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Apache is functioning normally

February 1, 2024 by Brett Tams

Imagine slashing your monthly mortgage payment to zero or, better yet, turning a profit from the very place you call home. This isn’t a daydream for the financially savvy few; it’s the reality of house hacking.

Through the eyes of those who’ve made it work, house hacking transforms your living situation into an opportunity for financial freedom. From young professionals to families, people across the country are finding that their biggest expense—housing—can actually become their biggest asset.

What is house hacking?

House hacking is a strategy that involves purchasing a primary residence with the intention of living in one part while renting out the rest as a rental property. This could mean buying a multifamily home and living in one unit, renting out the others, or even renting out spare bedrooms in a single-family home. The rent collected from tenants goes towards the mortgage and other property-related expenses, potentially allowing the owner to live for free or even make a profit.

A Spectrum of Possibilities

The beauty of house hacking lies in its flexibility. Here are a few scenarios to illustrate its range:

The Multi-Unit Maven: Alex buys a duplex, lives in one unit, and rents out the other. The rent from the second unit covers the mortgage, meaning Alex lives mortgage-free.
The Single-Family Sharer: Jamie purchases a four-bedroom house, occupies one room, and rents out the other three. The rental income covers all housing costs.
The Basement Dweller: Casey acquires a home with a separate basement apartment. Living in the basement, Casey rents out the main floor, using the rent to pay the mortgage and save for future investments.

These examples highlight how you can house hack to adapt to different housing markets, personal living preferences, and financial goals. Whether you’re drawn to the idea of living rent-free, eager to dive into real estate investment, or looking for a way to reduce your housing expenses, house hacking offers a practical path to achieving your objectives.

Tailoring the Strategy to Your Lifestyle

Choosing the right house hacking approach depends on your lifestyle, financial goals, and how comfortable you are sharing your space. Considerations include the type of investment property, your desired level of interaction with tenants, and local market conditions. The key is to find a balance that works for you, ensuring your home remains a comfortable place for you while optimizing its income potential.

By embracing the concept of house hacking, you can transform your approach to homeownership, turning a typically expensive part of your life into a source of income. With careful planning and a bit of creativity, your journey towards financial independence might just start at your own front door.

Benefits of House Hacking

House hacking isn’t just a real estate strategy; it’s a lifestyle adjustment that opens doors to numerous financial and personal benefits. Let’s dive into the advantages, supported by real-world examples and data, to understand why so many are turning to house hacking as a way to improve their financial health.

Financial Freedom Faster

One of the most compelling benefits of house hacking is the accelerated path it provides toward financial freedom. By significantly reducing or eliminating one of life’s largest expenses—housing—you can allocate funds towards paying down debt, investing, or saving for future goals.

For instance, consider the case of Sam, who purchased a triplex, lived in one unit, and rented out the other two. The rental income not only covered the mortgage but also allowed Sam to save an additional $1,000 a month. This extra savings contributed to Sam’s ability to retire early, a dream that seemed unreachable before house hacking.

Access to Better Financing Options

House hackers often enjoy more favorable financing terms. Owner-occupants can qualify for lower down payments and better interest rates compared to traditional investment property loans.

For example, an FHA loan might require as little as 3.5% down for a multi-unit property, provided one of the units will be owner-occupied. This lower barrier to entry makes real estate investment accessible to more people. Data shows that owner-occupied financing options can save homeowners thousands of dollars over the life of a loan, making the investment in house hacking even more appealing.

Learning the Ropes of Real Estate Investing

House hacking serves as an invaluable hands-on education in real estate investing and property management. This benefit is difficult to quantify, but incredibly valuable.

Take Angela, who started her real estate journey through house hacking. By managing her duplex, Angela gained firsthand experience in screening tenants, handling maintenance issues, and understanding the financial aspects of real estate investments. This knowledge empowered her to expand her portfolio and become a full-time real estate investor.

Tax Advantages

House hacking can also lead to potential tax deductions, including mortgage interest, property taxes, and expenses related to renting out part of your home. These deductions can significantly lower your taxable income.

For example, let’s say John allocates 50% of his property’s square footage to tenant use. John can deduct 50% of the mortgage interest, property taxes, and maintenance expenses on his tax return, providing a substantial financial benefit at the end of the fiscal year.

Building Wealth Over Time

House hacking stands out not just for its immediate financial relief on living expenses but also for its profound long-term impact on wealth accumulation. By strategically applying rental income towards mortgage payments, those who house hack effectively build equity without dipping into personal savings. This method of leveraging other people’s money accelerates wealth building, offering a tangible path to increasing net worth over the years.

Instead of allocating a significant portion of their income towards housing, house hackers can redirect these funds into savings, investments, or debt reduction. This shift not only enhances financial security but also amplifies the potential for future financial growth

While outcomes can vary based on numerous factors like market dynamics and property management, the foundational strategy of house hacking provides a compelling approach to financial independence and wealth building.

Case Studies That Inspire

The real magic of house hacking comes alive through the stories of those who’ve embraced it. From the young professional who used house hacking to eliminate student debt to the couple that built a real estate empire starting with a single house hack, these narratives underscore the transformative power of this strategy.

By analyzing their journeys, we uncover a common thread—a strategic approach to living and real estate investing that turns conventional wisdom on its head and opens up new possibilities for financial independence.

Exploring Your Options: Five House Hacking Strategies

So, now that you understand what housing hacking is and what the benefits are, how do you get started? Well, depending on your goals, here are four different ways you can go about it.

1. Rent out a portion of your home

The most common way to get started house hacking is by buying a home and then renting out a portion of it. For instance, if you bought a two-story home, you could rent out the downstairs. Or, if you buy a home with a finished basement, you could live upstairs and rent out the basement.

This house hacking strategy is good in low-cost living areas because the rental income could actually cover your monthly mortgage payments. However, this may not work out in parts of the country that have a high cost of living.

2. Rent out your home entirely

If renting out a portion of your home isn’t enough to move the needle financially, then you could try renting your entire house. This could be a suitable option for anyone who is young and able to find an alternative, affordable living situation.

For instance, if you could temporarily live in a trailer or rent an apartment with a roommate, you could rent out your home for more money. This would allow you to pay off the house and cover your monthly rent payments.

3. Rent out by the room

If you’re just looking for a little extra money every month and don’t want to sacrifice the majority of your home, you could just try renting out one room. For instance, if you have a large four-bedroom home, you could rent out one room.

This gives you some extra money to put toward your mortgage payments, but you still get to enjoy the benefits of being a homeowner.

4. Rent out an additional unit

Many of the options on this list are ideal for young, single people. But what if you’re married and have a family? In that case, the idea of living with full-time roommates might not interest you.

If so, you could buy a multifamily property and rent out the other units. You could also rent out units attached to your home. This could be a unit that either comes with the house or one that you build yourself.

This will take some effort because you’ll need to fix it up and turn it into a space someone would want to rent. But if you have the interest, this could be the best way to house hack your primary residence while still protecting your family’s personal space.

5. Do a live-in flip

Live-in flipping is a popular real estate investment strategy where the investor purchases a residential property and lives in it while making improvements to increase the property’s value. The investor will then resell the property at a higher price than they originally paid for it, resulting in a profit. This strategy is often used by investors who are looking to build equity quickly.

Living in the property allows you to get to know the neighborhood, research the local market, and avoid paying rent while working on the property. The improvements you make can include anything from painting and landscaping to remodeling the interior of the home.

Legal and Tax Implications of House Hacking

Venturing into house hacking offers financial benefits but also introduces a set of legal and tax considerations that are crucial for a successful strategy. Here’s a concise overview to guide you through these aspects:

Local Zoning Laws

Zoning Requirements: Check your local zoning ordinances to ensure that your house hacking plans comply with regulations regarding rental properties, especially if you intend to modify a single-family home into a multi-unit property.
Permits: Obtain any necessary permits for renovations or conversions to avoid legal issues and ensure the safety and legality of your property for tenants.

Tax Benefits and Liabilities

Rental Income Reporting: Understand that rental income must be reported on your tax returns. Proper documentation of income and expenses is essential for accurate reporting.
Deductible Expenses: Familiarize yourself with what can be deducted, such as mortgage interest, property taxes, maintenance costs, insurance, and depreciation. These deductions can significantly reduce your taxable income.
Capital Gains: If you sell your property for a profit, be aware of capital gains tax. Living in the property for two of the five years before selling can qualify you for an exclusion on capital gains tax up to a certain limit.

Compliance with Landlord-Tenant Laws

Legal Responsibilities: As a landlord, you’ll need to adhere to state and federal laws regarding tenant rights, fair housing, and safety standards. This includes understanding eviction procedures, security deposit regulations, and the requirement for habitable living conditions.

Proper Reporting and Documentation

Keeping Records: Maintain meticulous records of all financial transactions, leases, and communications with tenants. This documentation will be vital for tax purposes and in the event of legal disputes.

Professional Advice

Consultation: Given the complexity of tax laws and real estate regulations, consulting with a tax professional and a real estate attorney can provide tailored advice and ensure you’re maximizing your benefits while minimizing legal risks.

House Hacking Checklist: Preparing for Success

House hacking requires careful planning and consideration. To ensure you’re well-prepared, we’ve compiled a comprehensive checklist. This guide will help you work through the initial stages, make informed decisions, and set you up for a successful house hacking experience.

1. Assess Your Financial Readiness

Evaluate Your Financial Health: Check your credit score, debt-to-income ratio, and savings. Your financial stability will affect loan approval and interest rates.
Budget for Upfront Costs: Calculate potential down payments, closing costs, renovation expenses, and an emergency fund for unexpected repairs.

2. Understand Financing Options

Research Loan Types: Familiarize yourself with different mortgage options, including FHA loans, conventional loans, and VA loans, if applicable.
Pre-Approval: Before house hunting, get pre-approved for a mortgage to understand how much you can afford and demonstrate your seriousness to sellers.

3. Choose the Right Property

Analyze the Potential ROI: When selecting a property, assess key return on investment (ROI) metrics, including cash flow, cash-on-cash return, net operating income (NOI), and cap rate. These metrics will help you understand the financial performance and potential profitability of the property.
Location: Select a location with high rental demand, considering factors like proximity to schools, employment centers, and public transportation.
Property Type: Decide whether a single-family home, multifamily property, or another type of property, suits your goals and budget best.
Condition: Be realistic about the amount of work you can handle. A fixer-upper may offer a higher return but requires more investment upfront.

4. Plan for Landlord Responsibilities

Understand Landlord-Tenant Laws: Research local laws regarding landlord responsibilities, eviction processes, and tenant rights.
Create a Lease Agreement: Draft a clear and comprehensive lease agreement that outlines rent, rules, and responsibilities. Consider seeking the advice of a legal professional.

5. Prepare for Property Management

Tenant Screening: Develop a process for screening tenants, including credit and background checks, to ensure reliability and compatibility.
Maintenance and Repairs: Plan for regular maintenance and emergency repairs. Consider whether you’ll handle repairs yourself or hire professionals.

6. Consider Privacy and Lifestyle Changes

Set Boundaries: Think about how you’ll maintain privacy and manage shared spaces, especially if renting out part of your primary residence.
Adjust Expectations: Living with tenants or managing a rental property can bring challenges. Be prepared for a lifestyle adjustment.

7. Develop an Exit Strategy

Long-Term Goals: Consider your long-term real estate and financial goals. How does house hacking fit into your broader investment strategy?
Resale Considerations: Keep potential resale value in mind when choosing and maintaining your property. Making wise improvements can enhance future profitability.

8. Continuous Learning

Educate Yourself: Real estate and property management are complex fields. Continually seek knowledge through books, podcasts, and networking with experienced investors.

This checklist is your starting point for a thoughtful and structured approach to house hacking. By addressing each item, you’re laying a solid foundation for your real estate investment journey, poised to navigate the challenges and reap the rewards of this strategic endeavor.

Bottom Line

House hacking is a creative way to pay off your mortgage, improve your monthly cash flow, and gain real estate experience. You can begin house hacking as a way to earn a little extra cash every month, or you could treat it like a long-term real estate investment strategy. You can put as much or as little into it as you want.

Just make sure you do your due diligence before getting started. Make any necessary adjustments to the house, choose your tenants carefully, and take your responsibilities as a landlord seriously. This allows you to make the most of your house hacking experience.

Source: crediful.com

Apache is functioning normally

January 31, 2024 by Brett Tams

Inside: Learn the roadmap to financial freedom with no money. Surpass debt, embrace millionaire habits, invest wisely & start a victorious journey to become financially independent!

Navigating the road to wealth can feel daunting, especially without a financial head start. But the journey to becoming a millionaire isn’t reserved for the lucky few with an inheritance at their heel.

It’s about strategy, perseverance, and making informed decisions.

Reaching the status of a millionaire is possible. I have done it and many other Money Bliss readers as well.

You have to change your mindset to make this happen. Becoming financially stable is of utmost importance.

Now, if you are serious about making seven figures in your net worth, then keep reading on how to do it.

Foundations of a Millionaire Strategy with No Money

Building a wealthy future from the ground up demands a strong and comprehensive financial plan. This isn’t something super fancy and you don’t need crazy knowledge.

You just have to start and be determined.

Step 1: The Essential First Steps Toward Financial Growth

Before plotting any course, assess your current circumstances candidly. Are you battling debts? Barely managing expenses? Or perhaps saving inconsistently? Acknowledging your starting point is critical.

A financial plan acts as your roadmap. It outlines not only your current standing but also sets the destination: your millionaire goal. This is not a figure plucked from thin air but rather a calculated estimate determined by your aspirations and timeframe.

Structure your plan to encompass these elements:

Income Assessment: Calculate your total annual income, be it from your primary job or any side gigs you maintain.
Expense Analysis: Track every expense. From the daily coffee to the monthly rent, understand where your money is going.
Debt Strategy: High-interest debts can cripple financial growth. Prioritize paying off these debts to alleviate financial pressure.
Savings Plan: Start with achievable goals. Perhaps saving $100 a month initially, then incrementally increasing as your earnings grow.
Investment Consideration: Every dollar saved should be working for you.

Ultimately, keep your plan documented and visible. Regular interaction with your strategy keeps the vision of financial growth at the forefront of your daily choices.

Step 2: Harness a Mindset Crafted for Success

Maintaining a positive mindset can significantly amplify your success with money, empowering you to manifest your financial ambitions with clarity and confidence.

This positivity helps to reframe financial obstacles as opportunities for growth. To cultivate this prosperous mindset:

Practice gratitude by acknowledging and appreciating what you already possess, which can create a sense of wealth beyond the monetary value.
Counteract negative thoughts about money by consciously redirecting them into positive money affirmations, reinforcing your belief in your financial acumen and capabilities.
Focus on your ultimate goals and align your behaviors accordingly.

Step 3: Starting Small: Saving with Limited Means

When funds are scarce, saving can seem impossible. However, even the most modest savings habits can blossom into significant wealth over time. The key is to start – no matter how small, and to remain consistent.

Implement these techniques to save effectively on a tight budget:

Automate Savings: Set up a direct deposit from your paycheck to a savings account.
Savings Challenges: Engage in one of my popular money saving challenges.
Save Raises and Bonuses: Save at least half of any raises, bonuses, or tax refunds you receive rather than increasing your spending.
Micro-Saving Apps: Consider using apps that round up your purchases to the nearest dollar and save the difference.

Saving is habitual. Even with a limited budget, adapting ways to make saving a consistent part of your financial behavior is crucial.

Start with a small percentage that won’t strain your daily living but will quietly accumulate in the background. These mini saving challenges are perfect!

Step 4: Handling Debt: Strategies for Minimizing Financial Burdens

Tackling debt is a pivotal stage on the road to financial freedom and accumulating wealth. Personally, this is exactly what happened to me. Once we paid off our debt, we were able to increase our net worth substantially.

Simply put… When debt is left unchecked, it can blossom into an insurmountable challenge, thwarting efforts to acquire wealth. The cash flow killer.

Consider these tactics to manage and minimize your debt:

Debt Audit: Begin by evaluating all your debts. Take note of balances, interest rates, and minimum payments. Understanding the total sum of your debts is essential for forming a repayment strategy.
Prioritize High-Interest Debts: High-interest debts such as credit cards can quickly grow beyond control. Prioritizing these debts for repayment can save you a significant amount in interest over time.
Debt Snowball vs. Avalanche: Choose the method that will keep you motivated and align with your financial goals.
Negotiate with Creditors: If you’re in financial hardship, reach out to your creditors to negotiate for lower interest rates or modified payment plans. Many creditors prefer to work out a payment plan rather than risk not being paid at all.
Avoid Accumulating New Debt: As you pay off existing debts, it’s crucial not to accrue new ones. Stick to your budget and avoid temptations that could lead to further debt.

Remember, every debt you free yourself from is one step closer to letting your money work for you, not against you.

Step 5: Identifying Skills That Pay: Turning Talents into Revenue

In the evolving economy, capitalizing on your skills can be a powerful way to generate additional revenue streams. The beauty of skill-based earning is that it can fit around a traditional job and can be scaled up or down as your situation changes.

Here are possible avenues to pursue:

Demand for Your Skills: Look at the market and find out if you can outsource your skills
Start Freelancing: Platforms like Upwork, Fiverr, and Freelancer can connect you with clients looking for your specific skillset. Begin with competitive pricing and build up your portfolio and rates as your experience grows.
Teach Others: If you’re knowledgeable in a particular area, consider creating an online course or conducting workshops. With platforms like Teachable or Udemy, you can reach a global audience.
Networking: Leverage social media, professional networking sites like LinkedIn, and community forums. This builds your professional presence and can lead to job opportunities.

Lastly, do not be afraid to ask for a pay raise. Thus, will help you fast-track your path to six figures.

Step 6: Side Hustles and Entrepreneurship: Growing Your Earnings

To build real wealth, especially with no initial capital, earning income from multiple streams can be a game-changer. Side hustles and entrepreneurship are about leveraging your time, talents, and sometimes minimal financial investments to grow your income outside of your primary job.

Almost every millionaire I know has a side hustle or business that helped them to get to that point.

Here’s how you can expand your earnings with side hustles and entrepreneurship:

Make money online: The fastest growing area is knowing how to make money online. Even seemingly mundane skills can be lucrative.
Choose the Right Side Hustle: You can choose to make money or chill and watch TV. Pick on the popular side hustles to get started today.
Start Small Business Ventures: Consider creating a small business. It could start as simple as lawn care services, homemade goods, or consulting. Validate your business idea with minimal investment before scaling up.

As financial expert and entrepreneur Ramit Sethi states, “There’s a limit to how much you can save, but there’s no limit to how much you can earn.”

By actively growing your earnings and establishing additional income streams, you accelerate your trajectory toward millionaire status.

Step 7: Investment 101: Basics for the Beginner Investor

Investing is the escalator to wealth, turning your savings into passive income generators.

For beginners, the world of investing can seem labyrinthine, but with foundational knowledge and strategic baby steps, you can begin to navigate it confidently.

Don’t be afraid of the stock market as you are giving up way too much money! This was the stupid mistake I made in my 30s. Now, my investment portfolio is the primary way I am growing my wealth today.

Here’s what you need to know to get started with investing:

Start with a Retirement Account: If your employer offers a retirement plan, like a 401(k), especially with matching contributions, take full advantage of it. This is often a beginner’s first, and potentially most profitable, investment.
Low-Cost Index Funds: As a beginner, it’s wise to invest in low-cost index funds, which are designed to mimic the performance of a particular market index. They are diversified and typically have lower fees.
Automatic Investing: Set up automatic transfers to your investment account to facilitate regular contributions without having to actively think about it. Don’t forget to select which fund to invest in.
Educate Yourself: Take advantage of online resources, books, and courses to understand the basics of stocks, bonds, and other investment vehicles. This is what I did – invest in my stock market knowledge and it has paid off big time!
Understand the Rule of 72: A simple formula to estimate the doubling time of an investment. For example, at a 7% average annual return, your money could potentially double every roughly 10 years.
Understand Risk vs. Reward: All investments carry some level of risk. Typically, higher risk could mean higher potential returns, but also greater potential losses. Assess your risk tolerance before investing and use those stop losses!

Investing isn’t a sprint; it’s a marathon with compound interest serving as the tailwind to push you forward over time. Learn how to invest in stocks for beginners.

Step 8: Retirement Accounts: Why Maxing Out Early Matters

By maximizing contributions to retirement accounts, you not only safeguard your golden years but also capitalize on tax-advantaged growth, which can be substantial over time.

Just because you are in your 20s or 30s, don’t say I’ll invest later. You are missing the boat.

Here’s why it’s beneficial to start maxing out your retirement accounts as soon as possible:

Compounding Interest: The earlier you start, the more you benefit from compounding interest.
Tax Benefits: Contributions to retirement accounts like 401(k)s and traditional IRAs are made each year, but they come with limits and potential tax-deferred (IRA) or tax-free (Roth IRA) accounts.
Employer Match: Many employers offer a match on 401(k) contributions up to a certain percentage. Failing to contribute at least enough to get the full match is akin to leaving free money on the table.
Higher Contribution Limits: The earlier you start maxing out, the less you have to play catch-up later. The IRS sets annual contribution limits, and consistently hitting those maximums can mean a considerable difference in your retirement savings over time.

By comprehensively engaging with your retirement accounts from an early age, you start an assured path towards the millionaire echelon.

Yes, it is possible to have multiple Roth IRA accounts.

Step 9: Adopting the Growth Attitude: Learning from Millionaire Mentors

The difference between those who accumulate wealth and those who don’t can often be traced back to mindset and mentorship. Adopting a growth attitude and learning from successful individuals can accelerate your path to prosperity.

Millionaires, with their experience and results-driven approaches, often provide valuable insights into effective wealth-building strategies.

Here’s how tapping into the wisdom of millionaire mentors can benefit your financial growth:

Learning from Their Experiences: Millionaires can share their triumphs and tribulations, offering you a roadmap that highlights what to do and what pitfalls to avoid. Cultivate these millionaire habits in your life.
Networking Opportunities: Millionaire mentors often have expansive networks. By building a relationship with a mentor, you may be introduced to key connections that can lead to lucrative opportunities.
Mindset Shift: Interacting with successful individuals can shift your perspective from a fixed mindset to one that embraces challenges, persists in the face of setbacks, sees the effort as the path to mastery, and learns from criticism.
Innovative Thinking: Mentors can inspire innovative approaches to income generation, investment, and savings. They can encourage out-of-the-box thinking that may lead to financial breakthroughs.
Emulating Success: By observing the habits and tactics of millionaires, you can emulate strategies that have proven successful while avoiding practices that may lead to failure. Start these billionaire morning routines to help you.

By adopting a growth attitude and learning from the insights and experiences of millionaire mentors, you sharpen your financial acumen and enhance your ability to create and capitalize on wealth-building opportunities.

Step 10: Community Counts: Surround Yourself with Success

The people you surround yourself with can significantly influence your thoughts, actions, and ultimately, your success. By intentionally building a community of hard-working, success-oriented individuals, you can foster an environment that promotes wealth accumulation.

Here is why it’s crucial to immerse yourself in communities that align with your aspirations:

Shared Success Mindset: In a like-minded success-oriented community, you’ll find individuals who have goals similar to yours and an attitude that is conducive to financial growth. This collective mindset can reinforce your own ambitions.
Peer Learning: Being a part of a community allows for collaborative learning. Exchange insights, experiences, and tactics with peers who are also on a path of financial growth. I love my masterminds!
Accountability: Just as with individual mentors, a community can keep you accountable. Regular interactions with people who take financial success seriously can encourage you to do the same.
Cross-Pollination of Ideas: Varied perspectives in a group can lead to a cross-pollination of ideas, sparking creativity and innovation in your own wealth-building strategies.
Increased Confidence: As you witness others achieving success, it instills a belief that you can do the same. This confidence can push you to take calculated risks that lead to greater rewards.

This adage stresses the importance of being selective with the company you keep, as their attributes frequently rub off on you, influencing your path to becoming a self-made millionaire. Likely you want friends who are millionaires or striving to be, too.

Step 11: Steer Clear of Debt: Remaining Unshackled as You Ascent

The gravitational pull of debt can be a formidable force, impeding one’s ascent toward the zenith of financial independence. But, you can overcome this by using these debt free living habits.

Here are strategies to remain unshackled by debt:

Budget Religiously: A budget constrains overspending and reduces the temptation to rely on credit.
Build an Emergency Fund: A substantial emergency fund can cover unforeseen expenses, diminishing the need to fall back on credit cards or loans that could exacerbate your financial situation.
Spend Less Than You Make: This may sound simple, but this helps you to live within your means and avoid going into debt.
Discern Needs from Wants: Be meticulous in distinguishing true needs from mere wants.

Ultimately, your ability to evade debt not only safeguards your financial stability but also amplifies your capability to invest and save, propelling you firmly on the trajectory toward millionaire status.

Step 12: The Lifestyle Inflation Trap: Keeping Expenses in Check

Success and salary hikes can often lead to lifestyle inflation, a phenomenon where spending increases as income rises, negating the potential for savings and investments. Keeping lifestyle inflation at bay is pivotal to ensuring that growing income translates into growing wealth.

Here’s how you can avoid the lifestyle inflation trap and keep expenses in check:

Stick to Your Budget: Even as your income grows, maintain the budget that facilitates your savings habits.
Identify Trigger Points: Be aware of what prompts you to spend more. Sometimes, seeing others upgrade their lifestyle can trigger the same desire. Stay focused on your financial goals rather than external influences.
Automate Savings Increases: When you receive a raise or bonus, immediately update your automatic transfers to increase the amount going into your savings or investment accounts.
Value Experiences Over Possessions: Studies have shown that experiences bring more lasting happiness than material goods. Opt for a modest increase in experiences rather than expensive goods as your income grows.
Embrace Minimalism: Adhering to minimalist principles can reduce the urge to accumulate non-essential items, keeping spending down and savings rates up.

Avoiding lifestyle inflation doesn’t mean living as frugally as possible regardless of how much you earn. It’s about finding a balance that allows for a comfortable yet modest lifestyle, wherein you can enjoy the fruits of your labor without compromising your long-term wealth goals.

Billionaire investor Warren Buffett exemplifies this principle by still living in the house he bought in 1958 for $31,500 and driving a reasonably priced car. Buffett’s lifestyle choices display an astute awareness of the perils of unnecessary spending and emphasize the importance of consistency in financial discipline.

Step 13: Compounding: The Wonder that Builds Big Balances Over Time

Compounding interest is a powerful tool that has the potential to turn modest savings into vast sums over time.

The principle behind compounding is straightforward: the returns you earn on your investments generate their own returns in the next cycle, leading to exponential growth given enough time.

Here’s how the wonder of compounding works to build big balances:

Start Early: The magic of compounding is maximized by time. The sooner you start investing, the more cycles of compounding your money can go through, and the larger your balance can grow.
Reinvest Your Returns: To truly harness the power of compounding, reinvest the interest, dividends, and any capital gains you receive, rather than spending them. This increases your investment balance, which in turn means more significant potential returns in the next cycle.
Regular Contributions: Make regular contributions to your savings and investments. Consistent additional deposits can significantly amplify the effects of compounding over the long term.

Step 14: Procrastination and Perils: Why Immediate Action is Crucial

Procrastination is often the thief of time and opportunity, especially when it comes to financial decisions. Postponing essential actions like saving, investing, or paying down debt can have compounding negative effects, making it harder to achieve financial goals.

Understand the perils of procrastination and the importance of immediate action:

The Cost of Waiting: In the realm of investment, the longer you wait to begin, the more you miss out on the potential compounding returns. Delayed action can mean the difference between a comfortable retirement and a financially insecure one.
Opportunity Loss: Procrastination can lead you to miss out on time-bound opportunities, such as market dips that are ideal for purchasing investments at lower prices or missing the deadline for a tax-advantaged account contribution.
Paying More on Debt: By putting off debt repayment, you accrue more interest, which only increases the total amount you’ll eventually have to pay. Acting quickly to pay off high-interest debt saves money in the long run.
Increased Stress: Delaying important financial actions can lead to an accumulation of stress and anxiety, which can, in turn, impair your ability to make sound financial decisions.
Potential for Rash Decisions: When you constantly procrastinate, you might eventually rush into decisions without adequate research or consideration, leading to poor financial outcomes.

Recognize this type of behavior and set weekly money meetings with yourself to help you move forward – one task at a time. Grab an accountability partner too!

Step 15: Long-Term Vision: Setting Up For Sizeable End Gains

The journey to becoming a millionaire is often a marathon, not a sprint.

Nurturing a long-term vision for your financial future is essential in guiding your daily decisions and motivating you to stay the course.

To ensure sizeable end gains, you need to establish and maintain a future-oriented mindset:

Set Long-Term Financial Goals: Establish clear, achievable long-term financial goals that align with your desired = future. Whether it’s attaining a specific net worth, owning property outright, or securing a comfortable retirement, these goals should inspire your action plan.
Strategic Planning: Develop a comprehensive financial plan that includes savings, investments, retirement accounts, and estate planning. This plan should act as a living document that you can adjust as your circumstances and goals evolve.
Patience is a Virtue: Recognize that wealth typically accrues over time, and not without fluctuation. Stay patient and avoid knee-jerk reactions to short-term market swings or temporary setbacks.
Regular Investments: Commit to making regular investments, even in small amounts. Over time, consistent contributions can result in substantial wealth through compounding interest.

It’s about creating financial disciplines that compound over time, ensuring that with each day, month, and year, you’re progressively building towards a considerable nest egg.

FAQ: Climbing the Financial Ladder Without a Silver Spoon

Getting rich with no money might seem like a paradox, but it’s a trajectory that many self-made millionaires have pursued successfully. The blueprint involves a combination of mindset shifts, disciplined financial habits, and strategic action.

You have to take proactive steps to increase wealth even when starting from zero.

Starting from nothing and achieving millionaire status requires a multifaceted strategy, encompassing personal development, financial planning, and an entrepreneurial approach to income generation.

Wealth creation is a journey, and starting from zero means that progress may be slow initially.

However, by adopting these steps and maintaining a disciplined and proactive approach, you incrementally increase your chances of accumulating significant wealth.

Ready to Become a Millionaire with Nothing?

Are you ready to become a millionaire with nothing but your ambition, intellect, and unwavering resolve? If your answer is a resounding yes, then it’s time to take the first step.

With every small victory and learned lesson, you inch closer to your ultimate goal.

Your journey starts with dedication, a commitment to yourself that from this day forward, you will work relentlessly toward the life you envision.

Wealth is not just about the money you accumulate but also the knowledge, experience, and relationships you develop along the way. Wealth creation is often not a straight line but a series of strategic moves and consistent behaviors that, collectively, lead to financial success.

Remember, your current financial position is just a starting point – with the right mindset and actions, significant financial growth is within the realm of possibility.

Your next step is working towards becoming financially independent.

Did the post resonate with you?

More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!

Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.

Source: moneybliss.org

Apache is functioning normally

January 31, 2024 by Brett Tams

Rocket Mortgage was far ahead of its competitors in creating a fully online home loan process. In addition to this convenience, the free Rocket Rewards program offers closing cost discounts for learning about the mortgage process. This program allows you to read articles, use calculators, work on your mortgage application and more to earn points that you can redeem for credit toward your closing costs.

Additionally, Rocket Mortgage offers a step beyond traditional preapproval with its Verified Approval program. To qualify, underwriting must review and confirm your credit, income and assets. Afterward, Rocket Mortgage guarantees that your loan will close due to this review — and if not, you’ll get $1,000. Plus, this lender gives you up to 90 days to shop for a home with a locked interest rate through the RateShield program, which is available on 30-year conventional, FHA and VA loans.

Keep in mind that unlike some competitors, Rocket Mortgage doesn’t offer USDA loans. It also doesn’t provide any down payment or closing cost assistance. However, it will cover 2% of your down payment through its ONE+ program if you meet income, credit and debt requirements and also make a down payment of 1%.

Rocket Mortgage also accepts outside down payment assistance from other institutions on your behalf if you’ve been approved — though only down payment grants and loans are accepted.

Source: usatoday.com

Apache is functioning normally

January 29, 2024 by Brett Tams

The Hong Kong and Boston Chase Sapphire lounge locations were the first to open, and a third spot is entering the scene: As of January 2024, the Chase Sapphire Lounge at New York’s LaGuardia Airport has opened its doors.

Here is what you can expect when you visit this two-level Chase lounge at New York-LGA.

Getting to the Sapphire Lounge LaGuardia

To get to the Chase Sapphire Lounge in Terminal B, pass through security and turn right. Go past the colorful falling water fountain. At the end of the concourse, you’ll find the entrance to the Sapphire Lounge, next to the Centurion Lounge entrance.

Take the elevator down to the ground floor to enter the lounge.

Hours of operation

The Sapphire Lounge at LaGuardia is open from 4:30 a.m. to 9:30 p.m. daily. The private Reserve Suites are open from 5 a.m. to 9 p.m.

Layout

The Sapphire Lounge by The Club at LaGuardia beats out many of its competitors on square footage alone. At 21,850 square feet, this massive Sapphire Lounge can fit a maximum of 269 people. The Centurion Lounge next door comes in at less than half the size by square footage.

There are two levels. The lower level has seating areas, play areas (not just for kids), relaxation rooms and the main dining area and bar.

(Photo by Steve Miller)

Ascend the set of stairs located to one side of the center bar and you’ll find yourself in what Chase staffers called “The Perch.” This mezzanine area features more seating and tables, a refreshment station and access to the Reserve Suites: three reservation-only rooms available to groups who want more privacy than the lounge affords.

Design

(Photo by Steve Miller)

The theme of trees and greenery runs throughout, with several large “tree trunks” breaking up space on both the first and second levels. The pervasive woodgrain, mid-century furniture and colorful, abstract art on the tambour panel walls gives the feeling of walking into a particularly chic rainforest. There’s even a canopy of plants lining the railings of the upper-level mezzanine.

The womb chairs and light, oak-colored wood are in line with current design trends. Yet, the lounge has an air of timelessness that feels sophisticated but fun — falling somewhere between the retrofuturism of the TWA Hotel at JFK and the intentional whimsy of a hip coworking space. Elevated furnishings can be found in the by-reservation private suites, but more on that later.

The lounge doesn’t have a lot of windows because of its location within the airport. However, even without natural light, there’s not a spot in the lounge that feels underlit. The sconces and variety of other lighting fixtures are a delightful detail.

(Photo by Steve Miller)

Throughout the lounge, you’ll find touches of New York City, whether it’s a book of Bill Cunningham photos on the shelf or a series of photos featuring matchbooks from iconic New York restaurants like The Bitter End.

Seating areas on the lower level

(Photo by Steve Miller)

The first floor of the lounge features plenty of space for work, relaxation, dining and even a little play. Cushy couches and chairs are scattered throughout.

A backlit, water vapor fireplace provides ambience in a more work-oriented section of the lower level where guests will also find two-person booths and a private phone room.

(Photo by Steve Miller)

No need to worry about keeping your devices charged — there are outlets galore embedded in furniture, walls, tables and the floor.

Photo booth and arcade

On top of the areas for working or relaxing, there are a few rooms dedicated entirely to play. One is a photo booth that guests can use to snap photos with their traveling companions. Photos can’t be printed, but guests can have a digital copy sent to their email.

(Photo by Steve Miller)

The photo booth doubles as an entrance to what Chase staff referred to as “the speakeasy” — a hidden arcade room featuring a pinball machine, tabletop shuffleboard and a jukebox. While there’s no drink service in the speakeasy, staffers indicated that there might be someday.

Children’s playroom

(Photo by Steve Miller)

Families can use an enclosed playroom on the lower level without having to worry about disrupting other lounge guests.

Nursing room

(Photo by Steve Miller)

A nursing room featuring a sink and changing table is available for use by families in addition to a dedicated changing room for those with babies.

The Reserve Suites

The Reserve Suites are three rooms that can be booked within the lounge that offer groups a private seating and entertainment area, access to fully-stocked showers and an upgraded menu. The privacy comes at a premium though.

Chase Sapphire Reserve® cardholders can reserve one of the two six-person suites and one four-person suite. The six-person suites feature a movable wall between and can be booked together for use by up to 12 people.

Suites are available in three-hour slots. Each of the six-person suites costs $3,000 to reserve (or $6,000 to combine the two suites) and the four-person suite is $2,200 for a reservation slot. You must book suites through the Chase mobile app at least 72 hours in advance.

So what does roughly $1,000 per hour get you?

(Photo by Steve Miller)

In addition to private showers stocked with bathrobes and high-end toiletries from Oribe and Augustinus Bader, guests get access to a personal lounge staffer and a private menu from the New York restaurant Jeffrey’s Grocery.

(Photo by Steve Miller)

Menu highlights include a hefty lobster roll and the Plateau le LaGuardia, a two-tiered tower featuring king crab legs, shrimp cocktail and a variety of tinned seafood. The suite-exclusive wine list is curated by New York City wine bar Parcelle and each of the suites includes caviar service in its price.

(Photo by Steve Miller)

In the sitting area of each suite, there’s a beautifully incorporated TV on the wall that comes with a PlayStation 5 for guests. The TV can be turned off, leaving the design element of a stark, glossy black circle on the wall rather than a blank TV — a subtle touch that’s in line with the elevated feel of these private suites.

(Photo by Steve Miller)

One of the few windows in the lounge is in the four-person suite, providing a near-panoramic view of The Perch and lower level of the lounge; though, there’s a curtain for privacy should you prefer it.

Meditation pods and treatment rooms

If you want to luxuriate a little but don’t want to shell out for the suites with their private showers, stop by the wellness area and treat yourself to some spa time.

The ordeal of engaging with commercial air travel can be more than a little de-centering. If you feel like you need some time to refocus and quiet your mind, the lounge offers two meditation pods, which can be booked in 30-minute slots via the Chase app or the QR codes found throughout the lounge. Meditation pod reservations are complimentary.

(Photo by Steve Miller)

You can also book a free spa treatment, such as jade rolls and oxygen blasts, on-site on a first-come-first-served basis. The private treatment rooms are staffed by estheticians and feature products from New York facial bar Face Haus.

🤓Nerdy Tip

Each spa guest can also snag a free travel kit of skincare products from Face Haus.

Bathrooms

There are several bathroom stalls in the men’s room and women’s room on the first floor and an all-gender restroom on the mezzanine.

Food

Cold plates and made-to-order meals

At the back of the lounge’s lower level is the main dining area. The kitchen serves breakfast (4:30 a.m. to 10:30 a.m.) and all-day fare (11 a.m. to 9:30 p.m.) with menus featuring more typical lounge options alongside special, made-to-order dishes from Joseph Leonard, a West Village bistro.

(Photo by Steve Miller)

During breakfast and regular service, cold and hot plates are available at the buffet counter. For breakfast, guests can expect the usual fare like pastries, fruit, yogurt, eggs, pancakes and French toast. Made-to-order options — including omelets, egg and cheese baos, and vegan spinach bowls — can be ordered by scanning the QR codes found at every table.

(Photo by Steve Miller)

All-day food choices include Korean fried chicken bites, pumpkin muhammara, grilled cheese and made-to-order dishes like burgers or seared salmon over braised leeks. The latter items punched a fair bit above the lounge food weight class, retaining the restaurant quality you’d expect from a curated menu.

A selection of sweets is also available at the buffet, including lemon squares, chocolate chip cookies and mini chocolate bites.

The bar

(Photo courtesy of Chase)

Situated amid the dining space and seating areas is a circular bar, beautifully appointed with white stone countertops, mauve barstools and brass accents. Chase teamed up with New York mixologists Apotheke for locally-inspired cocktails.

The cocktail menu includes drinks exclusive to the LaGuardia lounge, like The Blackburn’s Sour — a berry-forward rum drink named for one of the first passengers to disembark at LaGuardia when it opened in 1939 — and a signature cocktail that you’ll find at all Sapphire Lounge locations, fittingly and simply called Sapphire.

Other standouts include the Red Eye, an interesting take on the all-too-familar espresso martini that takes things in a more refreshing direction with the addition of black cherry.

(Photo by Steve Miller)

A wine list curated by Parcelle, spirits and a selection of beers on tap round out the bar’s menu, with soft drinks, juices and coffee also available.

Refreshment stations

(Photo by Steve Miller)

The lounge features three refreshment stations, two on the first level and one on the second. Each refreshment station includes a mini fridge of canned beverages as well as drip coffee, tea, a digital espresso machine, nonalcoholic drinks on tap and assorted fruits and biscotti.

In keeping with the locally-sourced beverages, coffee is supplied by Greenwhich Village roaster Joe Coffee and teas are from SoHo-based tea blenders Harney & Sons.

How to get into the Chase Sapphire Lounge LGA

Access to the Sapphire Lounge by the Club at LaGuardia is pretty simple: you need to carry a qualifying Chase card or have a Priority Pass membership. Some credit cards include a Priority Pass membership as a benefit.

Chase cards that get you lounge access include:

Chase Sapphire Reserve® and J.P. Morgan Reserve cardholders each get two free guests, per visit. Additional guests come at a fee of $27 each. Ritz-Carlton cardholders get unlimited guests.

Priority Pass cards that get you access to the Chase LaGuardia lounge include:

The Platinum Card® from American Express

Capital One Venture X Rewards Credit Card

Marriott Bonvoy Brilliant® American Express® Card

Hilton Honors American Express Surpass® Card

U.S. Bank Altitude™ Reserve Visa Infinite® Card

Annual fee

Priority Pass benefits

Full Priority Pass Select membership. Enrollment required. Terms apply.

Full Priority Pass Select membership. Includes two guests per visit. No restaurants.

Full Priority Pass Select membership. Enrollment required. Terms apply.

10 complimentary Priority Pass lounge visits per year. Enrollment required. Existing cardholders who enrolled in Priority Pass on or before Jan. 31, 2023 will no longer have a membership as of Feb. 1, 2024. Cardholders who enroll between Feb. 1, 2023 and Jan. 31, 2024, will continue to have membership through Oct. 31, 2024. Terms apply.

Eight free Priority Pass lounge visits per year.

Learn more

(Top photo by Steve Miller)

The information related to the J.P. Morgan Reserve and The Ritz-Carlton™ Credit Card has been collected by NerdWallet and has not been reviewed or provided by the issuer of this card.

How to maximize your rewards

You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2024, including those best for:

Source: nerdwallet.com

Apache is functioning normally

January 29, 2024 by Brett Tams

When you rent a car during your travels, you usually aren’t thinking about what happens if you crash your car. that is, until the agent at the rental car desk paints that worst-case scenario during their collision damage waiver pitch.

Should you pay extra to cover your car in the case of an accident? Not if you hold the Capital One Venture X Rewards Credit Card.

If you are involved in a fender bender, you can rely on your credit card coverage to pay for damage to your rental car without making a claim against your personal auto insurance.

Although it’s a great idea to use your Capital One Venture X Rewards Credit Card to book your rental cars, the auto rental collision damage waiver benefit on the card doesn’t cover everything or every trip.

Here’s what you need to know about what the policy covers and how to file a claim.

How the Capital One Venture X Rewards Credit Card rental car insurance works

Every credit card car rental insurance requires you to use the card for your rental transaction and decline the car rental company’s collision damage waiver option. The car rental coverage provided by the Capital One Venture X Rewards Credit Card is no different.

If you want your Capital One Venture X Rewards Credit Card car rental insurance to cover your rental car, here’s what you must do:

You must use your Capital One Venture X Rewards Credit Card to reserve and pay for your entire rental car transaction.
You must decline the car rental company’s collision damage waiver provisions.

Simply being a Capital One Venture X Rewards Credit Card member isn’t enough — you must use the card to cover your rental transaction and decline the collision damage waiver offered by the rental counter.

Be aware that some rates include collision damage waiver insurance. If you book using one of these rates, you won’t be covered by the Capital One Venture X Rewards Credit Card car rental insurance on that rental.

What is covered?

The most important thing to understand about Capital One’s car rental insurance is what it covers. It covers only the following types of losses:

Damage to a rental car caused by a collision.
Loss of a rental car due to theft.

While your card’s insurance coverage will reimburse you for damage to your rental car, an accident can also cause damage to another driver’s vehicle or result in bodily injury.

If you injure someone (including yourself) in an accident or if you damage someone else’s vehicle, the Capital One Venture X Rewards Credit Card car rental insurance won’t cover these losses. Here are some items that are not covered by Capital One’s rental car insurance.

Personal liability.
Loss or theft of personal belongings.
Bodily injuries of any kind to anyone.
Damage to anything other than the rental vehicle.
Wear and tear or mechanical breakdowns.

Most likely, you’ll want travel insurance or personal auto insurance to shield yourself from liability, in case you are involved in an accident that damages someone else’s car or causes an injury.

Finally, Capital One car rental insurance covers rental periods of only 15 or fewer consecutive days within your country of residence. Rentals outside your country of residence are covered up to 31 consecutive days.

Notable exclusions

Certain vehicles

Capital One car rental insurance is meant to cover rentals of non-luxury passenger vehicles. The policy will pay only for the actual cash value of cars with a manufacturer’s suggested retail price (MSRP) of up to $75,000 when new, so extremely expensive luxury cars won’t be covered.

If you’re renting a Toyota Corolla, you’re going to be covered. If you want to drive an Aston Martin, you’ll need to find other insurance. Here are some of the types of automobiles that are excluded:

Expensive automobiles with an MSRP of over $75,000 when new.
Antique vehicles that are over 20 years old or have not been manufactured for 10 years.
Vans, other than those designed for small-group transportation and seat up to nine people.
Trucks and vehicles with an open cargo bed.
Two-wheeled vehicles like mopeds, motorcycles and motorbikes.
Limousines.
Recreational vehicles.

Certain destinations

Most car rental insurance policies provided by credit cards exclude certain countries from coverage. Your

Capital One Venture X Rewards Credit Card car rental insurance does not cover rentals in Israel, Jamaica, the Republic of Ireland or Northern Ireland.

Who is covered?

Capital One provides rental car damage and theft coverage only to you, the person whose name is embossed on your eligibleCapital One Venture X Rewards Credit Card. You must reserve, pick up and pay for the rental car and be listed as the primary driver.

Additional drivers on the rental car are covered by your Capital One car rental insurance, but you (the cardholder) must be the primary renter of the car.

How to file a claim

If you have an accident or your rental car is stolen, you will need to call the car rental benefit administrator to report the incident as soon as possible, regardless of your liability.

Within the U.S., call 800-825-4062. If you’re traveling outside the U.S., you can make a collect call to 804-965-8071. You can also initiate your claim online at https://www.eclaimsline.com/.

🤓Nerdy Tip

Be sure to submit your claim form within 90 days of the date of theft or damage or your claim may be denied. Submit the claim form even if you don’t yet have access to all other requested information.

To prepare to submit your claim, you’ll want to collect documentation that will be needed to process your claim. Here’s what you should collect and be prepared to submit to the benefit administrator.

The accident report form provided by the rental company.
A copy of the front and back of the initial and final rental agreements.
A copy of repair estimates and an itemized repair bill.
At least two photographs of the vehicle.
A police report, if one can be obtained.
A copy of any demand letter you receive from the car rental agency.

You’ll also need to fill out a claim form and submit the above documentation, plus a copy of your credit card billing statement including the rental charge. The benefit administrator may also request additional documentation to validate your claim.

Your claim will usually be processed within 15 days after the benefit administrator has received all requested documentation.

Capital One Venture X rental car insurance recapped

The Capital One Venture X Rewards Credit Card offers car rental insurance that covers damage to or theft of your rental vehicle when you decline the car rental company’s collision damage waiver insurance and charge the entire rental transaction to your credit card.

The coverage does not include liability coverage of any kind or cover trips longer than 15 days in your country of residence or 31 days abroad. Be sure to check your card’s Guide to Benefits for coverage details.

How to maximize your rewards

You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2024, including those best for:

Source: nerdwallet.com

Apache is functioning normally

January 28, 2024 by Brett Tams

If you’re in search of a low-risk way to grow your money, a liquid certificate of deposit (CD) might be worth a closer look. A liquid CD gives you a fixed, guaranteed rate of interest for a specific term, but unlike standard CDs, you don’t pay a penalty if you withdraw the funds before the maturity date.

Granted, the returns you earn on a liquid CD may not compete with stock market investments, but knowing that your money is earning interest and likely won’t incur any losses can be powerful benefits.
Here, you’ll learn more about liquid CDs, including:

• What a liquid CD is

• How to withdraw money from a liquid CD

• The pros and cons of liquid CDs

• Alternatives to liquid CDs.

What Is a Liquid Certificate of Deposit?

Before you think about investing in a CD, here’s a look at definitions:

• A certificate of deposit, or CD, is a savings vehicle that usually gives you a bit of interest with virtually no risk, provided you keep the money in place for a certain term. If, however, you withdraw funds before the CD matures (or reaches the end of its term), you are usually penalized. You will likely lose some or all of the interest earned and perhaps even a bit of the principal. In other words, are certificates of deposit liquid? Usually not.

• A liquid certificate of deposit, on the other hand, gives you flexibility. It allows the account holder to withdraw money from their account prior to the maturity date without incurring penalties. This means you can access funds in the CD should you need them without penalty. However, the rates for liquid CDs tend to be lower than other kinds of CDs.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

Understanding a Liquid CD

You may be wondering, “What are liquid assets?” In the realm of finance, the concept of “liquid” means that an asset can quickly be converted to cash. A liquid CD is a time-bound deposit account where you can earn interest for a specific period of time. Compared to traditional CD’s however, liquid CDs will not charge you early withdrawal penalties. This means you can easily liquidate (turn into cash) your CD without taking a hit in terms of its value.

As noted above, there’s a “but” to this proposition, which you may hear referred to as no-penalty CDs: Liquid CDs typically pay less than traditional CDs. Depending on which financial institution you go to, these products can offer various terms, either as little as a few months or up to several years or longer. Your fixed interest rate will vary according to the length of the term you’ve chosen. Typically, the longer you hold your money in the liquid CD, the higher the rate of return.

What can be a big plus about CD rates is that they are locked in during the full term. This means even if interest rates decrease, your rate would not change. Some financial institutions may require a minimum deposit for these CDs, and they can be significantly higher than traditional CDs; some are at the $10,000 and up level. What’s more, the minimum deposit may go up if you are seeking a higher interest rate, while others don’t have a minimum deposit requirement at all.

How Do You Withdraw Money From a Liquid CD?

If you have decided that you need to withdraw from your liquid CD, here’s what usually happens:

• Check with your bank about how long it will take to process a withdrawal and whether you need to withdraw a certain percentage at a time. (Some banks may require you to close the account entirely.)

• When ready, notify your bank of your withdrawal.

• You will likely have to wait about a week after opening the liquid CD before you can start withdrawing.

• Wait for your funds. Withdrawal is likely not as quick as withdrawing funds from a checking or savings account; your financial institution might require anywhere from a week to a month to process the transaction.

Recommended: What Happens If a Direct Deposit Goes to a Closed Account?

Liquid CD: Real World Example

Once you have decided a no-penalty CD is right for you, you will need to go to a bank or credit union that offers this account. Once you’ve opened an account, you have to fund it.

How it grows will depend on the principal, your APY (annual percentage yield), and how often the CD compounds the interest, which could be, say, daily or monthly.

• If you invested $10,000 in a liquid CD with a three-year at a rate of 5.30%, at the end of the three-year period with interest compounded monthly, you will have a total balance of about $11,719.28.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!

Pros of a Liquid CD

When evaluating liquid CDs, it’s worthwhile to review the benefits of these accounts. Some of the key upsides are:

• Liquidity. You can access and withdraw your funds prior to the term’s end. Perhaps you’re having an emergency that requires cash, or you decide to move around your money to better meet your financial goals. It’s possible!

• No penalties. If you dip into the account before it matures, you won’t be assessed a fee.

• Security. Liquid CDs are safe investments. These accounts are federally insured up to $250,000 per depositor, per account ownership category, per insured institution. You’ll know your money is protected when you open a liquid CD with a bank or credit union. Even in the very rare situation of a bank failure, you’re covered as noted.

• Guaranteed returns. When you start a liquid CD account, you usually know the interest rate upfront. It may not be stratospheric, but it’s a sure thing.

Cons of a Liquid CD

Now that we’ve explored the good things about a liquid CD, we need to give equal time to the potential downsides:

• Lower rate of return. The interest rates are significantly lower compared to certificate of deposit rates.

• Withdrawal rules. Yes, these accounts are more accessible, but after your deposit has been in place for a week, your withdrawal guidelines may be quite specific. For instance, you may have to remove all your funds if you want to make a withdrawal, or the amount might be limited to a certain percentage that doesn’t suit your needs. Check before starting a liquid CD investment.

• Tax implications. Earnings on your liquid CD will be taxed at your federal rate, which is something to keep in mind as that will take your return down a notch.

Recommended: How to Automate Your Personal Finances

Alternatives to a Liquid CD

If the idea of a liquid CD doesn’t sound like an appealing low-risk investment option, there are alternatives to also consider.

Traditional CDs

Traditional certificates of deposit require you to stow your money away for a certain period of time. In exchange, you receive a return at the end of that period. The catch is, you are not able to withdraw your funds during this holding period. If you have a financial emergency, for example, and need the money from your CD, you will receive penalties for withdrawing your cash before the period of maturity.

However, this might be a gamble you are willing to take, especially if you have a nice, healthy emergency fund set aside. You’ll earn a better rate of return than with a liquid CD.

Laddering

CD laddering usually involves opening CDs of different term lengths. This strategy allows you to invest long-term CDs which provide higher rates of return, while having the ability to access your funds through a shorter-term CD maturing.

Money Market Account

Another CD alternative is a money market account, which is similar to a savings account with some added benefits. Money market accounts typically require minimum balances and offer rates comparable to savings accounts, which can change over time. While the rates may be lower than a CD, money market accounts typically allow you to withdraw and transfer your money six times per month or more.

Emergency Fund

An emergency fund, or a rainy-day fund, is a savings account that should only be used in times of financial emergencies or unexpected expenses. Depending on your financial position, you can have an emergency fund in a regular savings account, money market account, CD, or liquid CD. It depends on how much you plan to access your emergency fund and how much interest you want to earn in the account.

High-Yield Savings Account

A high-yield savings account can offer a competitive rate of interest, depending on the financial institution offering it (online banks tend to pay more than traditional ones). And you’ll have more liquidity than a CD because you can deposit and withdraw from the account more frequently, though the specifics may vary with each bank. If you want easy access to your funds plus interest, a high-yield bank account may be a good option.

The Takeaway

Liquid CDs are a financial product that offers the safety and guaranteed return of a traditional CD with the bonus of not being penalized if you make an early withdrawal. For those who are comfortable locking their money into a CD but worry an emergency or other need might pop up, this accessibility can be very attractive. Worth noting: Expect lower interest rates from a liquid CD than a standard one. Alternatives to a liquid CD can include a high-yield savings account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with up to 4.60% APY on SoFi Checking and Savings.

FAQ

Are CDs liquid investments?

Traditional CDs are not liquid investments. Funds held in a CD cannot be accessed until the account term is reached. If you need to withdraw money from your CD prior to its maturity date, you will have to pay a penalty. A liquid CD, however, offers flexibility to withdraw money from your account prior to its term date without the usual fees.

What is a non-penalty CD?

A non-penalty CD, also known as a liquid CD, is a time deposit that offers interest on your money. However, the rate is usually somewhat lower than the rate for a typical CD (the kind with penalties). The longer the term you choose for your liquid CD, the more you usually can earn.

How much is the penalty for early withdrawal from a CD?

Each financial institution has its own way of calculating this, but it usually involves losing some of all of the interest you have accrued. If you have a two-year traditional CD and withdraw funds early, the fee could vary considerably; a recent search found anywhere from two months’ to a year’s’ worth of interest. If you have a liquid or no-penalty CD, you will of course avoid these fees.

Photo credit: iStock/champc

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Source: sofi.com

Apache is functioning normally

January 28, 2024 by Brett Tams

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Get answers to common questions that will allow you to maximize your credit card rewards points and avoid common point planning pitfalls with our Nerdy expert tips.

How can you travel more while spending less? How could changes in airline loyalty programs affect your travel plans? What are the benefits of co-branded airline or hotel credit cards versus flexible rewards cards? NerdWallet’s Sean Pyles and Erin Hurd dive deep into credit card rewards points, addressing a range of topics that will resonate with anyone eager to maximize their credit card points and travel perks. They discuss recent changes in airline loyalty programs, including Delta and Alaska Airlines, and explore the advantages and drawbacks of co-branded airline or hotel credit cards and the benefits of using flexible rewards cards.

They also present strategies for maximizing credit card sign-up bonuses while avoiding common mistakes that can lead to fewer rewards, and offer tips for how you can track and manage credit card points and perks. Sean and Erin also explain the pitfalls of carrying a balance on travel credit cards, the implications of credit card fees and surcharges at local stores, potential industry changes, such as interest rates and fee structures, and the potential impact of the Credit Card Competition Act on rewards programs.

Check out this episode on your favorite podcast platform, including:

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Episode transcript

This transcript was generated from podcast audio by an AI tool.

Sean Pyles:

Airline points, restaurant points, retail points, rental car points, hotel points, points, points, points, points, points. Wrap them all up in credit cards and sometimes it can be head spinning.

Erin Hurd:

My guidance is generally pretty similar for most people, even if they have pretty different travel goals, and that all really goes back to the idea of just earning flexible points. If you have a stash of flexible points that aren’t locked into any one travel brand, you have a lot of options.

Sean Pyles:

Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.

Erin Hurd:

And I’m Erin Hurd.

Sean Pyles:

This is the final episode of our nerdy deep dive into your money in 2024. Erin, we’re almost a month in, so how is your 2024 going so far?

Erin Hurd:

So far, so good. I can’t believe we’re already into 2024, but all is going well.

Sean Pyles:

Love to hear it.

Erin Hurd:

How about you, Sean?

Sean Pyles:

It’s been alright so far. I’m just glad the days are getting longer at this point, however slowly. So, Erin, we’ve brought you back onto the show because you are a nerdy points pro. How did you come to be so interested in credit card points programs and do you have a degree in complex mathematical equations? Because sometimes it seems like you need one to figure out how to use all of these.

Erin Hurd:

That sounds like it could be true, but actually it’s quite the opposite. I majored in English and math was always my least favorite subject. I’ve always been a deal seeker. I’m always looking for sales, I’m finding coupons, I’m figuring out how to get more, but how to pay less for it. So my husband and I have always loved to travel and I started dabbling in points and miles many years ago to help defray our travel costs so that we could travel more. But I really fell down the rabbit hole with the points and miles when we grew our family, and now we needed four seats on the airplane and in some circumstances, we need two hotel rooms for our family of four. So that’s when I really got serious about earning enough points and miles so that our family could travel more than just to the local campground, because that’s all that I would be willing to pay for.

Sean Pyles:

Yeah. And when you’re wrangling kids, I’m sure you don’t want to spend time doing math, but the good news is nobody needs a math degree because all they have to do is go to the NerdWallet site, poke around with our very handy calculators, and all will be revealed. But let’s give everyone a rundown of things they might want to think about when managing their credit card points. Now, would you say that the start of a new year is a good time for listeners to take stock of where they are with their points programs? Or is that something they should be monitoring all year round?

Erin Hurd:

Great question. Well, in a perfect world, ideally you do want to be giving your points some attention more than once a year, especially if you’re trying to save them up to take a big trip, because the amount of points that you’ll need for that trip can fluctuate. Often it requires more than you think that you’ll need and it can take time to earn those points and then to find great redemptions for them. But don’t fear, it’s never too late, so the new year is a fantastic time to check in if you haven’t been already.

Sean Pyles:

Well, we are going to give everyone a head start by taking a look at what we can expect from 2024 in Point Land. But before we get started, a reminder that we always want to hear what you think, too, listeners. To share your ideas, questions, concerns around credit card points, or anything else, leave us a voicemail or text the Nerd hotline at (901) 730-6373. That’s (901) 730-NERD, or email a voice memo to [email protected]. Stay with us. We’re back in a moment with the future year in credit card points.

So Erin, let’s start with a look back at last year in Point Land and see if there are some lessons that we can learn from 2023 to take into this year. And before we get too deep into the conversation, I want to flag that we are going to mention some companies that are NerdWallet partners, but that does not influence the way that we talk about them. So, Erin, in this conversation, we’re mostly going to focus on maximizing credit card points, but I want to briefly touch on the fact that at least two of the major airlines, Delta and Alaska, changed their point reward systems toward the end of last year. What did that mean for flyers and were there any kind of bigger messages about point systems that came out of that?

Erin Hurd:

Yeah, those were big headlines in the travel world. Now, they were pretty different in scope. Delta changed the requirements to earn elite status in future years, this won’t actually take effect just yet, but they also put limits on some of the benefits that credit card holders can use, like airport lounge access.

Now Alaska, on the other hand, made big changes to its award chart and an award chart is what determines the number of miles you’ll need to pay for a ticket. But these are both examples of a bigger takeaway that we see over and over again, and that is that you should never have all your proverbial eggs or points in one basket. So what I mean by that is that even if you fly a certain airline often because that’s what serves your home airport, having only a credit card that earns points or miles for that one brand really limits your options. The truth is that, unfortunately, travel loyalty programs change or get devalued relatively often and sometimes with little to no notice. So that means if you’ve racked up a nice chunk of say, Alaska miles for an upcoming trip, but they suddenly change their award chart, as they just did, and decide that the flight you want to book will now cost double the miles, you’re pretty hamstrung if all you’ve got is a chunk of Alaska miles.

Sean Pyles:

Yeah, having multiple different cards from different brands is a way of having credit card dollar cost averaging in a way, where you’re spreading your risk across different kinds of products. So, that is one way to offset the ups and downs of what these companies are doing. But I can see these changes making some folks wary of using these cards that are co-branded with an airline or hotel. Do you still think they’re worthwhile given recent changes?

Erin Hurd:

I do. For travelers, carrying a co-branded airline or hotel credit card, it can be really beneficial for certain perks. Some of the airline cards, for example, will give you free checked bags for you and sometimes, depending on the card, up to eight traveling companions every time you fly. So, that can add up to a huge value if you’re flying relatively often, even if you’re flying a couple times a year and you’re checking a bag, that can make it worth it. And especially because you’ll earn, generally, a welcome bonus when you open up the card.

But I advise leaning more on what we call flexible rewards credit cards, and they can give you a lot more options for your travel, plus they often earn more rewards on everyday purchases.

Sean Pyles:

Can you tell us what you mean by flexible points? How do they work and how do you earn them?

Erin Hurd:

Oh, sure. As the term suggests, they are flexible. So, there’s a number of credit cards that have their own travel points. Instead of earning Delta miles or Alaska miles or Marriott points, for example, there are several Chase cards that earn points called Ultimate Rewards. There are many different American Express cards that earn something called Membership Rewards. There’s City Thank You points, ect. And the beauty of these flexible points is that they can be used to book all kinds of travel, not just a Delta flight or not just an Alaska flight.

So generally, these credit card issuers have their own travel portal and you can book your travel there and pay directly with your points and you don’t have to involve any cash. And many of these programs also allow you to transfer those points to certain airline and hotel travel partners, usually at a one-to-one ratio, which is great because often you can get more value from your points when you transfer them to the airline or the hotel and book directly. But really, the biggest benefit is just having so much more flexibility. So instead of being locked into a Delta flight, like you probably would be if you only had a Delta miles earning credit card, flexible points just give you lots of options.

Sean Pyles:

Okay. Well let’s get to cards. First, anything from last year stand out to you? Any program changes you saw that were worth paying attention to or new ways to use them?

Erin Hurd:

Yeah. Well, the good news is that we’re still seeing some pretty juicy bonuses offered for new card holders who sign up for a card and meet certain spending requirements in the first few months. And we’re excited that those seem to be sticking around. Years ago, it used to be that a credit card welcome bonus of around 30,000 or 40,000 points was really generous, but over time those numbers have crept up and up, and it became not uncommon to see bonuses of 60,000 points or 80,000 points or even 100,000 points offered to new cardholders.

Now, that trend continued throughout COVID, even when people weren’t traveling as much, the banks kept offering big bonuses to keep travel credit cards interesting. And we’ve been wondering, all this time, if we’d start to see the bonuses start to shrink back down as people return to travel, as inflation and recession fears crept in. But the good news is we have not seen that happen so far. Right now, there are several six figure welcome bonuses out there for various travel credit cards and welcome bonuses are an important part of the travel credit card strategy for a lot of people.

Now, I don’t open credit cards just for the welcome bonus. I don’t advise doing that, but I also know that I’ll earn more rewards from that bonus than I probably will from a year or more of regular spending on that card. So it’s definitely a factor.

Sean Pyles:

Yeah. And these signup bonuses are often folks’ best chance at getting a huge amount of points since points can take a long time to accrue through daily purchases alone. And we’ve also seen new ways to use rewards, right? What’s the latest on that front?

Erin Hurd:

As far as new ways to use rewards, we’ve seen a steady stream of options evolving to use your points to pay for merchandise at various stores. At Amazon, for example, when you check out, you may have noticed you have the option to pay using several different kinds of points, credit card points. It makes it really easy and it can feel like you’re getting stuff for free if you’re using points instead of actually charging your card or paying cash. But really be careful because the downside is that you’re often getting poor value for your points when you use them this way. You’re paying for convenience and they’re betting on people not really understanding or questioning the value of the points.

So for example, if you use Chase Ultimate Rewards at Amazon to check out, they’re worth 0.8 cents each, but those same points can be worth up to 1.5 cents each when you use them to book travel through Chase, depending on which card you have, or often even more than 1.5 cents each if you transfer them to travel partners.

Sean Pyles:

Wow, that breakdown is really eye opening. I’ve seen that at Amazon checkout and I’ve been a little tempted to use my points in that context, but after that, I definitely won’t be doing so. So, thank you for that. So Erin, I think one of the most common questions people have is how to know which card and point program is not only best in class, but best for them and their specific situation. So, if you’re looking to maximize points, how do you figure out which card to get in the first place?

Erin Hurd:

Yeah, it’s a great question and there are so many options, and I know it can be really overwhelming for people who aren’t immersed in credit cards all day long like we are here at NerdWallet. And it may seem like there are many different factors, maybe you think it’s going to be different if you want to use points for travel, which airlines are most convenient for you? What style of travel do you enjoy? What kind of trips are you planning for? But really my guidance is generally pretty similar for most people, even if they have pretty different travel goals. And that all really goes back to the idea of just earning flexible points. If you have a stash of flexible points that aren’t locked into any one travel brand, you have a lot of options.

So I also encourage people who really want to get the most from their points to not get scared off by credit card annual fees. I know it can seem silly to pay a fee just to have a card, I hear resistance from people, and I get it, but the rewards and the perks that you get from the cards that charge annual fees often far outweigh the fee itself. In a lot of cases, you get what you pay for, and yes, there are lots of excellent no-fee cards out there, but if you really want to up your points game and take it to the next level, it’s really worth considering the more premium cards that do charge a fee.

Sean Pyles:

Yeah, I, for a long time, was really opposed to annual fees on credit cards because I just didn’t want to pay for access to a credit card and the fee-free option seemed to be sufficient for me. But I recently actually acquired a travel credit card that does have an annual fee because I looked at all of the perks that it was going to offer me and then compared that to how much the card costs on an annual basis. And the perks, by far, outweighed the cost. So you’re really getting something that’s worth more than you’re paying an annual fee if you make it worth it. You do have to do a bit of work to make sure you’re taking advantage of all of the benefits that these cards offer you.

Erin Hurd:

That’s right.

Sean Pyles:

So Erin, since you are deep in the points world, I would love to hear how you have approached this thought process in the past. Are you the type to be selective with cards in your wallet, or do you have a small collection of cards at your disposal?

Erin Hurd:

Well, both. So personally, I am selective, but I have also collected a pretty large portfolio of cards over time. Our family does travel a lot, and so we make pretty full use of the credits and the perks that the cards give us, but I also reevaluate each and every year to make sure every card still makes sense for me and for our family. And I really recommend that people go slowly and have a strategy. It’s really easy to get excited by the big welcome bonuses and people can be tempted to open lots of cards all at once, but please just slow down. Be aware that each credit card issuer has their own set of guardrails. They won’t extend excessive amounts of credit to any one person, and they want to make sure that you’re going to be a good long-term customer.

One issuer, for example, won’t approve you for a new credit card if you’ve opened more than five cards across any card issuer in the past 24 months. So I really like to hammer home that this is a long-term game and it pays to have a strategy. Don’t just go opening cards willy-nilly without a plan.

Sean Pyles:

And then with the cards that you use, how do you keep track of the points and perks that you have and the fees associated with them? Do you have a spreadsheet? Are you using a notebook? What’s your process for that?

Erin Hurd:

Yeah, I have a simple spreadsheet. As a credit cards Nerd, I’m also pretty engrossed in it all day long. NerdWallet has a lot of resources to keep everyone up to date, we cover all the news. So you can always check NerdWallet, but I recommend just a simple spreadsheet, taking note of what cards you have, when you opened it, what signup bonus you earned when, and then just what categories that bonus is on.

So another tip is to make sure you can meet the minimum spending requirements when you do open a new credit card. In order to earn the bonus, you’ll typically need to spend anywhere between $1,000 and $5,000 or even more on that card in the first three to six months. Make sure you have a plan to meet those spending requirements without spending any more money than you intend to or would otherwise.

Sean Pyles:

Yeah, and one big thing to watch out for is bonus categories. You can look for specific spending areas, say travel or groceries or gas, and get more points for those than for other purchases. Walk us through how to make sure we’re using each card in the most efficient way to rack up those points and rewards.

Erin Hurd:

Yeah, that’s a great point. And honestly, that’s another reason why many brand-specific cards, like a Delta card, probably won’t be your best bet because they tend to offer only 1x rewards on most everyday spending categories, except purchases on their brand. So if you really want to ramp up your points earning, don’t just blindly use one card for every purchase. I like carrying a few cards that can work together to earn the most rewards across many different categories. So you could use one card for groceries, but have a different card for restaurants.

Now, the good news is many of the major credit card issuers offer several cards that have synergy. They all earn the same bucket of flexible points for you, but one card is better for some categories and another is better for different kinds of purchases. Now, in the show notes, we’ll include our articles about some three-card combos you can have that can really help you ramp up your rewards.

But I know there’s a lot of people out there who don’t want to futz with having a lot of cards, and that is completely fine, but I would ask you to at least consider two cards. That way, if the largest spending in your budget is on grocery stores, say, you could choose a card that earns good bonus rewards at grocery stores, and then you could use another card that earns a flat 2% on all other purchases, and you’ll be good to go.

Sean Pyles:

When you’re thinking of which card to use or which card to take out, it really helps to know yourself and where you’re spending the most amount of money. So the card is helping you earn points on those categories that you’re spending on.

Erin Hurd:

That’s right.

Sean Pyles:

So Erin, what are some common mistakes that people make when trying to maximize their points? Can you run down a few of those for us?

Erin Hurd:

Absolutely. I think one of the problems I see a lot are that people don’t really understand the value of their points. And please do not feel badly if this is you, because it is a pretty complex scenario. Not all points are created equal.

The good news is NerdWallet has a full breakdown of baseline values for your points, and it shows you how you should expect to redeem them. Consult that guide before you redeem your points and it’ll help give you a gut check to see, is this a good use of my points or is this a poor value? I think it helps to think of points like a currency, right? So there are many different kinds of points and they all do have some kind of value, and that value is equivalent to an amount of money. And once you start thinking of them like a currency, and not just something that you get for free, you’ll be apt to spend them more wisely.

Sean Pyles:

And we should also mention that carrying a balance on a credit card that offers points, especially travel credit cards, can be a really costly mistake. Credit card interest rates are really high right now, and paying interest on your balance can negate any benefit that you get from the points that you earn.

Erin Hurd:

Yes, that is the number one rule in this game. The interest that you’ll pay on balances that aren’t paid in full every month will far outweigh the rewards that you’ll earn. Now, if you need a breather on interest, there are many cards on the market that offer a 0% intro APR period, and they also earn rewards. Another reminder is that it also rarely makes sense to pay more in order to use your credit cards. Like sometimes at local stores or restaurants, you may have to pay a surcharge in order to use that credit card, and the reality is that that surcharge that you’ll pay usually outweighs the reward that you’ll earn.

Sean Pyles:

That’s a great point and something that I am guilty of, because I just want the convenience of using my credit card and getting those points. But like you said, it negates the point of doing that in the first place. So, I’m taking that with me into 2024.

So Erin, if you could look into your plastic credit card crystal ball, is there anything you think is worth watching for this year in particular besides possible changes in interest rates?

Erin Hurd:

Yeah, we’ve seen several cards raise their annual fees, creep up the fees in exchange for adding more perks and benefits to the cards. And I think that’s a trend we could see continue. But just be careful because oftentimes these perks require some hoops. For instance, some offer credits towards certain purchases, but those credits are doled out monthly or quarterly, and they’re use it or lose it in that short timeframe. So just make sure you’re taking a look at the value you personally receive from a card each year when it’s up for renewal and not just its potential value on paper. If you are not using the perks, then it may not make sense for you any longer, even if it still makes sense for others.

Sean Pyles:

Erin, I also want to ask you about the Credit Card Competition Act, which has been making headlines for over a year at this point, but it seems like we might finally see some movement on this legislation that could change how we use points. Can you give us a rundown on that and what it might mean for point fanatics?

Erin Hurd:

Yeah. So, the Credit Card Competition Act is definitely something we’re keeping close tabs on here at NerdWallet. For those who aren’t familiar, this is proposed legislation that could really affect the rewards you earn from your credit cards.

See, merchants pay transaction fees as a cost of doing business for accepting credit cards. They’re called interchange fees, and this is where a lot of the money comes from that fund the credit card rewards. So if credit card issuers get less money from these fees, they may be forced to cut back on the rewards that they offer to consumers. So, we could be having a pretty different conversation about credit cards this time next year if it passes.

Sean Pyles:

We will all be keeping close eyes on this, and folks listening, we’ll let you know what happens as there’s any updates on this. Well, Erin Hurd, thank you so much for joining us and getting to the point.

Erin Hurd:

Thanks, Sean. And that’s all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at (901) 730-6373, that’s (901) 730-NERD. You can also email us at [email protected] and also visit nerdwallet.com/podcast for more info in this episode. And remember to follow, rate, and review us wherever you’re getting this podcast.

Sean Pyles:

This episode was produced by Tess Vigeland and Erin. I helped with editing. Kenley Young helped with fact checking. Kaely Monaghan mixed our audio. And a big thank you to NerdWallet’s editors for all their help.

Erin Hurd:

And here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general education and entertainment purposes and may not apply to your specific circumstances.

Sean Pyles:

And with that said, until next time, turn to the Nerds.

Source: nerdwallet.com

Apache is functioning normally

January 27, 2024 by Brett Tams

If someone has access to both your bank account and routing number, they could make fraudulent ACH transfers and payments out of your account. In other words, you could wind up being scammed.

That’s why it’s so important to understand this aspect of your personal finances and protect your money. Read on to learn what happens if someone has your bank account number and routing number, what the risks are, and how to protect yourself.

What Can Someone Do With Your Bank Account Number Alone?

Many of us wonder, “What can someone do with my bank account number?” The good news is, if someone has only your bank account number, that won’t give them enough intel to do any damage. It’s not the same as a scammer obtaining your credit card digits. No one will be able to withdraw money from your personal bank account if all they have is your account number.

For those who may not know the difference between a bank account vs. a routing number, here’s the scoop:

• Your bank account number is the unique string of digits that identifies your particular account at a financial institution. Even if you have, say, multiple accounts at a bank, each will have its own distinct account number.

• Your routing number is the series of numerals that identifies your financial institution, or where the account is held.

Just because your bank account number alone doesn’t make you vulnerable doesn’t mean that you shouldn’t protect it. You should. If a scammer had your account number and other info — perhaps your driver’s license number and/or your home address — they might be able to make illegal purchases online. So it pays to be vigilant.

Routinely monitoring your account activity — say, once a week — is a smart move that allows you to quickly detect if anything is awry.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

What Can Someone Do With Your Bank Account and Routing Number?

The short answer: Real damage. The combination of a bank account and routing number is a dangerous combo that scammers want. And those two numbers are fairly accessible. Think about how often these numbers get circulated: every time a check is written, cashed, signed over to someone else.

Here’s what can happen if they fall into the wrong hands.

ACH Fraud

With both those precious numbers, crooks could commit fraudulent automated clearing house (or ACH) transfers and payments. You’re probably used to seeing those ACH letters on your banking details when you set up automatic monthly payments and the like. When a scammer has your bank account and routing numbers, they could set up bill payments for services you’re not using or transfer money out of your bank account.

It’s tough to protect these details because your account number and routing number are printed right at the bottom of your checks. But do your best. Some pointers:

• Don’t leave your checkbook lying around.

• If you are mailing a check, wrap it in a sheet of blank paper so the numbers don’t show as it’s in transit.

• Pay attention to bank statements. Review them often to see if there are any fishy transactions happening.

• Protect yourself when online banking by using strong passwords. That password is a primary defense. If a thief has your bank and routing numbers and somehow manages to get access to your login name and password, big trouble may be on the horizon.

• Don’t make your password something obvious like your name, pass1234, or numbers that may be circulating in cyberspace, like your birthday which can be seen on Facebook.

Online Shopping

Know that all online retailers aren’t equal in terms of security measures. Some will allow people to make a purchase with bank account information alone, while others will also ask for a driver’s license or other state identification to add an additional layer of protection.

So what can a scammer do with your bank account number and routing number? They can find sites that let them shop with only that information. and could run up a tab.

Depositing Money

While it might seem like a dream come true if a mysterious sum of money appeared in your bank account, you should be more alarmed than overjoyed. Somebody who has your account and routing number may be using your digits to facilitate their illegal shenanigans (such as the kind of bank fraud known as money laundering). Report unusual deposits immediately.

Create Fraudulent Checks

Unfortunately, scammers can create fake checks using your checking numbers, and then those fake checks to pay for purchases (not every payee will verify a check) — or simply cashing them. Know, too, that with technology scammers could digitally scan the check and deposit the amount into their bank account.

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What to Do When Someone Has Your Bank Numbers

As careful as you try to be, stuff happens. What if someone has your bank account number and routing number? What if you see signs that they are using it for fraudulent transactions? Knowing how to report identity theft can help mitigate a bad situation. Have a strategy in place, just in case. Here’s some advice.

Contact Relevant Agencies

If you have the misfortune of being victimized, here’s what to do:

• Contact your bank the minute you realize it. You need to notify your bank within 60 days of your statement to avoid paying for unauthorized ACH transactions. The bank’s fraud department will work to help you get unauthorized charges reversed.

• Report the fraud to the fraud department of all three credit reporting bureaus, Equifax®, Experian®, and TransUnion®.

• File a report with your local police department.

• Also file a report with the Federal Trade Commission’s department that deals with identity theft.

Your to-do list doesn’t end there. You’ll want to be a stickler about monitoring your bank account to look for any signs that someone else is abusing your account. Be proactive and ask your bank about setting up text messages or push notifications every time a transaction is posted. This will help you keep track of what’s going on with your money.

Much as you may not be a paper person, when you’re a victim of bank fraud, documentation matters. You want copies of bank statements, a copy of the police report, your credit report, and any other relevant materials.

Cancel Your Account

As much as it’s a hassle, you need to get a new account number to replace the compromised one. Call your bank’s customer service number, contact a rep by chat, or, if you use a traditional vs. online bank, go to your local branch. Explain your situation, and take steps to get your assets transferred to a new bank account, get new checks printed, and get a new debit card if needed to safeguard your cash.

Tips on Avoiding Bank Fraud

There are no absolutes in life, but there are steps you can take to protect yourself as much as possible.

• You can get an identity theft protection service to monitor your bank accounts and alert you to any funny business, be it suspicious withdrawals or information changes.

• When shopping online, use a credit card (it offers more protection than say a debit card), prepaid card, or a money transfer app instead of typing in your account and routing numbers.

• Be stingy with your banking information to avoid bank scams. Know that less is best when it comes to sharing info.

• Go for multi-factor authentication when banking online. If you have linked bank accounts and credit or debit cards to online platforms, absolutely sign up for additional verification in order for purchases to go through. It’s like a forcefield around your account.

• It can be wise to limit your use of paper checks to only those things where an alternate form of payment is a hassle. Remember your checks are a gold mine of personal information, with your address, account and routing numbers.

The Takeaway

In today’s world, it pays to keep close tabs on your bank accounts and related numbers. Having your bank account and routing number can allow scammers to do damage in a variety of ways, from unauthorized ACH payments to fake checks. By protecting these digits and setting up other safeguards, you’ll minimize the odds of your falling victim to these wily thieves.

While on the topic of banking, it’s wise to make sure your financial institution is a good fit and offers the services and perks that suit you best.

Better banking is here with up to 4.60% APY on SoFi Checking and Savings.

FAQ

Which bank details should I keep secret?

Protect your bank account and routing numbers to avoid having scammers siphon money away from you. Setting up two-factor authentication for online transactions can help protect you, too. It goes without saying that no one except you should know your username, password, and security questions. Also shred financial documents that you don’t need.

Is it safe to give out your account details?

Share your banking information sparingly, especially online. At most, share a few key points with a trusted friend or family member, and only punch your details into secure websites (look for the “https” at the beginning of the url and the padlock symbol) — though even those aren’t 100% scam-proof.

Can I give out my routing number?

A bank routing number in and of itself reveals very little. After all, it’s a nine-digit code used by financial institutions to identify other financial institutions. It’s very much public information and only becomes a risk factor when paired with other personal details.

Can someone steal your money with your bank account number?

Typically, a scammer would need more than just a bank account number to steal your money, but routing numbers are easily found. With those two pieces of information, a crook could use those numbers for online purchases or to otherwise defraud you.

Photo credit: iStock/AJ_Watt

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Source: sofi.com

Apache is functioning normally

January 27, 2024 by Brett Tams

There’s no such thing as a safe investment, but some types of investments may be less risky than others. For instance, bonds tend to be less risky than stocks, though that’s not always the case. Depending on an individual investor’s risk tolerance, knowing which investments tend to be more conservative and which tend to be riskier, can be important to forming an investment strategy.

The Essence of Conservative Investing

It’s difficult to identify the least-risky investments on the market since they’re all subject to different types of investment risk. Your personal risk tolerance as an investor also comes into play, as you may have a much higher or lower appetite for risk compared to someone else. When viewed through that lens, an investment that seems relatively conservative to you might seem risky to someone else.

Defining Lower-risk Investment

You might assume that it simply means any investment that carries zero risk — but that’s not necessarily a definitive answer, or a realistic one, since all investments have risk. As such, when constructing a portfolio, it’s important to look at the bigger picture which includes an individual investment’s risk profile as well as an investor’s risk tolerance, as mentioned. Risk capacity, or the amount of risk required to achieve a target rate of return, can also play a part in investing decisions, and which can help investors define lower-risk investment options.

The Appeal of Fixed Income

Fixed-income securities can be particularly attractive to risk-averse investors. These types of securities tend to have lower associated risks, guaranteed returns, and maybe even tax benefits — but that’s balanced out by lower potential returns, and other types of risk. With that in mind, it may be a good idea to look at fixed-income investments right out of the gate for relatively conservative investment options.

Evaluating Risk in Investments

It’s not necessarily easy to evaluate an investment’s relative risk or risks. But investors can likely do well by learning about the types of risks that an investment may be associated with, and how those risks can line up with their strategy or portfolio.

Key Principles for Secure Investments

Perhaps the most important method involved in discerning how risky an investment is the specific type of risks it introduces to a portfolio.

Investors who choose products and strategies to avoid market volatility leave themselves open to a variety of risks. When researching less-risky investments, it’s important to consider how different risk factors may affect them. Here are some of the most common types of risk you might encounter when building a diversified portfolio.

• Inflation risk. This is the risk that your purchasing power can erode over time as inflation increases.

• Interest rate risk. Fluctuating interest rates can influence returns for less-risky investment options such as bonds.

• Liquidity risk. Liquidity risk refers to how easy (or difficult) it is to liquidate assets for cash if needed.

• Tax risk. Task risk can influence an asset’s return, depending on how it’s taxed.

• Legislative risk. Changes to investing or tax regulations could affect an investment’s return profile.

• Global risk. Certain investments may be more sensitive to changing geopolitical events or fluctuations in foreign markets.

• Reinvestment risk. This risk refers to the possibility of not being able to replace an investment with one that has a similar rate of return.

Risk vs Return: Finding the Balance

There’s a reason the sayings “nothing ventured, nothing gained” and “no risk, no reward” have been around so long. But having some knowledge of where various investments fall on that range of risks — as well as the types of risks to which a particular investment could be exposed — may help investors find the returns they need while still holding on to some sense of control.

Netting bigger potential rewards often means taking on more risk, investors may benefit from understanding the degree of risk they’re comfortable with and capable of enduring. That’s why it’s important to research every asset they add to their portfolio — or get help from a professional advisor when choosing between the riskiest and least-risky options.
💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

Best Lower-risk Investment Options in 2024

Among lower-risk investments on the market in 2024, here is a sampling of what investors might want to choose from, or research further.

High-yield Savings Accounts

Typically offered via online banks, high-yield savings accounts pay a higher interest rate than other types of deposit accounts. That said, since current interest rates are extremely low, these accounts are providing scant returns.

High-Yield Savings Accounts Pros

• You’re unlikely to lose your principal in a savings account.

• High-yield savings accounts are FDIC insured, so you won’t lose your deposit if your bank closes.

• Savings accounts are highly liquid, meaning you can access your money quickly at any time.
High-Yield Savings Accounts Cons

• Since interest rates on these accounts are lower than inflation, your money could lose purchasing power over time.

• High-yield savings accounts offer a lower rate of return compared to other conservative investments or those with moderately higher risk.

• Some banks place limits on the number of withdrawals that you can make from a savings account each month.

Recommended: Breaking Down the Different Types of Savings Accounts

Bonds and Treasury Securities

Investors typically consider savings bonds one of the least-risky investment options. Investors can purchase EE savings bonds (the most common type of savings bond) from the U.S. Treasury Department for half the face value and accrue interest monthly based on a fixed rate.

The interest rate is set for the first 20 years after purchase, and the Treasury guarantees an EE bond will be worth at least its face value when those 20 years have passed. After that, the Treasury resets the interest rate and extends the maturity by 10 more years.

Investors don’t have to hold onto a savings bond for the entire 30 years, but they do have to wait at least a year before redeeming it. And they’ll forfeit three months’ interest if they redeem a savings bond during the first five years after its purchase. The current rate for EE bonds is 0.10% annually. The return may be more conservative, but it’s also slow.

Further, Treasury securities (bills, notes, and bonds) provide funding for the government in exchange for a fixed interest rate. So, they are sold and backed by the “full faith and credit” of the U.S. government.

Because the government has the means to repay its investors (by printing more money or raising taxes), it’s highly unlikely it will default on these obligations, so investors get a practically guaranteed return of their principal and any interest they have coming, as long as they hold onto the security until its maturity date. For those reasons, Treasury securities land in the less-risky investments category.

Different types of government securities come with different lengths of maturity, and their interest rates reflect those term lengths. Treasury bonds have a higher interest rate in exchange for a longer term (30 years), but that lengthy term can be a drawback.

US Treasuries Pros:

• Since they’re backed by the government, securities are among the least-risky investment options.

• Varying maturity terms allow for flexibility when using securities to diversify a portfolio.

• Interest is guaranteed if investors hold U.S. securities to maturity.

US Treasuries Cons:

• Though conservative, you likely will not see sizable gains from this type of investment.

• Once you buy a Treasury security the terms won’t change, even if newer bonds are paying higher rates.

• Selling a bond before it matures could be difficult if there are bonds with more favorable terms on the market.

Certificates of Deposit (CDs)

A certificate of deposit account or CD is a time deposit account. These accounts require you to save money for a set time period, during which you can earn interest. Once the CD matures, you can withdraw your original deposit along with the interest earned. You can open CD accounts at brick-and-mortar banks and credit unions or online financial institutions.

CDs are similar to a savings account, and they’re FDIC-insured, which means the government will cover the depositor’s principal and interest (up to $250,000) if the bank or savings association issuing the CD fails. But unlike other bank accounts, savers must leave their money in the account for a designated period of time — usually from a few months to a few years. The longer the term, the higher the interest rate. And if savers take out the money early, they might have to pay a penalty (although there are some exceptions).

CD Pros:

• Lower-risk as interest rates can be guaranteed for the CD’s maturity term.

• FDIC coverage minimizes the risk of losing money if your bank closes.

• The ability to earn interest on funds you don’t need to use for the near term.

CD Cons:

• Withdrawing money from a CD before maturity can trigger an early withdrawal penalty.

• When interest rates are low, CD interest earnings may not keep pace with inflation.

• Some CDs may require larger minimum deposits to open.

Money Market Funds & Accounts

Money market funds are fixed income mutual funds that invest in short-term, lower-risk debt securities and cash equivalents. You may find them offered by banks though you’re more likely to encounter them at an online brokerage. They’re not to be confused with money market accounts, which are on demand deposit accounts also offered by banks and credit unions. Money market funds must comply with regulatory requirements regarding the quality, maturity, liquidity, and diversification of their investments, which can make them appealing to investors looking for a conservative and steady security that pays dividends.

But the less-risky and short-term nature of the investments within these funds means that returns are generally lower than those of stock and bond mutual funds with more risk exposure. That means they may not keep pace with inflation.

Money Market Fund Pros:

• Money market funds are a conservative investment that carry less risk than traditional mutual funds or exchange-traded funds (ETFs).

• Unlike CDs, savings bonds or U.S. Treasury securities, you’re not necessarily locked in to money market funds for a specific time period.

• Money market funds can generate returns above high yield savings accounts or CDs.

Money Market Fund Cons:

• A lower risk profile also means a lower return profile compared to other mutual funds or ETFs.

• Risk doesn’t disappear entirely; you could still lose money.

• Certain money market funds may offer greater liquidity than others.

Corporate Bonds

Corporate bonds may not be as conservative as CDs or government bonds, but investors generally consider them a lower risk than stocks. The term “investment grade” lets investors know a bond is a lower risk based on ratings received by either Standard & Poor’s or Moody’s. You can purchase corporate bonds through some online brokerage accounts.

Investors expect that a higher-quality investment-grade bond — rated AAA, AA+, AA, and AA- by Standard & Poor’s — will perform consistently and pay interest on a regular basis. Bonds rated A+, A, and A- also are considered stable, while those rated BBB+, BBB, and BB- may carry more risk but are still considered capable of living up to their debt obligations. Like other types of bonds, corporate bonds are susceptible to interest rate risk, and with a longer commitment, there’s typically more exposure to that risk.

Corporate Bond Pros:

• Investors can earn interest from corporate bonds for reliable income.

• May offer higher yields than other types of bonds, with longer terms generally producing higher yields.

• Higher-grade bonds generally have a lower default risk, making them relatively less-risky investments with high returns.

Corporate Bond Cons:

• Default risk could mean losing money if the bond issuer fails to uphold their end of the bargain.

• Interest rate risk can negatively impact a corporate bond investor’s return profile.

• Longer bonds may carry a higher degree of risk compared to bonds with shorter terms.

Preferred Stocks

Preferred stocks, or preferreds, may be an appealing option for conservative investors looking for a higher yield than CDs or treasuries have to offer. Preferreds are often referred to as a “hybrid” investment, because they trade like stocks but are like bonds in that they provide income. You can trade shares of preferred stock in some online brokerage accounts.

These investments generally pay quarterly dividends that you can use as income or reinvest for more potential growth. In a worst-case scenario, if a company can’t pay its preferred dividends for a while, the money owed accumulates as backpay. And when the company resumes payments, preferred shareholders get their accumulated dividends before those who own common stocks.

You can sell preferreds at any time, but they’re typically used as a long-term investment. Just as with corporate bonds, companies that are more financially stable will receive higher marks from credit ratings agencies, so investors can have some idea of what they’re getting into.

Still, the ins and outs of buying preferred shares can be complicated, so beginners may want to work with a financial professional who is experienced in this type of investment.

Preferred Stock Pros:

• Preferred stock can offer consistent income in the form of dividends.

• Preferred stock shareholders take priority for debt repayment in the event that the company goes bankrupt.

• Investors can realize capital gains when selling preferred stock if shares have appreciated in value.

Preferred Stock Cons:

• Companies that offer preferred stock can reduce or eliminate dividends so payouts are not necessarily always guaranteed.

• Like other stocks, preferred stocks can be riskier investments than bonds or similar securities.

• Preferred stock shareholders are not assigned voting rights.

Blue Chip Stocks

Stocks issued by big companies that have a reputation for performing well in good times and bad are typically known as blue chips. They aren’t immune from big losses, but they tend to handle market drops better than other stocks. You can purchase blue chip stocks through an online brokerage account.

These companies have a history of dependable growth and paying consistent dividends. Investors who want to do some research can get insight on blue chips by checking out the “Risk Factors” section of a company’s annual 10-K filing.

Companies must list their most significant risks, usually in order of importance. Some risks apply to the entire economy, some to that particular industry, and a few may be specific to that company.

Blue Chip Stock Pros:

• Blue chip stocks are typically associated with stable companies, making them less susceptible to market volatility.

• Some Blue chip stocks pay regular dividends

• Blue chip stocks have the potential for long-term, steady growth which can allow investors to reap the benefits of capital appreciation.

Blue Chip Stock Cons:

• Blue chip stocks are not entirely insulated against market volatility or its accompanying downside risk.

• Blue chip stocks may have limited growth potential, as these are companies that are already well-established.

• Investors interested in adding innovative companies to a portfolio may be disappointed by blue chips, as these are usually older companies with a set business model.

Investment Strategies for the Conservative Investor

An investor who takes a defensive posture, or attempts to stick to less risky investments is often referred to as “conservative” – which is different from a conservative political leaning. Conservative investing is, as noted, defensive, and seeks to preserve wealth by reducing risk in a portfolio.

The opposite of conservative investing is aggressive investing. Investors in one camp or another can and will use different strategies and assets that align with their risk tolerances and time horizons. Generally, a conservative investor is perhaps more likely to stick to a buy-and-hold strategy than, say, one that involves a lot of day-trading or options trading. That’s because, over time, a buy-and-hold strategy may prove less risky as the market tends to rise over time.

Balancing Your Portfolio with Lower-risk Investments

Along with a longer-term investment strategy, conservative investors may lean into less risky investments, which can include bonds, index funds, mutual funds, and more. They may still add some riskier investments or assets to the mix, in order to provide a little bit of additional growth potential, but the balance between the risk of some investments and the lower risk of others is what a conservative investor is aiming for.

How to Identify and Select Lower-risk Investments

Investors doing their best to seek out and choose relatively lower-risk investments for their portfolio will need to do their homework. That includes looking at some key metrics that may help discern how volatile an asset’s value could be.

A good place to start is by looking at an asset’s standard deviation, which can help determine the volatility associated with an investment. Experienced investors can go even deeper, looking at Sharpe ratios, Betas, and Alphas – which are fairly high-level metrics.

Due Diligence and Diversification

When deciding how much risk to take, investors typically consider several factors, including their age, personality, and purpose. Investors who can’t handle a lot of risk for any or all of those reasons may wish to lean toward those investments that are typically the most conservative.

But another way to help protect a portfolio is through diversification: choosing investments from different asset classes, in different sectors, and with different risk factors. For example, you may choose to invest in a mix of conservative investments such as bonds or U.S. Treasury securities alongside higher risk investments, such as individual stocks or cryptocurrency.

Having some lower-risk assets in a portfolio can minimize the impact of volatility in other assets. Typically, investors with a long time horizon (such as young investors saving for retirement) can take on more risk in their portfolios, while those with shorter-term goals may want a more conservative approach. Investors with a low tolerance for risk may prefer conservative investments during times of uncertainty.

Diversification can help to balance risk so you don’t have to make an either-or choice with regard to a risky investment or conservative investment. The various assets in your portfolio can counterbalance one another as the market moves through changing cycles.

Special Considerations for Lower-risk Investments in 2024

As noted throughout, there are some special considerations investors will want to make when looking at their lower-risk investment options.

For one, depending on market trends, returns on lower-risk investments may be disappointing to some investors. As discussed, assets with lower associated risks tend to be associated with lower growth or returns. Conversely, higher-risk investments may have higher associated gains. Think about the difference in how the value of a stock might increase compared to the value of a bond – assets accrue value in different ways and at different rates.

Another thing to think about is inflation, which is the tendency of money to lose value over time. One of the reasons that many people invest is to try and see their wealth grow faster than the rate of inflation (which is, traditionally, around 2% annually, but may be higher or lower). If they’re successful, their wealth grows, rather than erodes, over time.

There’s a lot to consider when trying to outpace inflation, including the balance of risks and rewards, as mentioned. But many investments that can offer relatively high yields or dividends (like certain bonds) can also be at risk of interest rate changes. During times of high inflation (as experienced in the U.S. and much of the world in 2021, 2022, and 2023), central banks may increase interest rates to slow the economy.

That change in interest rates may cause some investments to lose value. Again, this is a consideration many investors, especially in 2023 and 2024, should be aware of.
💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.

Next Steps for the Prudent Investor

For conservative investors, or even those who are merely looking to add a dimension of lower risk to their portfolios, there are a lot of potential strategies and investment types out there. But, again, there’s no single “correct” thing to do for every investor – you’ll need to give some serious thought to your risk tolerance, time horizon, overall financial goals, and weigh the pros and cons of conservative investing accordingly.

As for next steps? It may involve speaking with a financial professional for some guidance. It may also just entail taking a look at your existing holdings, looking for areas where you can mitigate risk, and rebalancing or reallocating your resources accordingly.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

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1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.

2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA(www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of SoFi Digital Assets, LLC, please visit SoFi.com/legal.

Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Bank, N.A.

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Source: sofi.com

Apache is functioning normally

January 26, 2024 by Brett Tams

Advertiser Disclosure: Credit.com has partnered with CardRatings for our coverage of credit card products. Credit.com and CardRatings may receive a commission from card issuers.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

A credit card’s interest rate is obviously one of its most important factors. Some credit cards offer an ongoing APR that’s lower than average, while others offer a 0% interest rate for an introductory period after opening your account.

If you’re in the market for a low APR credit card, we’ve compiled a list of some of our favorites below. All of the cards in this list at least have a 0% introductory offer and have been ordered from least to greatest ongoing APR at the time of writing.

Note: You’ll notice that most of these credit cards have a variable ongoing APR. Ultimately your interest rate will be determined by your unique credit.

Read our full review

credit score, you’ll also want to know what’s on your credit reports before you apply. When you apply for a credit card, most issuers will check your creditworthiness before approving you. This is what’s known as a hard inquiry (as opposed to a soft inquiry, when you check your own credit). Multiple hard inquiries within a short amount of time – like if you get rejected for a card and try to apply for others right away – can hurt your credit. Your best bet is to apply for a card only if you’re confident you’ll be approved.

Heads up: the best low APR credit card offers tend to require good credit. Many of these lenders want to see a credit score of at least 650 or higher as well as an income and debt situation that ensures you can make your payments.

Research Other Rewards

APR is one thing, but you’ll also want to carefully consider the card’s other features. For example, if you travel a lot, you might be in the market for a travel rewards credit card with a 0% intro APR offer to spread out the cost of your trip over multiple interest-free payments.

Alternatively, if you like the idea of earning cash back on daily purchases, you might be more interested in a card that offers high amounts of cash back rewards on categories such as groceries or gas.

Consider Fees

If you choose a card that offers a 0% intro APR period, make sure you also consider what the ongoing APR will be once the intro offer is over. You’ll also want to carefully consider what other fees the card comes with, including any regular usage fees or penalty fees. Depending on how you use the card, you could end up paying more in fees than what you save in interest.

If you haven’t checked your credit score in a while, or you’re wondering what may be on your credit reports, you can also take a quick look at your credit by signing up for a free account with Credit.com.

Advertiser Disclosure: Credit.com has partnered with CardRatings for our coverage of credit card products. Credit.com and CardRatings may receive a commission from card issuers.

Source: credit.com