Navigating the process of home inspections in South Dakota can be a daunting task for many homebuyers, especially those who are new to the real estate market. This comprehensive guide is designed to demystify the home inspection process, offering crucial insights and practical advice specifically tailored for those looking to purchase a home in the beautiful state of South Dakota. So whether you’re looking at homes in Sioux Falls or anywhere else in the Mount Rushmore State, here’s Redfin’s guide on what you need to know about South Dakota home inspections.
Why should you get a home inspection in South Dakota?
Investing in a home is a significant financial commitment, making a thorough home inspection in South Dakota a crucial step in the process. A comprehensive inspection can uncover potential issues, ensuring you make the right decision about your purchase. From finding structural issues to assessing the condition of electrical and plumbing systems, a professional inspection provides a holistic view of the property, offering peace of mind and potentially saving you from unexpected expenses down the road.
Are there any specialized inspections that South Dakota buyers should consider?
In South Dakota, buyers may want to consider specialized inspections based on the property’s unique features or location. For homes in flood-prone areas, a flood risk assessment is advisable. Similarly, properties with extensive acreage may benefit from a thorough well and septic system inspection. Mold and radon testing are also prudent in certain regions. Customizing inspections to suit the property’s characteristics ensures a more targeted evaluation, addressing potential issues specific to the South Dakota landscape and climate.
Are home inspections required in South Dakota?
While South Dakota doesn’t legally require home inspections, they are highly recommended and often considered a standard practice in real estate transactions. “Home inspections are not required in South Dakota, but 92% of all homes that are sold are inspected in South Dakota,” says Nick Gromicko, founder of the International Association of Certified Home Inspectors. Opting for an inspection is a proactive choice that serves the buyer’s best interests. It provides valuable information about the property’s condition and can be a negotiating tool in the buying process, allowing buyers to address issues or negotiate repairs before finalizing the deal.
How much does a home inspection cost in South Dakota?
The cost of a home inspection in South Dakota varies based on factors such as the property’s size, age, and additional services requested. On average, expect to invest a few hundred dollars. While the upfront expense may seem significant, it’s a small price to pay for the peace of mind and potential cost savings that come from identifying and fixing issues early on.
Can you sell a house in South Dakota without an inspection?
In South Dakota, sellers are not required to conduct a home inspection before listing their property. However, many sellers opt for pre-listing inspections. This approach allows them to address potential issues beforehand, presenting the property in the best possible light and potentially speeding up the selling process. While not mandatory, a pre-listing inspection can be a strategic move for sellers looking to be transparent and build buyer confidence.
Any other information or advice for South Dakota residents regarding home inspections?
Brad Banks of Black Hills Professional Home Inspections, based in Rapid City, recommends getting an independent home inspection from someone who doesn’t work with your realtor to get an unbiased opinion. “Your inspector should be working for the buyer, not the sale,” he says.
South Dakota home inspection: the bottom line
Regardless of where you choose to live, it’s important to understand the ins and outs of a home before buying. That’s what makes South Dakota home inspections so important. By having the important elements of your potential home looked at by professionals, you can eliminate the guesswork and avoid extra expenses.
There are things in life that we wish we had known earlier because they may be able to save us from wrong decisions in life. Well, these people share some of the wisdom they wish they’d known a decade ago, which would have made their lives easier!
1. Fitness Is Good for Your Mental Health
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“Working out is really good for mental health. It might not be all you need, but it’s gonna be a good majority. At least for me,” said one.
“Truth! I hate it when I get sore because I can’t workout anymore. I went from being lazy and never working out for the first 25 years of my life to loving it and wondering why [the heck] was I so lazy. I did have to get incredibly depressed after a breakup, though lol,” replied another.
2. Invest in the Right Stocks
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One person said, “To invest in the right stocks.”
Another one replied, “Seriously, I think of this all the time. I wish I had known to invest in Bitcoins a decade ago when the price was around 100 dollars per coin. I would have also started mining em!”
3. That the Man I Married Is a Predator
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Somebody shared, “Who the man I married was/is…Spoiler, he’s a child pr*dator and I helped him find his way to prison.”
The second person replied, “I’m so sorry. I can’t imagine what kind of [awful things] you must have gone through discovering this.”
Then the original commenter replied, “Yeah, it was a bit like a bomb went off. I’m still a little shaken.”
4. That a 30-Minute Workout Is Easy
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One user commented, “I wish I’d realized how easy it is to do 30 min of working out a day and that consistency is the key to fitness. I manage to do it now with a toddler and a job, and I should have been able to do it easily before my kid was born.”
5. My Girlfriend
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“My current girlfriend. She’s the love of my life. Means everything to me. We absolutely adore each other. Going on 3 years soon,” shared somebody.
6. Remove Toxic People From Your Life
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“Just because you’ve been friends with someone since you were ten years old doesn’t mean you have to stay that way. Remove them from your life if they are toxic,” said somebody.
7. Spirituality Is the Ultimate Goal
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One user said, “Life is not about accumulating materials. Ultimate goal should be at least being on the spiritual path for understanding the nature of my own life.”
8. All About Inner Engineering
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“I wish I had known about inner engineering—how to manage my mind, thoughts, and emotions and not to mess up the most precious youthful years of life by finding a perfect partner who never exists,” somebody stated.
9. That I’m Meant to Be Alone
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Somebody commented, “That I’m more than likely meant to be alone and I could save a ton of heartache by not getting into any relationships.”
10. That I’m Autistic
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“That I’m autistic and it’s the reason why everything is/feels so hard for me. Spent my childhood and teenage years blaming myself for things I had no control over. I think it would’ve saved me a lot of the heartache that comes with thinking you’re fundamentally broken when in reality my brain is literally different from others,” somebody shared.
Can you relate to some of the things listed here? Let us know in the comments!
Source: Reddit
10 Actors Perfectly Cast for Their Character Roles
Photo Credit: Warner Bros.
Have you ever watched a movie or show and been completely lost in it because of how well an actor or actress became their character? Check out this article for a whole list of actors who were perfectly cast!
11 Vampire Movies That Will Make You Thirst for More
Photo Credit: Columbia Pictures.
You know that feeling where you’re on a movie kick in a certain genre, but you seem to run out of good movies to watch? Well, if you’re down for a vampire movie or three, check out this article for the best ones out there!
10 Incredible Movies That People Rated 10 Out of 10
Photo Credit: Universal Studios.
It’s pretty hard to replicate the experience of watching your favorite movie for the first time, but we’ve put together a list of movies that people have rated at a perfect 10/10. Next time you need a good movie to watch, check this out!
10 Famous People Who Canceled Themselves With Their Own Stupidity
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We’ve all been there: you make a comment you haven’t thought through at all, and the whole room goes silent at what you’ve just said. But can you imagine doing that as a famous person—and getting canceled? Check out this list of celebrities who did just that!
13 Things You Shouldn’t Do When You’re in the US
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Are you planning a trip to the US? Culture varies a lot between countries, even countries that share borders. So if you’re headed to the good old U. S. of A, here are a few pointers to make your travels go more smoothly!
Representative Maxine Waters, a Democrat from California, held a town hall meeting on Saturday at Inglewood High School where she pointedly asked executives from City National Bank, PNC Financial Services and Wells Fargo & Co., if they would each open a branch in her district. Photographer: David Paul Morris/Bloomberg
David Paul Morris/Bloomberg
LOS ANGELES – Rep. Maxine Waters held a town hall meeting on Saturday where she pointedly asked executives from City National Bank, PNC Financial Services and Wells Fargo & Co., if they would each open a branch in her district. She said she wanted to hold the banks accountable for promises made in recent merger agreements or consent orders.
The town hall meeting at Inglewood High School got fiery at times as Waters pressed the three bank executives to answer questions from constituents in her 43rd congressional district in South Los Angeles. Waters, the ranking member of the House Financial Services Committee, said she invited all the top banks to attend but was turned down by Bank of America, Citigroup, JPMorgan Chase and U.S. Bancorp.
Next week, the Senate Banking Committee plans to hold an annual oversight hearing with executives from the nation’s top banks. Waters said she was disappointed that Republicans in the House would not hold a similar hearing. Her town hall, she said, would try to fill in the gap.
When Jeffrey Martinez, executive vice president and head of branch banking at PNC Bank, described how the Pittsburgh bank was upholding its pledge to invest an eye-popping $88 billion in local communities over four years as part of its 2020 acquisition of BBVA, Waters asked specifically if PNC was coming to her neighborhood.
“When are you going to open up a branch in my district?” Waters said. “We have a problem with branch banking not being available to us in all of our communities in the way they should be. We call them banking deserts.”
Martinez responded: “That’s a great question, it’s an important one and one of the things we’ve slated even though we’re new to California.”
“We would like to help you find a location,” Waters said, to thunderous applause and laughter from the crowd of about 300. “I’m so looking forward to establishing” a branch here, she added.
Waters then described how City National Bank in Los Angeles had agreed in January to pay $31 million to settle redlining allegations brought by the Justice Department. As part of the agreement, City National has promised to open one branch in a majority-Black and Hispanic neighborhood in L.A. County.
“Can you discuss where you might be opening the branch?” Waters asked. “Where are you with all of this?”
David Cameron, City National’s executive vice president of personal and business banking responded, “That is a great question,” drawing laughter from the audience.
“I don’t have any announcement on where we’re going to put that branch.”
To which Waters replied: “Oh, we’ll help you,” to further applause from the audience.
City National plans “to go above and beyond,” the agreement to invest at least $29.5 million in a loan subsidy fund for residents of majority-Black and Hispanic neighborhoods in Los Angeles County, Cameron said. The bank has hired more than 20 loan officers to support the initiative to provide grants of up to $15,000 each to first-time homebuyers.
Waters also questioned why City National did not have a mortgage loan officer at a local branch on Crenshaw Boulevard in Los Angeles.
“You’ve done well at that branch, are you going to expand that branch and put a loan officer there?” Waters said. “Can you do these things?”
Waters skillfully thanked each of the bankers for showing up to the town hall meeting, while also hitting them hard on consent orders.
“I really thank you for coming today. I know that you know we have a lot of questions for you, based on the fines that you received and all of that,” she told Cameron, and then asked the audience to give him a round of applause.
She also asked Colleen Canny, Wells Fargo’s executive vice president and national head of branch banking, why the San Francisco bank has been closing so many branches, which Waters estimated at 2,000 branch closings over many years. She cited the Wells Fargo 2016 fake accounts scandal that led the Federal Reserve to impose an asset cap on the bank.
“First tell us, why did you close those branches?” Waters asked.
Canny said that customer transactions through branches have fallen 50% over the past three years as more banking is done online, through mobile apps or ATMs.
“We still think branches are important and we continue to look at our branch footprint to ensure we have the proper coverage,” Canny said.
Waters lamented that banks are closing branches in inner cities where seniors who may not necessarily use a cell phone to bank still prefer to go to a branch in person.
“I want to tell you something that is a cultural discovery for everybody,” Waters told the bankers and the audience. “We like to go to a teller as we put our money across the counter. We like this kind of interaction with the people that we do service with and this is the kind of cultural consideration that the bank should take into account.”
At the town hall, which lasted for four hours, constituents asked a wide range of questions including why there were long lines at their local branches and why they were not able to get small business loans or even speak directly to the same banker on each visit. CFPB Director Rohit Chopra, who spoke after the bankers, answered a range of questions on reverse mortgages, digital redlining and junk fees.
Waters also lambasted the banking industry generally for Republican-led efforts in the House, which voted on Friday to nullify the Consumer Financial Protection Bureau’s small-business data-collection rule. Despite the bill’s passage in a 221-202 vote, President Joe Biden has vowed to veto the bill and uphold the rule.
The head organizer for Rise Economy, the consumer group formerly known as the California Community Reinvestment Coalition, asked the bankers generally why they did not support the Consumer Financial Protection Bureau.
“Your industry trade groups are attacking the CFPB, they’re attacking fundamental consumer protections … and very basic data on small business lending that we fought hard for for nearly 10 years,” said Jyotswaroop Kaur Bawa, chief of organizing and campaigns at Rise Economy. “We want you to tell us specifically how many Black and Hispanic-owned businesses you make loans to and at what rate—that’s what the fight is about.”
The small-business lending rule is expected to be used by the CFPB to identify discrimination, though the bureau exempted more than 2,000 community banks and small businesses from the rule. The coalition sued the CFPB in 2019 for taking so long to issue the rule, which Dodd-Frank’s Section 1071 mandated.
The 1071 rule was about wealth-building and closing the wealth gap, Waters said.
“The Senate Republicans put up a great fight against getting the rule, the data that we needed to determine why we can’t get small business loans — they fought us very hard, and they said they represented the banks,” Waters said. “Republicans won on trying to kill that rule that would give us information that would show that Blacks, Latinos, women and LGBTQ would not be getting small business [loans.]”
Water did commend one bank: First Citizens BancShares, which acquired the failed Silicon Valley Bank and last month announced an agreement to invest more than $6.5 billion in California and Massachusetts communities through an updated community benefits plan. The agreement, Waters said, paved the way for a branch to be opened in Watts.
Waters characteristically played to the audience by rattling off the various programs created after the pandemic including loans that banks delivered via the Paycheck Protection Program.
“You’re wondering, if there’s all this money around, why haven’t we been able to get some of it,” Waters said.
You’ve got some cash in a savings account earning a paltry 0.01%. You plan to spend it to buy a home or a car or something else in a few years. How can you invest the money until then to earn some extra interest?
It’s called short-term investing, and it’s tricky. Put your money in the stock market, and it could be gone when you need it. Put it in a traditional savings account, and it earns practically nothing. So, what should you do?
Recently, a listener to our podcast, Michael, emailed me with just this dilemma:
Let’s answer Michael’s question.
What is a Short Term Investment?
What exactly is a short-term investment? Well, there is no official definition. There is no governing body that defines what short-term or long-term investing is. It’s arbitrary.
For me, short-term investing is investing money you’re going to need to spend in fewer than five years.
Why five years? Because most of the time, the stock market doesn’t lose money over a 5-year period. It can, of course. Go back to the 1930s and 40s and you’ll find 5-year periods where the market was crushed, as this Bankrate slideshow demonstrates… 1932 was the worst. The 5-year period ending that year saw a drop of 60.9%.
But that’s rare.
When we have a pretty significant stock market correction or a bear market, it usually takes us at least five years to pull out of it. Of course, that’s not a guarantee. We could hit a bear market, and it could take us 10 years to pull out of it.
Either way, five years is where I draw the line. You may want to draw your own line more conservatively… or even less conservatively, for that matter. What I hope to do today is give you some information that will enable you to make a sound decision.
So, let’s begin.
The 10 Best Short Term Investments
1. Lending Club
Lending Club offers a great option with the potential for better returns. This P2P lending platform makes it easy to invest in loans to individuals and companies.
It’s also perfect for short-term lending. Loans on the platform are for either three or five years. If you know you won’t need the money until then, Lending Club is a reasonable alternative.
I’ve invested in Lending Club loans since the platform was first launched. My current annualized return, including loans that defaulted, is over 8%.
With higher returns, however, comes higher risks. Loans do go into collections and eventually default from time to time. Over the years, I’ve invested in 17 loans that defaulted.
The key is diversity. You can invest in a loan with as little as $25. By diversifying across many loans, you minimize the effect a single default will have on your portfolio.
LendingClub Pros and Cons
Very easy to invest in a diversified loan portfolio
Potential for high returns on a short-term basis
Not FDIC-insured
Cannot liquidate the loans early
Potential for losses
Expected Annual Return: 5.00 to 7.00+%
Read more: Lending Club Review
Lending Club Disclaimer:
2. Certificate of Deposit
The second option for short-term money is a certificate of deposit. CDs give us a lot more options than a savings account. The term of a CD can range from a few months to more than five years, and the longer the term, the higher the rates.
These higher rates, however, come with added risk. Here’s why.
A CD can be cashed in before it matures. For example, you could invest in a 5-year CD, but decide to withdraw your money after the first year. If this happens, however, most CDs charge a penalty. The amount of the penalty varies by bank and CD product.
As a result, it’s best to keep money in a CD until it matures. For this reason, picking the length of the CD is a critical decision.
So, you end up having this delicate dance- you want a long CD term so that you can make the most interest. But you don’t want to pay a penalty if you take the money out early.
CD Pros and Cons
FDIC insured
CD terms ranging from 6 months to 5 years or longer
Higher interest rates on longer term CDs
Can create a CD ladder
Still relatively low interest rates
Penalty for early withdrawal
Expected Annual Return: 1.00 to 2.50%
Here is a list of banks that offer high-yield CD options:
3. Investing With Betterment
Betterment presents an interesting opportunity for short-term investors. It’s not an investment. Rather, it’s an online company that makes investing in stock and bond ETFs easy.
The service can be used for all types of investing, including long-term retirement investing. To use Betterment in the shorter term, you must get the asset allocation right.
Learn More: The Perfect Asset Allocation Plan
Betterment lets investors decide how much to put in stock ETFs and how much to put in bond ETFs. For short-term investing, a 50/50 allocation protects against the downside while allowing for potentially higher returns.
Here’s the 50/50 asset allocation with Betterment:
The 50% in stocks gives us a chance to earn greater returns. The 50% in bonds helps protect short-term investors from a market crash.
There are no guarantees, of course. But looking at a 50/50 portfolio during the 2008-2009 market crash gives us some comfort.
Using PortfolioAnalyzer, I assumed we invested $10,000 at the start of 2008. Assuming we needed the money three years later, how would our 50/50 portfolio perform over a 3-year period. Remember that in 2008, a total U.S. stock index fund lost more than 37%.
Here are the backtested results of our 50/50 portfolio:
The portfolio still lost money in 2008, although far less than the 37% that the market dropped. And what was our final portfolio value at the end of 2010? It grew to $11,014, for an annual return of 3.27%.
While 3.27% is not a great return, remember that 2008 was a very bad year for stocks. Shift our time period one year forward (2009-2011) and our annual return jumps nearly 11%.
As a result, a 50/50 portfolio with Betterment is a reasonable choice for those needing the money in three to five years.
Betterment Pros and Cons
Very easy to implement
Money can be withdrawn at any time
Potential for much higher returns
Fees are very low
Not FDIC-insured
Potential for capital losses
Expected Annual Return: 0 to 10+%
Learn More: Betterment Review
4. Online Savings Account
Traditional banks pay as little as 0.01% on a savings account. That’s as close to zero percent as you can get.
One option for short-term savings that pay more is to go with an online bank. While the rates are still nothing to brag about, the top online savings accounts today pay about 0.50%. Chime®is now paying an APY of 2.00%, which is right in line with the best online savings accounts available. Chime offers a terrific online savings and checking account geared toward savers. You can see the top current rates here.
Online Saving Account Pros and Cons
FDIC insured
Funds can be withdrawn at any time
Rates better than a brick and mortar bank
No monthly fees
Interest rates are still low
Inflation exceeds the rates
Expected Annual Return: 1.30%
Here are some high-yield savings account options:
5. Municipal Bonds
There is a significant downside to bonds: taxes. Interest earned on bonds is taxed, as are any capital gains.
One option to reduce the tax burden is municipal bonds (known as “munis”). These bonds are typically free of federal income tax and may be free from state income tax, too. Munis are an excellent option for those in the higher federal tax brackets.
I’ve invested in Vanguard’s Intermediate-Term Tax-Exempt Fund (VWIUX) in the past. SEC yields on these funds are lower than similar taxable bonds. The comparison must be made on an after-tax basis. This fund currently sports an SEC yield of almost 2%.
Municipal Bonds Pros and Cons
Potential for higher returns
Tax advantages
Easy access to funds without penalty
Potential for losses
Not ideal for those in lower tax brackets
Expected Annual Return: 2 to 5% (after tax)
6. Short Term Bonds
Our third option is short or intermediate-term bond funds. More specifically, we want to look at low-cost index mutual funds and ETFs. Both Vanguard and Fidelity offer several options.
Here, you have some important choices to make. Do you want a fund that invests just in U.S. government bonds or one that also invests in corporate bonds? Do you want a short-term bond fund or an intermediate-term bond fund?
Like everything else in life, these choices involve trade-offs.
U.S. Government bonds are more secure than corporate bonds, but they pay less. Short-term bonds are less sensitive to interest rate fluctuations than intermediate-term bonds, but they pay less. Today, short-term government bonds do not pay much more than an online savings account. For example, the SEC yield on Vanguard’s short-term Treasury fund is just 1.25%.
For my money, I want to do better than that in a bond fund. While intermediate-term funds can lose money in a given year, they are reasonably stable. Vanguard’s Intermediate-Term Bond Index Fund (VBILX), for instance, costs just 0.07% and sports an SEC yield of over 2.50%.
A review of the performance of VBILX shows that it lost money in only one of the past ten years:
Short Term Bonds Pros and Cons
While not FDIC-insured, still reasonably secure
Intermediate-term bonds can yield significantly higher rates than a savings account
Money can be withdrawn from the fund when needed
Not FDIC-insured
Can lose money
Rates are historically low
Expected Annual Return: 1.00 to 6.00%
7. Bulletshares
There is a downside to traditional bond funds. They can experience capital losses as funds sell some bonds to buy new ones. If interest rates have risen, the fund incurs a loss on the sale of bonds.
Enter Guggenheim’s Bulletshares. These ETFs combine the potential returns of a bond fund with the fixed maturity of a CD. I first learned about Bulletshares from Jeanne J. Fisher, MBA, CFP, CPFA of ARGI Financial Group.
Traditional bond funds continue in perpetuity. The fund management regularly sells bonds as maturities age and replaces them with new bonds with longer maturities. In contrast, Bulletshares have a defined term of one to ten years.
At the end of the term, assets are returned to existing shareholders. And unlike CDs, a shareholder can sell his or her ETF shares at any time without penalty.
Related: What Are ETFs (and Are They a Strong Investment Option)?
Bulletshares come in two flavors: (1) corporate bonds and (2) high-yield corporate bonds. The first invests in investment-grade corporate bonds. The second buys bonds issued by corporations with a credit rating below investment grade. It involves more risk but offers higher returns.
As an example, the Guggenheim BulletShares 2020 High Yield Corporate Bond ETF has a current yield to maturity of over 5%.
Bulletshares Pro and Cons
Potential for higher returns
ETF shares can be sold at any time
Fixed maturity dates
Not FDIC-insured
Funds can lose money
Expected Annual Return: 1.50 to 5.50%
8. Wealthfront
Like Betterment, Wealthfront is a robo-advisor that makes investing easy. I list it here in addition to Betterment for one reason: It’s free.
Well, it’s free for your first $5,000 if you sign up using a DoughRoller link. After that, the cost is similar to Betterment. For both, you pay the very low fees charged by the ETFs. You also pay a Betterment or Wealthfront fee of about 25 basis points.
With Wealthfront, however, the 25 basis point fee is waived for the first $5,000.
Wealthfront Pros and Cons
Very easy to implement
Money can be withdrawn at any time
Potential for much higher returns
Fees are very low
Not FDIC-insured
Potential for capital losses
Expected Annual Return: 0 to 10%
Read more: Wealthfront Review
9. Worthy Bonds
Worthy Bonds offers you an opportunity to earn 5% on your money, with an investment of as little as $10. It’s a peer-to-peer investment site, where you can invest money in bonds issued by small businesses. The bonds aren’t guaranteed by a government agency, like FDIC, but many of them are collateralized by business inventory.
When you use the Worthy Bonds mobile app, you can automatically add funds to your investment account. Similar to many micro-savings apps, Worthy Bonds uses spending round-ups to move small amounts of money into your investment account as you spend. For example, if you pay $4.10 for a cup of coffee, the app will charge your account an even $5. $4.10 will go to pay the merchant, and $0.90 will go into your investment account. Once you accumulate an even $10 in round-ups, the funds can be used to purchase a bond.
Worthy Bonds Pros and Cons
Invest with as little as $10
An investment of $1,000 can be diversified across 100 different bonds
Interest is credited weekly
There are no fees charged on your account
Earn interest at more than twice the rate of inflation
Pays simple interest only, and does not compound for higher returns
The maximum investment is not more than 10% of your net worth or annual income, or $100,000
Expected Annual Return: 5%
Read more: Worthy Bonds Review – A Worthy Investment for Everyone
10. SmartyPig
The final investment option on our list offers an interesting twist to online savings accounts. SmartyPig combines a high yield with savings goals. As of August 2018, SmartyPig currently offers a high yield savings APY of 1.55%.
Now, the savings goals. With SmartyPig, you set specific savings goals. You can set multiple goals, or just one. You then add to the account until you reach your goal. In this way, SmartyPig is ideal for short-term savers.
Related: 6 Keys to Setting Financial Priorities
SmartyPig Pros and Cons
FDIC-insured
Potential for returns higher than most online banks
Makes saving for a specific goal very easy
Low rate compared to other options
Expected Annual Return: 1.00+% (depending on account balance)
Is the Stock Market a Good Place for Short-Term Investing?
We could stop here. After all, the above short-term investing options should cover most situations. Yet many will ask one remaining question: Why not just put all our money in the stock market?
It’s an understandable question. Particularly when the market is rising, missing out on money can be painful. It’s funny, though. Nobody asks me this question in a bear market.
And that’s the point. With the stock market, you can lose money over a short period of time.
Thinking Long Term: Sweat In Up Markets So You Don’t Bleed In Down Markets
Let’s return to 2007 and run a test. We’ll use the Vanguard S&P 500 index fund as a proxy for the market. And we’ll assume we have $10,000 at the start of 2007, that we’ll need to use in three to five years.
How would a $10,000 investment have performed? At the end of three years, we would have $8,395, for an annual return of -5.66%. At the end of five years, we would have $9,837, for an annual return of -0.33%
Yes, 2008 was a bad year. But again, that’s the point. Investing 100% of short-term money in the stock market presents a significant risk of loss of capital. Fortunately, we have better ways to invest for the short term.
Public is an app that helps you invest in individual stocks, even if you don’t have much money to commit. What makes it good for short-term investments is its lack of fees. There is no commission to buy or sell a stock so you can move your money in and out of the market at will without worrying about minimum investment terms. Read our Public app review
How to Manage Your Short Term Investments
Track and Analyze your Short-Term Investments for Free: Managing investments can be a hassle. You may have multiple IRAs, multiple 401ks, as well as taxable accounts. And then there are bank accounts. The easiest way to track and analyze all your investments, regardless of where they are located, is with Empower’s free financial dashboard.
Empower enables you to connect all of your 401(k), 403(b), IRAs, and other investment accounts in one place. Once connected, you can see the performance of all of your investments and evaluate your asset allocation.
With Empower’s Retirement Fee Analyzer you can see just how much your 401k and other investments are costing you. I was shocked to learn that the fees in my 401(k) could cost me over $200,000!
Empower also offers a free Retirement Planner. This tool will show you if you are on track to retire on your terms.
If all of this is overwhelming and not something you want to handle on your own, you may want to think about working with a financial advisor or investment advisor. We suggest visiting Paladin Registry, where you can fill out a form online to tell them what you are looking for. It’s free to use and Paladin Registry will email you a list of three highly-rated professionals that match your needs. From there you can interview each one and choose the best fit.
Happy investing!
Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at RobBerger.com.
Looking to learn the best ways to make money while you sleep? Do you ever feel worn out from your regular routine and tired of struggling to manage your money? Just picture being able to earn money even when you’re sleeping, without having to work long hours. In this article, I will show you 19…
Looking to learn the best ways to make money while you sleep?
Do you ever feel worn out from your regular routine and tired of struggling to manage your money? Just picture being able to earn money even when you’re sleeping, without having to work long hours.
In this article, I will show you 19 ways to help you reach financial freedom by earning passive income, such as while you sleep.
Having different ways to make money might seem like something crazy, but with the right plan and some hard work, it can actually happen.
In fact, I earn income all the time while I am sleeping and I love it. Now, that doesn’t mean that it’s easy. Some of the ways below will be harder than others, and they may take up a lot of time still. But, you may be able to earn money throughout the day from the hard work that you put in.
Key Takeaways
There are many ways to make money while you sleep, such as by blogging, selling digital products on Etsy, renting out storage space or real estate, putting your money in a high yield savings account, earning dividends, and more.
Some are easier to start than others – so make sure to think about the pros and cons, such as how much time it may take you or how much money you will need to start (your minimum investment!).
19 Best Ways To Make Money While You Sleep
Below are 19 ways to make money while you’re asleep.
1. Blogging
My favorite way to make money while I’m sleeping is by blogging, and it is a great way to make passive income while you sleep. I have been blogging for many years now (since I started Making Sense of Cents, I’ve made more than $5,000,000 from my blog), and I am able to work and earn money while I am asleep, such as by selling digital products, display advertising, and through affiliate marketing.
This is because readers read my blog posts throughout the day and night, even when I am not working. I have blog posts and advertising on my site, for example, that earn me income throughout the day.
So, what is a blog? A blog is like the article you’re reading now, written and published on a website. It’s basically a collection of written content. You can start a blog about many different topics, such as finance (like my blog!), recipes, family, health, wellness, pets, sports, outdoors, travel, and more.
Other similar ways to make money in your sleep include starting a podcast or a social media account, such as on TikTok or Instagram.
Recommended reading: The 25 Most-Asked Blogging Questions To Get You Started Today
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Want to see how I built a $5,000,000 blog?
In this free course, I show you how to create a blog, from the technical side to earning your first income and attracting readers.
2. Affiliate marketing
If you want to learn how to make money overnight (such as when you’re sleeping), then my absolute favorite way is affiliate marketing.
This is one of the main ways I make money on my blog, but you don’t need a blog to do affiliate marketing either. You can do affiliate marketing on Instagram, Facebook, Pinterest, an email list, and more.
Affiliate marketing is when you share products or services from other companies with readers, subscribers, or people that you know. When someone buys through your referral link, you get a commission and earn some money from the company.
Here’s an example: Let’s say you write about a book on your blog and provide a link to it. If someone buys that book through your referral link, you get a commission.
You’ve probably bought things through affiliate marketing many, many times over the years. I definitely have!
Recommended reading: Affiliate Marketing Tips For Bloggers – Free eBook
3. Selling printables
Making and selling printables is another good way to make money without much active effort.
Printables are digital items that people can download and print at home. They can be things like games for a bridal shower, checklists for grocery shopping, planners for managing budgets, invitations, coloring pages, quotes designed to be printed and hung on walls, and more.
I buy printables all the time, and so do other people. In fact, I bought a printable the other day for my daughter – one that would help her learn the alphabet that I could print out at home for her.
Making printables can be a passive way to earn money. You only need to make one digital file for each product, and you can sell it as many times as you want. All you need is a laptop or computer and an internet connection, which makes it a low cost way to start a business.
Recommended reading: How I Make Money Selling Printables On Etsy
Do you want to make money selling printables online? This free training will give you great ideas on what you can sell, how to get started, the costs, and how to make sales.
4. Investing in real estate
Investing in real estate is a popular way to make passive cash flow while you sleep.
By purchasing rental properties, you can earn a steady flow of rental income from tenants and guests. Also, your property’s value will most likely appreciate over time, which can increase your net worth.
You can invest in residential properties, commercial real estate, short-term rentals (such as starting an Airbnb), REITs (real estate investment trusts), and more. There are pros and cons of each, so you will want to think about that before you get started.
Recommended reading:
5. Starting a YouTube channel
Starting a YouTube channel is another way to make money while you sleep. This is because you can add affiliate links to your videos, generate ad revenue, form brand sponsorships, and sell products within videos as well.
You’ll need to create videos that entertain, educate, or inform viewers, and get as many views to your videos as you can (for the most part, more page views usually does mean more income).
As your YouTube content becomes more popular, you will earn passive income from past videos while working on new content.
Recommended reading: How I Grew From 0 Subscribers To Over $100,000 On YouTube In Less Than One Year
6. Dropshipping
Dropshipping is a type of business where you sell items on an online store, but you don’t do the shipping. Instead, you have a supplier that does the shipping for you.
So, this means that you don’t need to keep any products in stock yourself.
That doesn’t mean that this is easy, though – you have to find trustworthy suppliers and make sure your customers get their orders on time. You will also need to create a website, find a way to differentiate yourself from other dropshippers, take pictures of the items you are selling, answer customer questions, and find ways to grow your store.
The types of items that you can sell in a dropshipping store include clothing, electronics, home decor, pet supplies, luggage, stationary, craft supplies, books, and more.
7. Online courses
I have made over $2,000,000 from selling courses over the years – courses that I have personally created.
Making and selling online courses is a great way to earn money at any time of the day – even while sleeping.
Some examples of courses that can be created include:
Parenting and family
Health and wellness
Woodworking
Dog training
Standardized tests preparation
Playing the guitar
Teaching a language
Traveling
Painting
Cooking
And so much more!
I have taken courses on all sorts of topics over the years, such as baby sleep classes, personal finance, credit card rewards, and so much more.
Creating an online course is one of the fastest ways to use your time, increase your earnings, and help more people.
Recommended reading: How I’ve Made Over $1,000,000 From My First Course Without a Big Launch
8. High yield savings accounts
A high yield bank account is a low-risk method to make extra cash while you sleep.
These types of savings accounts earn a higher interest rate than a regular savings account, so your money grows faster.
You will want to make sure that you pick a trustworthy bank and check the interest rates regularly because they can go up or down. Some people move their money into high yield savings accounts often so that they can get the highest interest rates.
Remember, these accounts usually over the long run have lower interest rates compared to stocks or real estate, but they give you a stable and secure way to earn money.
I personally use Marcus by Goldman Sachs as they have a very high rate. You can get up to 5.40% at the time of this writing through a referral link bonus. According to this high yield savings account calculator, if you have $10,000 saved, you could earn $540 with a high yield savings account in a year. Whereas with normal banks, your earnings would only be $46.
9. Dividends
Buying stocks that pay dividends is another way to earn money while sleeping.
When you invest in these stocks, you get a portion of the company’s earnings on a regular basis.
Here’s how dividends work: If you have shares of a company that gives you money because you own them, that’s called a dividend. So, if you own 10 shares of Company XYZ, and they give you $5 in dividends every year, you’ll get $50 in total for that year. Usually, companies give out dividends four times a year. In the example, the $5 they give you every year will likely be divided into $1.25 for each quarter (four times a year).
Recommended reading: What Are Dividends & How Do They Work? A Beginner’s Guide
10. Rent out your garage
If you have extra land or space in your home that you’re not using, you can make money by letting other people use it for storage.
You can rent storage space for things like cars, boats, boxes, and more. This could be your garage, driveway, closet, basement, attic, or even just a shelf.
A website where you can list your storage space is Neighbor. On this site, you can make between $100 and $400 or more every month. How much you earn depends on how much people in your area want to rent and what kind of space you’re renting out.
Recommended reading: Neighbor Review: Make Money Renting Your Storage Space
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You can use this website to list your unused space for rent and make up to $15,000 per year by doing so. With Neighbor, you can rent out your garage, driveway, basement, parking lot, shed, warehouse, carport, attic, street parking, or even a closet.
11. Hosting webinars
Webinars are like online classes or workshops about specific subjects (I’ve included a list below of some examples). If you’re an expert in something, you can record a webinar and charge people to attend or sell products and services related to the topic during the webinar.
You can also record your webinars and let people watch them whenever they want, which can bring in money while you are sleeping or on vacation.
For example, you could host a webinar about:
Starting an e-commerce store – Teach participants the ins and outs of setting up and running a successful online store.
Digital marketing strategies for small businesses – You could share online marketing techniques to help businesses grow their online presence, such as tips for TikTok, Instagram, Pinterest, Google SEO, and more.
Stock market investing for beginners – You could share advice and tips for newbies in the world of stocks, mutual funds, index funds, bonds, S&P, and investment portfolios.
How to make money with affiliate marketing – You could teach the strategies behind successful affiliate marketing sites.
How to invest in fine wine – Or, any other type of investment! If there is something specialized that you invest in that is different from normal, you may be able to generate interest in your webinar.
And so much more.
12. Peer-to-peer lending
Peer-to-peer (P2P) lending is when you lend money to people or businesses who need loans, and they pay you back with interest.
Websites like LendingClub and Prosper let you spread out your money to lots of borrowers, which lowers the risk if someone can’t pay you back.
As borrowers make their payments, you get a part of the interest, which adds to your passive income streams that you can make without working.
With a peer-to-peer lending site, people can borrow money from a group of lenders like you and me, rather than from a traditional financial institution like a bank. People use peer-to-peer lending sites for all sorts of reasons such as debt consolidation, home improvement, small business financing, investment opportunities, and more.
13. Selling stock images and graphics
If you like taking pictures, you can make money in your sleep by selling stock images on websites like Shutterstock, Getty Images, or Adobe Stock.
People buy stock images for all sorts of reasons, such as to put on their website, within articles and blog posts, on social media, and more. I buy stock images all the time because they can help to make a blog post more enjoyable to read (you can find several stock images within this blog post, in fact).
A great thing about stock content websites is that they can bring in money even when you’re not actively working. You take pictures, put them on the site, and they can keep making money for a long time.
Some common types of pictures that you can sell include travel, business, people, food, animals, health, fashion, sports, and more.
Recommended reading: 18 Ways You Can Get Paid To Take Pictures
14. Start a membership site
Creating a membership site where people pay a regular fee (such as each month or each year) for special content, resources, or services is a way to make money.
Some examples of membership sites that you can start include:
Stock image library – You can sell a collection of pictures or videos that subscribers can use for their own projects (such as their own business). Subscribers pay for access to this media library. I personally have been paying for a stock photo membership for years, and I think they are amazingly helpful.
Newsletter – Send valuable and special content straight to your subscribers’ email inboxes regularly where you charge a subscription fee for access.
Mastermind groups – You can form small, focused groups of individuals who come together to support and challenge each other in achieving their goals, and you charge a membership fee for participation. I have seen mastermind groups go for anywhere from free to tens of thousands of dollars a year to participate.
Freelance job board – You can start a site where freelancers can find real job listings and opportunities. Members pay for access to these job listings because they want to find real jobs that pay (instead of having to weed through fake ads or low paying ones).
Consulting or coaching services – You can give personalized advice, coaching sessions, or access to a private community for members looking for guidance in a specific area, like life coaching or business consulting.
Fitness membership – You can create a platform with workout plans, meal plans, and wellness tips. Members pay a monthly fee for access to this content.
Digital downloads library – You can create a library of downloadable resources like ebooks, templates, or software. Subscribers gain access by becoming members.
Community forum – You could create a community around a shared interest or hobby where members can engage in discussions, ask questions, and share experiences, and you charge a fee for access.
Online courses membership – You can start a platform where you have courses on a specific subject, like photography, cooking, or digital marketing, where subscribers then pay a monthly fee to access the content.
Keep in mind, the secret to a successful membership site is giving real benefits to your subscribers. So, whether it’s great content, a helpful community, or useful resources, make sure your members feel like they’re getting what they paid for so that they keep their subscription for months and years to come.
15. Sleep studies and mattress testing
Taking part in sleep studies and mattress testing will most likely not be a long-term, reliable source of income, but it can earn you some extra money while you literally sleep.
You can find these by researching local sleep clinics or mattress companies that have paid studies or testing. Many universities also pay for sleep studies, such as the Harvard Division of Sleep Medicine.
The amount of money you can make depends on the specific study or testing, but it can be an interesting way to earn some extra money or get a free mattress for your time.
16. Vending machine business
Running a vending machine business can be a good way to make money, and you can sell different kinds of products. You may be able to earn over $1,000 a month with a well-run vending machine business.
Here are some ideas of what you can sell in a vending machine:
Snacks and drinks:
Chips
Candy
Nuts and seeds
Cookies
Soda
Bottled water
Energy drinks
Juices
Healthy and organic food:
Granola bars
Dried fruits
Nut mixes
Organic snacks
Low-calorie drinks
Hot drinks:
Coffee (regular, decaf, specialty)
Tea
Hot chocolate
Frozen treats:
Ice cream
Frozen yogurt
Popsicles
Fresh food:
Sandwiches (pre-packaged)
Salads (in sealed containers)
Fruit cups
Yogurt parfaits
Personal care and hygiene items:
Tampons and pads
Toothbrushes and toothpaste
Hand sanitizer
Makeup
Vitamins and supplements
First aid kits
Pain relievers
Electronics and accessories:
Phone chargers
Headphones
Power banks
Office and school supplies:
Notebooks
Pens and pencils
Sticky notes
USB drives
Specialized items:
Fishing bait and supplies
Beauty and skincare products
Baby items (diapers, wipes, toys, snacks)
Recommended reading: How I Make $7,000 Monthly With A Vending Machine Business
17. Amazon FBA
Amazon FBA (Fulfillment by Amazon) is where sellers store products in Amazon’s fulfillment centers, and Amazon handles customer shipping, returns, and customer service on the seller’s behalf. By using FBA, you can sell a variety of products without worrying about storing inventory or handling shipping logistics.
You would be finding the products to sell, though. Even if you have no experience selling on Amazon, you can earn money selling household goods, toys, books, electronics, and so on.
If you want to learn more about starting an Amazon business, I recommend signing up for this free training that will teach you how to sell products on Amazon and make $100 to $500 per day.
Recommended reading: How To Work From Home Selling On Amazon FBA
18. Write a book
People can buy books at any time of the day, including while you are sleeping.
Self-publishing online platforms, such as Amazon KDP (Amazon’s Kindle Direct Publishing platform), allow you to reach a broad audience without the need for a traditional publisher.
Writing your own book is a great way to make money from home, and there is probably something helpful that you could write about (even if you think otherwise!). One very popular topic right now is romance novels, in fact.
Recommended reading: How Alyssa is making $200 a DAY in book sales passively
19. Develop and sell an app
If you have technical skills, developing and selling an app can be a way to make money overnight while you are sleeping.
Creating your own app, whether it’s a helpful tool, a fun game, or something else, can help you to make passive income.
Even though it will take some work and money up front, once your app is in the app stores, it can generate revenue no matter the time.
Some ideas for apps that you could create include a budgeting tracker, meal planner, fitness tracker, meditation app, travel itinerary planner, and more.
You will want to do some research, and make sure that there are people who want to use the app that you are thinking about creating, of course. You could start brainstorming ideas by thinking about what kind of app you think could be helpful in your life to have.
Frequently Asked Questions On How To Make Money While You Sleep
Below are answers to common questions on how to make money while you sleep.
What is passive income?
Passive income is money you earn without actively working, and instead, it comes from investments, businesses, or assets that require minimal effort on your part. Now, that doesn’t mean that making passive income is easy, as you will most likely have to put in a lot of work in the beginning to get started. But, it can be well worth it to make money at any time of the day. Passive income is personally my absolute favorite way to make money.
Which businesses make income overnight? What businesses make money while you sleep?
A few businesses that can generate income even when you’re not actively working are online stores, affiliate marketing websites, and selling printables. These businesses run online, making them accessible to customers 24/7 so people can use them.
What did Warren Buffett say about making money while you sleep?
Warren Buffett, a successful investor and businessman, is quoted as saying, “If you don’t find a way to make money while you sleep, you will work until you die.” This goes to show how important it is to find ways to make money without constantly working a regular 9-to-5 job.
What is the best way to make money while you sleep? – Summary
I hope you enjoyed this article on how to make money while sleeping. As you can see, there are many full-time jobs and side hustles to make money while you sleep such as:
Blogging
Affiliate marketing
Selling printables
Investing in real estate
Starting a YouTube channel
Dropshipping
Selling online courses
Putting your money in high yield savings accounts
Dividends
Rent out your garage
Hosting webinars
Peer-to-peer lending
Selling stock images
Start a membership site
Sleep studies and mattress testing
Vending machine business
Amazon FBA
Write a book
Develop and sell an app
Do you want to learn how to make money while you sleep?
I’ve been investing nearly 25 years, long before online brokers came on the scene. During that time I’ve used several of the best online discount brokers, including Scottrade, OptionsHouse, and even Vanguard’s brokerage services. Based on that experience and a lot of research, I’ve compiled this list of the top options.
Note that I have accounts at each of these firms and have personally tested their trading platforms, research, and other tools. Here’s a quick look at the top brokers.
Compare Discount Brokerage Accounts
Best Online Discount Brokers Firms of 2023
TD Ameritrade: Ideal for more experienced traders looking for a rich set of tools and resources.
E*TRADE: offers trading platforms and tools for any investment style
Ally Invest: Best for new investors and those looking for a very easy website to navigate.
Fidelity: Best for those looking for a robust broker with offices nationwide.
You Invest by J.P. Morgan: Best for free trades and cash bonuses
Over the years I’ve learned three important things about brokerage firms.
First, there are a lot of them. You’ve probably heard of many discount sites that allow you to trade stocks online, but I’m guessing there are a lot of online brokers you’ve never heard of (Sogotrade may be one example).
Second, while on the surface they can all seem similar, when you dig deep into what these brokers offer, you’ll find big differences. For example, not all of them offer the same account types. With some you can’t buy mutual funds, while others offer more mutual funds than most. And the stock trading tools available to you vary from one discount broker to the next.
And the third thing I’ve learned is that the cost of these discount firms can be tricky to understand, and in the end, may not be the most important factor. Because I watch every dime we spend, it may seem odd that cost isn’t the most important factor to me (after all, we are talking about “discount” sites, not full-service brokerage firms). The reality, however, is that unless you are an active trader, the cost of a few trades a year will be small.
Summary Of The Best Online Discount Brokers
TD Ameritrade
The now least expensive discount broker on our list, TD Ameritrade, offers some of the best online trading tools. Its platform “Trade Architect” is my favorite portal to use, specifically designed for casual investors like myself. If you’re looking for a more hardcore approach, they also have a thinkorswim platform that offers more data, more 3rd party research and more functionality.
Again, decided to cater to both casual and advanced investors by creating two separate mobile apps.
TD Ameritrade Mobile (for the casual investor)
Mobile Trader (for the advanced investor)
TD AmeritradeSummary:
Trade Stocks: $0 flat fee
Margin Rates: -0.75% to +1.25% of a base rate (base rate = 8.25% as of 11/12/2020)
Broker Assist Fee: $25.00
Mutual Funds (Load): $0
Mutual Funds (No Load): $49.99
Minimum Deposit: None
Sign up Bonus:N/A
For more information check out our TD Ameritrade review or visit TD Ameritrade.
E*TRADE
E*TRADE has been on a buying spree. Back in 2014 TradeMonster and OptionsHouse merged. Now E*TRADE has acquired the combined entity. E*TRADE offers trading platforms and tools for any investment style. It offers low costs even for infrequent traders, like myself. E*TRADE also offers E*TRADE Pro for active traders. And of course, it offers an excellent mobile experience.
E*TRADE Summary:
Trade Stocks: $0
Trade Options: $0 ($0.65 per contract or $0.50 per contract w/ 30+ trades per quarter)
Margin Rates: Ranges from 7.00% to 10.50% based on debit balance
Mutual Funds: $0 to $19.99 per trade
Read More: E*TRADE Review
Ally Invest
I’ve banked at Ally for years. Its website is one of the easiest to use among all banks, including online banks. Its fees are low to non-existent, and its banking rates are some of the best you’ll find on deposit accounts. So it was no surprise that Ally brought the same consumer-friendly approach to investing.
At Ally Invest stock and ETF trades are just a flat fee of $4.95. For you options traders out there, Ally charges just $0.65 per contract plus a $4.95 base. If you have a $100,000+ average daily balance and/or more than 30 trades per quarter the cost per stock or ETF trade drops to $3.95 and options contracts fall to $0.50 + $3.95 base. It’s hard to imagine a lower cost.
Ally also offers a Cash Enhanced Robo Portfolio. Like other robe-advisors such as Betterment, Ally Invest manages the portfolio, including dividend reinvestment and rebalancing. Ally charges 0% for the service. The minimum investment is just $100.
Capital One Investing
Formerly ShareBuilder, Capital One Investing offers a full range of trading services. In addition to online trading, it also offers managed portfolios. While its fees are generally reasonable, its managed portfolios require a $25,000 minimum investment and charge 0.90% of assets under management. Due to the fees, we don’t recommend Capital One Investing’smanaged portfolio.
Capital One Investing Summary:
Trade Stocks: $6.95 flat fee
Trade Options: $0.75 + $6.95 base
Margin Rates:5.20% to 8.20%
Mutual Funds: $0 or $19.95
Bonus: Up to $600 based on the amount of deposit
Merrill Edge
Merrill Edge is one of my favorite platforms. In addition to online DIY investing, they offer a managed portfolio. You can invest with an advisor, if you so choose. And the website is incredibly easy to use.
Managed portfolios require a $5,000 minimum and cost 0.45% of assets under management. While this fee isn’t the lowest, it’s reasonable for those looking for some extra help.
Trade Stocks: $6.95 flat fee
Trade Options: $0.75 + $6.95 base
Margin Rates:5.50% to 9.625%
Mutual Funds: $0 or $19.95
Bonus: Up to $600 based on amount of deposit
How Much Will You Pay To Buy And Sell Equities Online
All of the firms make a point to advertise how much you pay to buy or sell stocks, mutual funds, options, or other equities. Today most trades at discount sites run from about $2.50 to $12 per trade. The key to remember, however, is that many of these firms charge additional fees, depending on how you use your account. These additional fees may include fees for large buy or sell orders, fees to buy or sell stocks trading at less than $1, account maintenance fees, account inactivity fees, and of course interest if you buy on margin.
Because these fees vary among discount brokers, the starting point is to understand how you will use your stock trading account. Will you trade frequently or just once or twice a month (or quarter)? Do you want to set up an automatic investment plan? Will you be buying stocks and mutual funds, or do you also plan to trade options? The answers to these questions will help you narrow the selection and ultimately pick the best broker for you investing needs.
Factors To Consider Other Than Cost
But just like most anything we buy, the cost is just one of many factors to consider. And the same is true when selecting a discount broker. So what are the factors besides cost that we should consider when selecting a discount stock broker? There are several, and they include ease of use, customer service, types of accounts offered, investing tools, type of investments you intend to buy, and account minimums. I’ve highlighted these and other factors below in the summary of the best online discount brokers. But just like cost, it’s important to know your investing goals when you evaluate your options. For example, account minimums may be a non-issue for you if you plan to invest a significant amount of money. Likewise, if you are looking for a specific account time (like an IRA), you can quickly eliminate those discount stock brokers that do not offer that account type.
Discount Broker Consolidation
Several brokers have acquired other online trading platforms. Ally Invest was previously TradeKing, until the online bank purchased the broker in 2016. TD Ameritrade has entered into an agreement to purchase Scottrade. E*TRADE acquired OptionsHouse.
The flurry of acquisitions has left the industry in a state of flux. How smoothly will customer accounts transfer to their new home? How will the loss of competition in the space affect fees and features?
Time will tell. As the dust settles, we’ll continue to update this list.
Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at RobBerger.com.
Are you considering refinancing your mortgage, but hesitant about the high cost of closing? A no-closing-cost refinance may be the solution for you.
In this article, we’ll explain what a no-closing-cost refinance is, how it works, and the benefits and drawbacks of this type of mortgage refinance. We’ll also go over the qualifications and the process of getting a no-closing-cost refinance, so you can decide if it’s the right choice for you.
What is a no-closing-cost refinance?
In short, it’s a mortgage loan that offers homeowners the option to refinance their mortgage without having to pay initial fees to lenders.
Closing costs usually pay for lender fees as well as loan origination fees, third-party expenditures, appraisal fees, and underwriting and processing costs. Refinance lenders also take on costs that originate from third parties, including escrow and title costs.
With a no-closing-cost refinance, you potentially save money on closing costs, lower your monthly payment, and build equity in your home faster.
It’s certainly tempting and may be the right choice for certain types of borrowers. However, those closing costs saved are costs added to the loan amount that you’ll eventually have to pay back.
How does a no-closing-cost refinance work?
The application process for a no-closing-cost refinance is similar to that of a traditional refinance. You’ll need to provide financial information and documentation to the lender, and they will run a credit check. Once the mortgage lender approves your application, the refinance process can begin.
You may be wondering how the lender makes money on a no-closing-cost refinance. The lender recoups their costs by charging a slightly higher interest rate on the loan. This way, they can potentially make more money in the long run, even though you don’t pay any closing costs up front.
Pros and Cons of No Closing Costs
Having no upfront closing costs comes with a range of both advantages and disadvantages. The idea of skipping the closing costs and fees upfront may be appealing, or even right for you.
However, it’s still important to consider the various ways it may affect your financial situation next month, next year, and next decade. Here are some pros and cons:
Pros
Upfront savings: The most immediate benefit of a no-closing-cost refinance is the elimination of substantial upfront fees. This can be particularly advantageous for homeowners who may not have the liquid assets to cover these costs at the time of refinancing. It allows for the conservation of cash that could be used for other pressing financial needs or opportunities.
Simplified financing: This type of refinance simplifies the financial burden for homeowners. It removes the hurdle of saving for and managing large, one-time closing costs. This is especially helpful for those with limited disposable income or those facing unexpected financial challenges.
Quicker break-even point: For homeowners planning to move or refinance again in the short term, a no-closing-cost refinance can be financially advantageous. By not paying closing costs upfront, they can reach a break-even point more quickly, especially if they sell the home or refinance before the added costs accrue significantly.
Cons
Increased long-term cost: While there’s an immediate saving on closing costs, this type of refinance often results in a higher interest rate or a larger loan balance. Over time, this can lead to significantly higher interest payments. Homeowners should carefully consider the long-term financial implications, such as how the increased loan balance or rate will impact the total interest paid over the life of the no-closing-cost loan.
Higher monthly payments: Due to the higher interest rate associated with a no-closing-cost refinance, homeowners might face higher monthly payments. This increase can strain monthly budgets, especially for those who are already managing tight finances.
Reduced home equity: Rolling closing costs into the loan balance can reduce the amount of equity a homeowner has in their property. This is a critical consideration for those who may need to leverage home equity in the future for other financial goals or emergencies.
How to Qualify for a No-Closing-Cost Refinance
When it comes to qualifying for a no-closing-cost refinance, the eligibility requirements are similar to those of a traditional refinance. Your lender will look at your credit score, income, and debt-to-income ratio to determine if you qualify.
To improve your chances of being approved for a no-closing-cost refinance, and potentially lower your monthly payment, it’s a good idea to make sure your credit score is as high as possible. You should also have a solid income and a low debt-to-income ratio, which lenders assess to determine your ability to manage the monthly payment. Additionally, having a good track record of paying your bills on time can also help.
Once you have determined that you are eligible for a no-closing-cost refinance, you need to compare different options to determine which one will be the most cost-effective for you in the long run. Be sure to consider the interest rate, fees, and overall costs of each option before making a decision.
Finding Lenders Offering No Closing Cost Refinance
When considering a no-closing-cost refinance, finding the right lender is a crucial step. Different lenders offer varying terms and rates, so it’s important to conduct thorough research to find the best option for your financial situation. Here’s a guide on how to find and compare lenders for a no-closing-cost refinance:
Start with your current lender: Your existing mortgage lender is a good starting point. They may offer competitive refinance options to retain your business. Ask about their no-closing-cost refinance options and compare these with what you might find elsewhere.
Research online: Many lenders provide details of their refinance products online. Use mortgage comparison websites to gather information on various lenders’ offerings. These platforms often allow you to compare rates, terms, and fees side by side.
Check with local banks and credit unions: Local financial institutions sometimes offer better terms to members or local residents. Visit or call your local banks and credit unions to inquire about their no-closing-cost refinance options.
Consult mortgage brokers: Mortgage brokers have access to various lending sources and can often find deals that may not be widely advertised. They can help you navigate through different offers and identify the most cost-effective option.
Consider online lenders: Online mortgage lenders can be a viable option as they often have lower overhead costs, potentially translating to better terms or lower rates. However, ensure you research their reputation and customer service record.
Understanding the Details of No-Closing-Cost Refinancing
Before you get excited about not paying anything upfront, sit down with your lender to discuss all the details. Be sure to keep an eye out for the following details:
Some loans are not actually “no cost”
Some loans solely cover lender fees, while others may cover all expenses, including third-party costs
Home loans differ from lender to lender, so it’s important to shop around
Lenders may pay different interest rates and costs on your behalf. Find out all the details before you commit.
Consider all the costs: title and appraisal, lender fees, credit report fees, escrow, home inspections, mortgage points and other third-party fees
Is a no-closing-cost refinance right for you?
Deciding on a no-closing-cost refinance requires weighing your immediate financial needs against the long-term effects on your mortgage. This option is attractive for its low initial fees, but understanding its overall impact is essential. For those planning to move or sell their home shortly, saving on upfront costs can offer immediate financial relief. It’s an appealing choice if staying in your current home isn’t part of your long-term plan.
However, a no-closing-cost refinance usually translates to a higher loan amount or increased interest rate, affecting the total cost over time. If you’re several years into your mortgage, like 10 years into a 30-year loan, the added expense from higher interest rates can surpass the benefits of initial savings.
Before deciding, it’s important to calculate how this choice will affect your monthly payment and compare the overall costs with those of a traditional refinance. Shopping around for the best deal is crucial to align this financial decision with your overall goals.
A Closer Look at No-Closing-Cost Mortgage Deals
Now that you understand the positives and negatives of selecting a no-closing-cost refinance, here’s an example of how these loans may play out in a lending setting:
For example, you may be charged $4,500 in closing costs, the average cost for homeowners today. If you choose to pay this out of pocket, the $4,500 cost will remain static as a one-time charge.
On the other hand, if you skip those fees, that sum will be rolled into your mortgage bills each month over the duration of that loan. Over 30 years at 4.125% interest, the borrower will eventually pay a total of $7,851.
Meanwhile, over the course of five years, the borrower will wind up paying $6,000 after initially skipping the $4,500 closing fee.
Whether this is worth it or not is entirely up to you. If you’re planning to sell your home within the next couple of years, the immediate savings may be worth it for you to pay a bit more over two years.
You can take that saved money to invest in repairs, remodels, realtor fees, and other associated costs that accompany selling a home. Moving a home quickly on and off the market can save you other costs that make this type of loan right for you.
How to Spot a Bad No-Closing-Cost Refinance Deal
No-closing-cost loans are each different from one lender to another. By seeking different opinions and home equity options, you can ensure that you’re getting a good deal. Here are a few warning signs to look out for:
The loan is called “no cost” but it turns out you’ll have to pay for appraisals, title fees, escrow, property taxes, insurance, and prepaid interest.
The loan is called a “no lenders fee loan,” which means the bank will only cover just that—lenders fees, and nothing else.
Carrying out a refinance through a mortgage broker, who then adds on a lender credit, further increases your interest rate.
A bank uses “bundles” that tack on closing costs on top of the cost of the loan. These bundles further increase the size of the loan, as well as the interest rate, leading to a higher monthly payment over time.
Be aware of potential red flags and take your time when considering any type of home loan. This is especially true if the terms of the loan are unclear, and you are feeling pressured to make a decision before fully understanding the details of the loan. It’s always better to be cautious and well-informed before making a commitment.
5 Tips for Negotiating No-Closing-Cost Refinances
Negotiating the terms of your no-closing-cost refinance is crucial in securing a favorable deal. Focus on these effective strategies:
Conduct thorough market research: Understand the current market rates and terms from various lenders. This knowledge positions you as an informed borrower, giving you an edge in negotiations.
Leverage your creditworthiness: If you have a strong credit history, use this as a bargaining chip. Lenders may offer better terms to borrowers who present lower credit risks.
Discuss customization options: Each borrower’s situation is unique. Talk to your lender about tailoring the refinance terms to suit your specific financial needs and goals, especially if you plan to stay in your home for a long time or move soon.
Be prepared to walk away: If the terms offered don’t align with your needs, be ready to explore other options. Showing your willingness to consider other lenders can motivate your current lender to offer better terms.
Review the final offer thoroughly: Ensure that all negotiated terms are clearly included in the final offer. A careful review before agreeing can save you from unexpected terms or conditions.
By applying these strategies, you can effectively negotiate and secure a no-closing-cost refinance that aligns with your financial objectives. Remember, your aim in negotiation is not just to lower costs, but to find a deal that supports your overall financial strategy.
Frequently Asked Questions
What are the average closing costs for a refinance?
The average closing costs for a refinance can vary depending on the location, property type, and loan type. Typically, closing costs for a refinance can range from 2% to 5% of the loan amount.
For example, on a $200,000 loan, the closing costs can be anywhere from $4,000 to $10,000. These costs include the loan origination fee, appraisal fee, title search and insurance, and other miscellaneous fees.
Can you negotiate closing costs on a refinance?
Yes, it is possible to negotiate closing costs on a refinance. While some costs, such as the appraisal fee or title search, are set by third-party providers and cannot be negotiated, other costs such as the origination fee or lender’s title insurance can be negotiated with your lender.
Here are a few strategies to negotiate closing costs on a refinance:
Shop around: Compare offers from multiple lenders and negotiate with them to see if they can lower or waive certain fees.
Timing: Closing costs tend to be lower during slow periods for the housing market.
Ask for a credit: Some lenders may offer a credit towards closing costs in exchange for a slightly higher interest rate.
Be prepared to walk away: If a lender is not willing to negotiate closing costs, it may be best to look for another lender that is more willing to work with you.
When would a no-closing-cost refinance be a bad idea?
A no-closing-cost refinance may not be the best idea in certain situations. Here are a few reasons why a no-closing-cost refinance may not be a good idea:
Short-term ownership: If you don’t plan to keep your home for a long time, you may not be in the house long enough to recoup the costs of the refinance.
Not enough equity: If you don’t have enough equity in your home, you may not be able to qualify for a no-closing-cost refinance.
Higher interest rate: If the interest rate is higher than the rate you already have, it typically does not make sense to refinance.
Limited budget: if you’re tight on budget, and the higher interest rate on the no-closing-cost refinance will put you in a difficult financial situation, then it’s not a good idea.
Looking to start your own business? You’re not alone. Some 76% of Gen Z and millennials dream of being their own boss, according to a 2022 Microsoft report.
While launching your own business allows you plenty of professional freedom, it can also be expensive. As you’re creating your business plan, one question you’ll likely face early on is, how much does it cost to start a business?
The average small business owner spends around $40,000 in their first full year. But that amount can vary based on a number of factors, including the size, type and location of your business.
Let’s take a closer look at the startup costs of different types of businesses and common ways to cover the expenses.
Typical Small Business Startup Costs
The old adage is true: You have to spend money to make money. And unfortunately, some of the biggest business costs can come during the startup phase, when you are defining your business goals, finding a location, purchasing domain names, and generally investing in the infrastructure.
In order to make sure your business is on firm financial footing, it’s important to estimate your small business startup costs in advance. Here are some common ones to keep in mind:
Payroll
Many small businesses start out as a company of one. But if you’re planning on having employees, salary will likely be one of the biggest costs you’ll have. After all, offering an attractive pay and benefits package can help you recruit and retain top talent.
In addition to wages, you might also want to budget for other types of payroll costs, such as overtime, vacation pay, bonuses, commissions, and benefits.
Office Space
No matter what your business is, you’ll need somewhere to work. Are you leasing a storefront, or will you buy a membership to a co-working space or startup incubator? If you’re planning to work from home, consider whether your new business will increase your internet or utility bills.
And don’t forget about the supplies you’ll need to do the work. Depending on your business, this could include things like computers, phones, chairs and desks, paper supplies, or filing cabinets. 💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.
Inventory
If you’re starting a business that sells products, you’ll need to have some inventory ready to go. Calculating stock as part of your start-up costs ensures that you can buy your product in advance, so that you’re ready to serve customers from day one.
Licenses, Permits, and Insurance
Some businesses, especially storefronts and restaurants, require more legal leg work than others.
For example, if you’re starting a native-plants landscaping business, will you need a permit? If you’re starting a new bar, will you need a liquor license? Licenses and permits vary by city and state, but most come with an application fee.
Likewise, your new business may require one or more insurance policies to protect you in case of future litigation, so be sure to factor in the cost of monthly premiums.
And don’t forget about the costs associated with registering your business. Whether you plan to set up shop as a sole proprietorship, corporation, limited liability corporation or other business entity, you’ll need to pay a nominal fee. The amount will depend on the state where you operate.
And if you plan on enlisting the help of a lawyer, accountant or tax professional to get your business up and running, add those potential costs to your budget as well.
Advertising
Getting the word out about your new business is one of the most important things you can do to ensure that business starts off strong. Whether you want to advertise on social media or take out a billboard, your startup costs should reflect money you plan to put toward taking out ads for your business.
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Differences in Startup Costs Based on Industry
The actual cost of starting a small business can vary by business and industry. Here’s what you might be looking at if you want to start a few common types of small businesses.
Online Business Startup Costs
Like brick and mortar stores, the cost of doing business online varies depending on the type of business you have. But in general, you’ll need to budget for things like:
• Web hosting service and domain name
• Web design and optimization
• E-commerce software
• Payment processing
• Content creation and social media
If you’re selling products, you will need to invest in inventory and shipping. If you’re providing services, you may need to hire employees. All of these costs can be significant.
However, one benefit of starting your small business online is that you may be able to keep other costs low. For example, if you can conduct business from home, you may not need to rent office space, which can be a major savings. If you’re able to do the work without purchasing inventory or hiring employees, the startup costs can be even lower.
Average startup cost: $500 to $20,000 or more (depending on your business)
Storefront Startup Costs
If your business idea requires a physical space, your startup costs might range from $1,000 for a small kiosk inside a mall or park to more than $69,000 for something like a home goods store.
Although $69,000 might seem like a daunting number, remember that many smaller, independently owned stores began with a much smaller budget.
Average retail startup cost: $39,210
Restaurant Startup Costs
If you’re betting on bringing in bank by selling your grandma’s famous bánh mì, you could be looking at startup costs of anywhere from $40,000 for a used food truck or cart to up to $3.7 million to buy a franchise restaurant. Typically, small restaurant costs, including coffee shops, fall somewhere in the $80,000 to $3000,000 range.
Average startup cost: $375,000
How to Finance Your Startup Business
Many who want to start a business are overwhelmed by the initial costs, but there are several ways to fund your passion project.
Friends and Family
Perhaps one of the most common ways to raise money for your small business is to ask friends and family to invest in you.
Friends and family loans can be ideal for financing a new small business because you can negotiate low-interest rates, flexible pay-back schedules, and avoid bank fees. Of course, borrowing money from friends and family can quickly become complicated by family drama, so make sure to agree on conditions before taking out a family loan.
Outside Investors
When we hear about startup companies, we frequently hear about so-called “angel investors” sweeping in to fully fund new businesses. But there are other practical ways to fund your small business with outside investors.
Some small businesses use crowdfunding platforms to find investors who each contribute a small amount, and others use startup funding networks to find investors looking to fund their specific type of business. Outside investors want to know that your business is likely to succeed, so you’ll need a solid business plan to land outside funders.
Personal Savings and Investments
Most people end up covering some of their small business start-up costs out of their own pocket. Self-funding your new business venture can be the most convenient option. After all, if you’re your own funder, you don’t have to worry about family drama or picky investors. And putting your own money on the line can be an extra motivation to make sure that your business is set up to succeed.
Of course, it can seem overwhelming to save up enough money to fund your small business. Luckily, there are simple strategies to effectively manage your money.
Business Loans
If you’re looking to purchase equipment, inventory, or pay for other business expenses, a business loan might make sense for you.
There are various types of small business loans available, each with different rates and repayment terms. Note that in some cases, lenders may be reluctant to give loans to a brand-new business. You might need to put up some type of collateral to qualify for funding.
Personal Loans
A personal loan can be used for just about any purpose, which can make it attractive for entrepreneurs who want to turn their passion project into a reality. These loans are usually unsecured, which means they’re not backed by collateral, like a home, car, or bank account balance.
Personal loan amounts vary. However, some lenders offer personal loans for as much as $100,000. Most personal loans have shorter repayment terms, though the length of a loan can vary from a few months to several years.
While there’s a great deal of latitude with how you use the funds, you might need to get your lender’s approval first if you intend on using the money directly for your business. 💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.
The Takeaway
Going into business for yourself can be personally and professionally fulfilling. But it can also be expensive, especially if you’re starting from scratch. Estimating your startup costs early on can help ensure you’re on solid financial ground from the get-go. Labor, office space, and equipment are among the biggest expenses facing many entrepreneurs, but there are smaller fees and charges you’ll likely need to consider.
Fortunately, small business owners have no shortage of options when it comes to covering startup costs. Dipping into personal savings, or asking friends and family to invest are popular choices. Taking out a business loan or personal loan is another way to help finance a new business. The money can be used for a variety of purposes, and that flexibility can be especially useful when you’re just starting out.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
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If you’ve just gotten your first $1,000 that’s free to invest, you might be freaking out a little bit. What are you going to do with that money? And how will you keep it growing so that you can continue to invest more for your future?
Well, $1,000 is a great start, but it’s not a ton of money. That means you can’t spread it out into too many different options. But you can prioritize the best ways to invest that thousand bucks. Here are some of the best ways to invest your first $1,000.
Overview: How and Where to Invest $1000
Investment Type
Best For
Paying off debt
Those with high-interest debt
High-yield savings account
Emergency fund
Tax-advantaged account
Beginner investing
Stocks
Having control over where your money goes
Real estate
Alternative investment
Art
Alternative, long-term investment
Peer-to-peer lending
High-risk/high-reward
CD
Those who don’t need the money right away
Treasury security
Safe investment to balance risk
Use a Micro-Savings app to both save and invest
Those who want to invest while shopping
1. Pay Off Debt
First, if you have high-interest debt, you’re likely best off putting your money towards that. If you’re paying 15% or more interest, you won’t likely be able to put your money towards an investment that out-earns that. So it’s best to pay off that debt.
The general rule of thumb here is that you first put enough money into an employer-sponsored account to get any matching option. Then, you put your money towards high-interest debt until that’s paid off. Once that’s done, you can move on to these other options.
2. Use a High-Yield Savings Account
If you don’t have any money saved for an emergency, put your $1,000 into a high-yield savings account for emergencies. This keeps you from going into more debt if an emergency does arise, so it’s a good idea. Look for a savings account with little to no ongoing fees and as high an APY as possible.
Here are a few of our favorite high-yield savings accounts:
Featured Savings Accounts
Bank/Credit Union
Min. Deposit
Learn More
3. Put It Into a Tax-Advantaged Account
If you don’t have an employer-sponsored retirement plan, or if you can’t put this $1,000 in there, you should consider making your investment through an IRA. Tax-advantaged investment accounts can boost that amount and grow your money over time. Luckily, some of the options below, including some robo advisors, allow you to invest through an IRA, so you can get both good returns on your investment and tax advantages.
4. Try Your Hand At Investing In Stocks
You don’t want to invest your whole portfolio over time in stocks. But if you’re interested in trying your hand at stock investing, try it through a solid platform like E*TRADE, TD Ameritrade, or Ally Invest. These platforms let you make trades on your own, so you can see what it’s like to build your custom investment portfolio. You can also opt for a semi-robo advisor like M1. This one is free to use and lets you put together your portfolio of ETFs, which tend to be more stable than individual stocks but still give you the feel for putting together your investments.
But if you don’t know what you’re doing or just don’t want to deal with the time and energy it takes to pick good stocks, fear not. One of the best ways to have your money managed for you is by working with a Certified Financial Planner. The problem is, they’re hard to find (good ones, at least).
5. Start a Robo Advisor Account
If you want more handholding or to be hands-off with this starter investment, consider using a robo advisor like Betterment. With a dollar amount on the small side like this, Betterment is probably your best bet. It’ll let you set your investment preferences and forget about managing your account daily.
6. Use a CD For Mid-Term Savings
What if you want to put that $1,000 towards the start of some larger savings goal for the medium-term? Like buying a house or a car? In this case, you might consider putting it into a CD. If you know you won’t need it to be liquid for a set period of time, a CD can get you a good return on your investment without risking your capital as you will with many investing opportunities.
Read more: Best CD Rates
7. Buy a Treasury Security
If you have a higher income tax rate, you might get a better deal from a Treasury security versus a CD. They do tend to have slightly lower rates, but their earnings are exempt from state and local taxes. Before you decide to lock your money up in either option, be sure you do the math to get the best bang for your buck.
8. Put it in your kid’s 529 account
What if you’re already maxing out your retirement accounts or saving as much as you feel like you should? In this case, consider adding that $1,000 to a 529 college savings account for your kid. These accounts act as an IRA for education spending, so they’re a valuable way to save up now for those hefty college expenses you’ll see in the future.
9. Use a Micro-Savings App to Both Save and Invest
Did you know that you don’t even need to wait to accumulate $1,000 to begin investing? Naturally, there’s more you can do with your portfolio if you have that kind of money. But if you have been having difficulty accumulating it, or you have at least $1,000 and want an automated system to increase it, Stash Invest needs to be on your radar.
Stash Invest provides you with a debit card. You can set the card to use round-ups to make regular contributions to your investment account. For example, if you make a purchase for $9.15, your account will be charged the full $10, with $.85 going into your investment account. Multiply that by dozens of transactions per month, and you can easily see $20, $30, $40, or even $50 going into your investment account each month.
Stash Invest even makes investment recommendations for you. You’ll have the option to choose from more than 400 individual stocks and exchange-traded funds. They provide a portfolio model based on your risk tolerance, time horizon, and investment goals. They won’t manage the portfolio for you but will guide you toward creating one that works for you. As much as anything else, Stash Invest is an excellent introduction to self-directed investing, both helping you to accumulate funds for investment and then gradually helping you get your feet wet with managing your portfolio.
Read our full review on Stash Invest.
Start Keeping Track
Whatever you decide to do with that $1,000, be sure you keep the cycle going by keeping track of both your budget and your investments. One way to do this is with Empower, a platform that lets you pull all of your investing and spending data together into a single place. With it, you can watch your original investment grow, but you can also manage your budget to live on less than you earn and invest the rest.
FAQ
How much interest will I earn on $1k?
To determine the interest you’ll earn on $1k, multiply 1,000 by the rate of return you expect. So, for example, if you expect a 6% rate of return, you’d earn $60 in interest by the end of the year (1,000 x .06 = 60).
How should I invest $1k to make 100k?
To turn $1k into $100k, you expect to 100x your investment. The best way to do this is to start with $1k and continue to invest at regular intervals over time. For example, if you started with $1,000 and invested $200 per month, every month, for 20 years and earned a modest rate of return of 6.5% (compounded monthly), you’d end up with just over $100k.
How can I invest $1k wisely?
To invest $1k wisely, you should open an account with a robo advisor and let them do the work for you. $1k isn’t enough to invest in most mutual funds or even some index funds, but it is enough to start investing with a robo advisor. This way, your investment will be broadly diversified and actively managed on your behalf.
What’s the best way to invest $1k short term?
The best way to invest $1k in the short term is to put it into an ETF or index fund that captures a wide scope of the total stock market (like VTI, for instance). Most brokers will allow you to open an account with $1k, but you might have to search for a fund that will let you buy in for $1k (many require a minimum investment of $2,500, for example). Alternatively, you can put the $1k in a robo-advisor account and let them manage it.
Bottom Line
Having $1k to invest is more than many people have. Most Americans don’t have $1,000 to cover an emergency without going into debt. So consider yourself lucky in that sense. That’s why you want to make sure it lasts, and it’s invested wisely.
Related: Savings by Age: How Much to Save in Your 20s, 30s, 40s, and Beyond
Review our advice above, choose a safe, short-term investment, and keep a close eye on it. Your $1,000 investment isn’t going to get you to retirement by itself, but it can serve as a wonderful safety fund and a foundation for a larger portfolio.
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Abby is a freelance journalist who writes on everything from personal finance to health and wellness. She spends her spare time bargain hunting and meal planning for her family of three. She has a B.A. in English Literature from Indiana University Purdue University Indianapolis, and lives with her husband and children in Indianapolis.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
The debt snowball method is a repayment plan that involves paying off debts in order of lowest to highest principal sums. As you pay off small loans, you gain the confidence and money needed to repay larger ones.
Paying multiple debts is a juggling act. On one hand, paying all debts at once is tempting but expensive. On the other hand, paying one at a time is more affordable, but that takes long-term financial management. Thankfully, you can use the debt snowball method to simplify your debt payoff plan..
The debt snowball method is a debt repayment plan in which you quickly pay off small debts to focus on larger ones. Even though it’s simple in concept, you may have questions about the execution. To help you out, we’ll explain the method in detail, walk you through its steps and share a few best practices.
Table of contents:
What is the debt snowball method?
How to snowball debt in 4 steps
Snowball method example
Best practices for the snowball method of paying off debt
The snowball method vs. avalanche method of debt consolidation
Pay off debt and improve your credit with Lexington Law Firm
What is the debt snowball method?
The snowball method is a debt repayment approach where you pay off debts in order of smallest to largest principal sums. After making the minimum payment on all debts, spenders invest all they can into debts with the smallest principal. Once you pay off these small debts, you can roll funds over to the next highest.
Unlike other debt consolidation and payoff strategies, the snowball method doesn’t factor in interest rates. Instead, this approach focuses on principal payments. With each debt repaid, you should feel better equipped to tackle the next in line.
Who should use the snowball method?
Anyone juggling multiple debts should consider the snowball method. It provides a simple strategy for organizing your debts. As you knock out small debts, the snowball effect offers the momentum and confidence you need to get out of debt.
Pros of the snowball method
The snowball method of debt repayment offers distinct benefits over other approaches. The main advantages include:
Actionability: Small changes to your budgeting make this approach actionable. It doesn’t come with any prerequisite or additional charges. As a result, jumping in is fast and straightforward.
Empowerment: If you can’t pay your bills or keep up with debt, the snowball method mentally and financially empowers you. With every small debt cleared, you see progress and stay motivated as you pay off greater debts.
Simplicity: The snowball method is easy to wrap your head around. It also breaks large chunks of debt into smaller, approachable pieces.
Cons of the snowball method
Despite its strengths, the snowball method comes with a few downsides, including:
Interest accrual: If your larger loans have a higher interest rate, the snowball method may not work as well. According to these credit facts, if you follow the strategy, higher interest rates may cost you more over time.
Emphasis on small debts: This approach works best when knocking out small debts back to back. You won’t see the same immediate results if you’re juggling a few large loans.
Inflexibility: The snowball method doesn’t leave much room for customization. You may want to consider another option if you want a malleable strategy you can modify.
How to snowball debt in 4 steps
Thanks to its simplicity, you can implement the snowball method in only four steps. This is the process in detail:
Step 1: Take a debt inventory
The first step of the debt snowball method is to list all your debts from smallest to largest. While you can keep interest in mind, focus on the principal balance. If two debts share a similar principal, you can place the one with a higher interest rate first.
Step 2: Make minimum payments on all debts
Make the minimum payment on each of your debts every month. This step is crucial because you don’t want to incur any fees or penalties for not making payments on other debts even as you focus on one in particular.
Step 3: Pay down your smallest debt
On top of the minimum payment, invest as much as you can into your lowest principal balance. While you want to pay it off quickly, don’t forget to set money aside for:
Savings
Groceries, laundry and other household costs
Day-to-day expenses like eating out or investing in your hobbies
Step 4: Repeat until debt-free
As you pay off each debt, you can roll more money into larger ones. When you aren’t juggling as many debts, you’ll have the resources to focus on paying down the highest sums. Eventually, most or all of your debts should get paid off.
Snowball method example
To help explain the snowball method, here is an example of how you budget for it. Assume you make $2,500 a month and have to manage these expenses:
Rent: $700/month
Utilities: $150/month
Student debt: Minimum payment of $120/month (total principal: $21,000)
Medical debt: Minimum payment of $60/month (total principal: $4,500)
Auto debt: Minimum payment of $40/month (total principal: $1,800)
Credit card debt: Minimum payment of $15/month (total principal: $900)
You would implement the snowball method of paying off debt like this:
Pay necessary expenses like rent and utilities. This brings you down to $1,650.
Pay the minimum balance on all debts. Your spending money drops to $1,415.
Pay down your lowest debt. In this case, it’s the credit card debt. Let’s say you pay $500 and bring that principal down to $400. Your remaining balance comes out to $915.
Spend the remainder of your money on day-to-day expenses. Remember to save as much as you can. It never hurts to have an emergency fund ready.
Once you pay off the credit card debt, move on to the next lowest principal sum. So, you would pay off auto, medical and student loans in that order.
Best practices for the snowball method of paying off debt
To see the best returns on the snowball method, follow these tips:
Don’t base repayment order on interest: Anyone trying the snowball method should focus on principal balances. This approach relies on small wins to build up to bigger debts. Large, high-interest loans get in the way of that.
Mitigate high interest with lower rates: While focusing on small loans, try to reduce interest on larger ones. Negotiating a lower interest rate will help save money in the long run.
Track spending over time: You should avoid wasting money that could go toward paying off debt. Additionally, track the amount you spend on debt repayment. That way, you can stay on track as weeks or months pass.
Don’t fall behind on bills: Falling behind on bills or loans can lead to fees or a higher interest rate. In the long run, this will slow down your repayment.
Set aside emergency funds: You shouldn’t invest every cent in settling your debts. An emergency fund can help you avoid more debts after home repairs or health issues.
The snowball vs. avalanche method
The avalanche method is another way of paying off debt that determines payment order by interest rate. In both the avalanche and snowball approaches, you make minimum payments on all debt each month. From here, they diverge:
The avalanche method has spenders pay off the debt with the highest interest rate first. Once customers pay off this loan, they move to the one with the next highest interest rate.
The snowball method ignores interest rates to focus on principal payments.
While the snowball method quickly pays off small debts, the avalanche approach is slow and steady. It may take you longer to pay off your debts, but you will accrue less interest. So, depending on your interest rate and principal sum, you may pay less overall, which could make this option more appealing.
Which method is right for you?
The avalanche and snowball methods can both help with debt repayment. The right approach for you depends on personal preference and your financial situation. To find the right strategy, ask yourself:
Do you need help staying motivated to pay off debts? If so, the snowball method offers more small wins to keep you going.
Is your financial management style analytical and patient? Then the avalanche method will complement a slow and steady approach.
Do you have several small loans or a few high-interest loans? The snowball method suits the first situation, and the avalanche method fits the second.
Work to improve your finances and your credit with Lexington Law Firm
Whether you need to rebuild your credit or get out of debt quickly, the debt snowball method can help. Unlike other strategies, the snowball approach is easy to jump into. While paying off debts can take time, this method gives you the confidence and direction to pay down debts one by one. While using any debt repayment plan, you don’t want to forget about maintaining or even improving your credit. Stay current on all your bills, create a budget and track your spending. If you’re working on repairing your credit, Lexington Law Firm could help you on your journey with our credit repair services.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Brittany Sifontes
Attorney
Prior to joining Lexington, Brittany practiced a mix of criminal law and family law.
Brittany began her legal career at the Maricopa County Public Defender’s Office, and then moved into private practice. Brittany represented clients with charges ranging from drug sales, to sexual related offenses, to homicides. Brittany appeared in several hundred criminal court hearings, including felony and misdemeanor trials, evidentiary hearings, and pretrial hearings. In addition to criminal cases, Brittany also represented persons and families in a variety of family court matters including dissolution of marriage, legal separation, child support, paternity, parenting time, legal decision-making (formerly “custody”), spousal maintenance, modifications and enforcement of existing orders, relocation, and orders of protection. As a result, Brittany has extensive courtroom experience. Brittany attended the University of Colorado at Boulder for her undergraduate degree and attended Arizona Summit Law School for her law degree. At Arizona Summit Law school, Brittany graduated Summa Cum Laude and ranked 11th in her graduating class.
