.
Tips on Investing
How much money to keep in cash, bonds and stocks can be a complicated balancing act that shifts widely from your working years to retirement. A financial advisor can help answer how to structure your holdings. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Fidelity recommends that you have 10 times your annual income saved for retirement by age 67. To find out if you’re on track, try SmartAsset’s retirement calculator. This will estimate how much you’ll have when the time comes to retire.
When shopping for a wedding dress, I was given some sound advice: don’t try it on if you can’t afford it. Because if you fall in love with it, you will either be heartbroken when you can’t have it or you’ll blow your budget to get it.
What I love about this advice is that it is applicable to more than just wedding dress shopping.
For example, it works just as well when figuring how much rent you can afford. After all, the last thing you want to do is find your dream apartment only to discover it’s way out of your budget.
What’s Ahead:
Determine How Much Rent You Can Afford
Here are some rules of thumb to use when determining how much of your income should go to rent:
The 30% Rule
This rule is about as quick and easy as it gets when trying to decide how much you can afford to spend on rent: you should spend about 30% of your gross monthly income (before taxes) on rent.
Keep in mind the 30% rule doesn’t include utilities or any other housing expenses — it’s 30% of your gross income on rent alone.
So, if you bring home $3,000 per month, then you should aim to spend around $900 (or less) on your monthly rent ($3,000 x 0.30 = $900).
Source: Giphy.com
Keep in mind, this is just a general rule. The 30% rule is a good starting point, you may still need to adjust this figure based on what works best for you.
For example, if you live in a city with high rental prices, then you might be required to pay more than 30% just to find housing.
On the other hand, if you have student loan payments or other loans, then spending 30% on rent might be too high for your monthly budget.
Read more: How To Manage Student Loan Debt
The 30% rule has its origins in 1937 and the U.S. National Housing Act, which created the public housing program for low-income families. Income limits were established as eligibility for families that wanted to live in public housing. Back then, the rule was that, “a tenant’s income could not exceed five to six times the rent.”
Since then, the limit has increased. In 1961, the Housing and Urban Development Act established that the rent threshold should not exceed 25% of a family’s income. This was then raised to 30% in 1981 — a benchmark that’s since stayed the same.
The 50/30/20 Budget Rule
Another simple rule for determining how much of your income should go to rent is the 50/30/20 budget. This rule states you cam use 50% of your net income (after taxes) for your “needs.” Your needs include things like housing, utilities, car payments, and groceries.
Next, allot 30% of your monthly income for wants — things like clothing, eating out, and hobbies.
The remaining 20% should go towards saving, investing, and debt repayment.
Source: Giphy.com
So, if you bring home $3,000 per month after taxes, this would give you $1,500 per month to spend on your needs, $900 for wants, and $600 for saving, investing, and debt repayment:
To calculate 50% ($3,000 x 0.50 = $1,500).
To calculate 30% ($3,000 x 0.30 = $900).
To calculate 20% ($3,000 x 0.20 = $600).
Remember, the 50% is for all your needs, not just your rent alone. So make sure you have a good idea of how much you spend per month on things like food and utilities before deciding the exact amount you can put towards rent.
For help calculating your 50/30/20 budget, check out our handy 50/30/20 calculator.
The 50/30/20 rule was popularized by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi in their book, “All Your Worth: The Ultimate Lifetime Money Plan.”
Other Considerations besides the Rent Price
While these rules of thumb are helpful starting points for determining how much rent you can afford, there are several other factors to consider — such as other expenses associated with renting, where you want to live, how much debt you have, and the kind of lifestyle you want.
Additional Costs Associated With Renting
Your monthly rent payment will likely be your largest housing expense, but it’s not the only expense. Often landlords require all sorts of extras. Here are some other things you’ll need to factor in:
Moving costs.
Security deposit.
Pet deposit.
Utility payments.
Renters insurance.
Parking.
Commuting costs.
Where Do You Want to Live?
If you’re looking in a high-cost-of-living city like San Francisco, where the average cost of a one-bedroom apartment is $2,995, then you might have to spend more than the recommended benchmark amount (or get four roommates).
On the other hand, if you’re looking for a place in a low-cost-of-living city and you make a high salary, you might spend less.
How Much Debt Do You Have?
You also have to consider how much debt you are carrying. If you are completely debt-free, then you might be able to pay a little more to your rent.
If you are drowning in student loans and credit card debt, then you probably need to be putting more of your income towards debt repayment.
Read more: How to Pay Off Credit Card Debt Fast
What Kind of Lifestyle Do You Want?
This is very important: don’t forget to think about the type of life you want to live. Your spending habits and other financial goals matter.
If you enjoy going out for dinner or spending extra money on hobbies, then make sure you are budgeting for these things. You don’t want to be house-poor and forced to spend all your time at home if what you enjoy most in life is being out and about.
Read more: When It’s OK to Spend Money
How To Reduce the Amount You Spend on Rent
If you want to decrease your housing expenses, there are some things you can do to reduce what you spend on rent:
Move to a city with a lower cost of living. If you can work remotely or you have the option to move to a cheaper city, consider doing it.
Move farther outside the city. Living in the city core can be expensive. If you want to reduce your rent, you can look into moving to the suburbs. This will often afford you more space for less money.
Get a roommate. Splitting housing costs with a few roommates can drastically reduce the amount you are spending on rent each month.
Negotiate with your landlord. Depending on where you live and the demand for rentals, you might be able to negotiate the cost of rent with your landlord. You can offer to prepay for a few months upfront in exchange for a discount. Or you could offer to extend the length of your lease if they are willing to reduce the monthly rent.
Offer to help your landlord. If you’re the handy type, offer your services to your landlord in exchange for reduced rent. Maybe you could paint or do minor fixes around the place for a cheaper monthly bill.
The Bottom Line
For many of us, we are spending the largest chunk of our income on rent.
While what you should spend on one month’s rent comes down to a few personal factors, like where you live and how much debt you’re carrying, simple rules like the 30% rule or the 50/30/20 budget can help set a baseline for what you can afford.
