FinMasters

6 Best Alternatives to Savings Accounts to Make More Money

Sat, 26 Nov 2022 19:00:29 +0200

Almost everyone needs a savings account. That doesn’t mean you should keep all your money in one. As your financial life gets more complicated you’re likely to need one or more of these alternatives to savings accounts.

If you’re simply looking for someplace to stash your short and medium-term savings, like your emergency fund, a savings account may be all you need. Your money will be safe and you can get it when you need it. If your savings needs are more complex or you simply want to earn a higher interest rate, there are alternatives to a savings account that could serve you better.

Alternatives to Savings Accounts:

5 Best LegalZoom Alternatives for 2022

Fri, 25 Nov 2022 19:00:13 +0200

LegalZoom provides people with legal expertise when they need it, regardless of who they are or how much money they have. It has leveled the playing field by offering services that are much less expensive than hiring a lawyer.

Though LegalZoom is a leader in online legal solutions and documentation, it is not your only option. Look at LegalZoom alternatives that offer similar services so you can make an informed choice.

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Payday Loan Scams: Common Scams and How to Deal With Them

Thu, 24 Nov 2022 19:00:14 +0200

Payday loans are often a financial disaster to start with. These loans have extremely high interest rates and are designed to trap borrowers in a cycle of debt. Payday loan scams target these vulnerable borrowers, who are often already under deep financial stress.

Payday loans are often the only loans available to people with bad credit or no credit. Borrowers use them because they are desperate: they have run out of money and their paycheck isn’t going to arrive soon enough. They have little choice but to accept the predatory terms offered by payday lenders.

People in this position are often not financially sophisticated and make ideal targets for scammers. If you have a payday loan or have used payday loans before, you could be a target.

Here’s what you need to know.

How Scammers Get Your Name

Scammers use the information they get from payday lenders. Sometimes this involves hacking, but many payday lenders sell information to marketing partners, and once information is out there it can end up anywhere. Some payday lenders may even sell data direct to scammers.

If your account details are compromised, scammers may use inside knowledge to sound like legit company representatives or debt collectors.

Let’s look at how these scams are presented, how they can be detected, and how you can protect yourself.

Signs of Stolen Information

You may have used a legitimate lender at one time, and then hackers stole your information and sold it (or the lender sold it). That type of personal data makes it much easier for scammers to convince victims that they may have forgotten to make a payment on a payday loan.

The scammer who bought the information may contact you by pretending to represent the original loan company. They will then try to convince you that you still owe money, which, in fact, you already paid.

If you receive an email, check the return address. If it is from a gmail.com or yahoo.com account instead of a company email, beware. Most legitimate businesses don’t send messages from a Gmail or Yahoo account. A legitimate loan company would use a company email address. The Better Business Bureau recommends that if you do see what looks like a company email address, check the spelling. Scammers will often slightly misspell an email address to make it look legitimate.

If you get a phone call, call the company back on a number that you know (if you no longer have loan records, do an internet search) and ask if the call is legit.

Check Their Required Payment Methods

If a payday loan company asks for payment through apps or gift cards, beware. Whether you are asked to pay fees or make payments on your debt, fraudsters may ask for a payment in a form that makes it tough to get the funds back. This can include gift cards, apps like Venmo, or wire transfers through places like Western Union.

Look for Posers Claiming They Are Lawyers

Scammers will use names that resemble law firms to intimidate consumers. They will pose as debt collectors and try to bluff you into making payments on debts you have already paid.

Ask for written confirmation of the debt. Any debt collector must provide you with a written validation notice containing essential information about the debt within five days of their first contact with you. Refuse to speak to any debt collector who will not provide a validation notice.

Learn how to deal with debt collectors.

Don’t Give Out Personal Information

Scammers may ask you for bank account numbers or Social Security numbers, saying they need these to deposit or receive money from you. They are trying to steal your cash and sell your data. No legitimate company would ask for this information via phone or email.

Stand Up to Threats

If the person threatens you, you have a scammer communicating with you.

Watch for these threats:

You are going to jail
You will be blacklisted for jobs
Banks will not deal with you
Your Social Security payments will be stopped
Your wages will be garnished

Payday lenders and debt collectors cannot legally do any of these things. They don’t have legal authority. The scammer is trying to scare you into taking hasty action, like sending money.

Don’t “Return” Money Deposited in Your Account

Be on the alert if you are asked to return a deposit that was made in your bank account. Some fraudsters will claim they are confirming your bank information by sending you such a deposit. The catch is they want you to return it, and that return request is your red flag.

The scam works like this:

The company that “sent” the money provides you with a copy of a (fake) deposit slip to “confirm” your bank account is working correctly. Other scammers may make a deposit into your account and then contact you, saying it was an error.

They ask for a return of the money. If you send them the same amount as listed on the fraudulent deposit slip or your bank record, you have lost your money. The deposit was never made. Even if you see it in your account, that only means the deposit is pending. The bank will catch the error, but only after you have sent the money to the scammer.

Tip: Legitimate companies do send test deposits to make sure your bank information is accurate. The difference is that their deposits are usually $1 or less, and you don’t send them back. They disappear eventually.

Beware When They Call With an Offer

Be suspicious of a payday loan representative that calls you. A legitimate payday loan company does not call consumers to offer a loan. If a company initiates a loan offer over the telephone or online, do your research.

Note: The BBB’s Scam Tracker site is a searchable database of the reported scams, so checking a business name there is a good first step.

One red flag to watch for is when the call comes from a restricted number. Your phone may display the caller information as “Unknown”. A legitimate company won’t hide its contact number.

Only do business with a lender if you initiate the contact.

Don’t Pay an Upfront Fee

Legitimate lenders will not demand a commission or an amount of money upfront to “guarantee” the loan. Instead, expenses and interest should be deducted from the loan amount or charged to repay the loan. Similarly, if the caller wants you to pay for “insurance” to secure the loan, you are talking to a scammer.

Don’t Feel Ashamed

Many people get scammed, so don’t let embarrassment paralyze you and keep you from taking action. Annually, the United States sees s much as $4 million in losses to payday loan scammers.

Don’t take the blame; take responsibility. That means reporting the scammer and finding alternate ways to raise funds.

Payday Loan Scams

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How to Report a Scam

When it’s time to fight back, take command of the situation. Report the company:

Report your case to BBB.org/ScamTracker.
Use the Federal Trade Commission (FTC) report fraud page.
Find your state attorney general’s website to see if you can file online.

Tip: You can tell the fraudulent payday loan company you are reporting them. This may get them to back off and stop overcharging you.

Alternatives to Payday Loans

A payday loan can be considered a scam in its own right. These loans become very expensive very quickly, and most borrowers regret taking them out. These alternatives may help if you are considering a payday loan or if you’re already in the payday loan trap.

Advances on Your Paycheck

Your employer may be willing to pay you before your paycheck is scheduled to go to you. This can happen when you have already worked the days you will be paid for. For example, if you have worked a week of the current pay period, your boss may pay you for that week in advance. That amount will be deducted from your next paycheck. Note that this is not a loan, and you won’t pay interest in most cases.

Borrowing From Your Family and Friends

This is the quickest and least expensive method to raise cash. Even if they charge you interest, it will be much lower than a payday loan company would charge. Still, you should write and sign an agreement to make it official so that no one misunderstands the terms. Include how long the loan is for and the total dollar amount you will pay back (not just the interest rate).

Create a Debt Management Plan

Nonprofit credit counseling agencies provide free credit counseling services. They may recommend a debt management plan, which is a form of debt consolidation. You pay the agency, which then pays the creditors. This means you will pay one monthly payment instead of making several payments to all of your creditors. The service will also negotiate with your creditors to get you better deals. You will pay a monthly fee for this service.

Debt Settlement Companies

The problem in paying back your payday loan may be that you have too many other debts, such as credit cards, additional loans, and medical bills. You may be able to reduce your payments to those creditors by negotiating. Note that debt settlement companies are for-profit organizations. Just make sure the cost of dealing with them is worth the debt reduction you will get.

Tip: Your credit score will be hurt whether you use a nonprofit or for-profit company to negotiate your debts.

Payday Alternative Loans

Community Banks or Credit Unions often offer these loans, which are designed to help their depositors or members avoid or escape the payday loan trap.

These are typically small loans, similar to payday loans but without the predatory terms. Check with your bank or credit union.

Tip: While credit unions have traditionally been restricted to specific areas or groups, there are now credit unions that anyone can join.

Calculate “Legitimate” Payday Loan Interest Rates

Even if a payday loan company hasn’t been investigated or cited, fees and interest rates are usually exorbitant. Interest rates on a payday loan can range from 400% to 600%.

For Example

Here’s how people get fooled. Let’s say that a borrower is taking out a $400 loan with a finance charge of 20%. The actual interest paid is calculated by multiplying the loan amount by the interest charge ($400 x .20 = $80).

But there’s a catch. That’s the charge for a week or two. It is not an annual rate. The annual percentage rate comes from 391% to 521%.

According to The Consumer Financial Protection Bureau, most payday loans don’t get paid back in two weeks. The bureau says 80% of loans get renewed because the borrower can’t make the payment. In that case, you continue to pay interest on the balance, and there may be fees for each renewal. Your debt is getting larger. You can end up paying back five times what you borrowed.

Here is an example:
Loan Amount	$400
Finance Charge	$80
Loan Term	2 Weeks
Annual Percentage Rate	521.43%
Total You Repay if The Loan Renews Every Two Weeks for a Year	$2,081.75

You can find free online calculators to find the exact numbers for your payday loan.

Always ask what the annual percentage rate is.

Tip: It is illegal for a payday loan company to change the terms of your agreement after you have received the loan money. This includes adding fees that are not in your original contract.

Conclusion

The best way to avoid payday loan scams is to avoid payday loans in the first place. They are almost always a bad idea, and many lenders are less than reputable. At best you will face high interest rates and predatory terms. At worst, your data may end up in the hands of a scammer.

If you are using payday loans or you’ve used them in the past, there’s a good chance that your personal data are circulating and could end up with a scammer. Know the signs of a scam, be wary, and assert your rights!

The post Payday Loan Scams: Common Scams and How to Deal With Them appeared first on FinMasters.

Root Insurance Review: Is It Worth Using? (2022)

Wed, 23 Nov 2022 19:00:56 +0200

Root Insurance is an insurance carrier that bases auto policy premiums primarily on your driving habits. Your age, gender, credit score, and zip code play less of a role, which may help you qualify for cheaper coverage. It can help some drivers get coverage at a lower cost. It also provides renters and homeowners insurance.

Effectiveness

3.5 out of 5

Ease of Use

4.5 out of 5

Support

3.5 out of 5

Price

3.8 out of 5

Pros

Lower premiums for low-risk drivers

Comprehensive, user-friendly mobile app

Free roadside assistance

Cons

Inaccessible to higher-risk drivers

Not available in every state

Not as well-established as top competitors

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10 Best Chime Alternatives for 2022

Tue, 22 Nov 2022 19:00:11 +0200

If you’re looking for a digital bank, you’ve probably considered Chime, which has been the market leader for a few years. However, not all consumers who use digital banks agree that Chime is the best choice. Let’s take a closer look at Chime and some top alternatives to Chime.

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What is the FDIC?

Mon, 21 Nov 2022 19:00:37 +0200

If you go to a bank and look at its paperwork or visit a bank’s website, you’ll probably see the words “Member FDIC” somewhere. You might be curious what that really means and what the FDIC is all about.

The Federal Deposit Insurance Corporation (FDIC) is a government agency that oversees banks and the banking industry, helping protect everyday people from failures in the banking system.

How Does the FDIC Work?

The FDIC is an independent government agency that is involved in the banking industry. The FDIC’s primary task is to provide deposit insurance to its member banks, protecting depositors in the event that the bank fails.

Most banks in the US are members of the FDIC.

Note: Credit unions function like banks, but are not banks, so they are not covered by the FDIC. Instead, they are insured by the National Credit Union Administration (NCUA) or by state agencies that offer similar protections to depositors at credit unions.

On top of offering deposit insurance, the FDIC is involved in regulatory oversight. They watch over banks to ensure they are following all legal requirements and complying with consumer protection laws, like the Fair Credit Billing Act and the Truth in Lending Act. These laws ensure that banks use fair practices when offering loans to customers.

In short, the FDIC is a government group that protects everyday people from malicious or negligent actors in the banking industry.

What is FDIC Insurance and What Does it Cover?

One thing that many people are familiar with, or have at least heard of, is FDIC insurance. This deposit insurance is one of the primary services the FDIC offers and helps to protect consumers in the event that a bank fails.

The FDIC offers insurance on the following types of accounts:

Savings accounts
Checking accounts
Certificates of deposit
Money market accounts
Money orders
Cashier’s checks
Other official items issued by banks

FDIC insurance offers up to $250,000 per depositor, per account ownership category, per insured bank. Ownership categories include:

Single accounts
Joint accounts
Retirement accounts
Revocable trust accounts
Corporation, partnership, or unincorporated association accounts
Irrevocable trust accounts
Employee benefit plan accounts
Government accounts

What that means is that if you deposit money at a bank and that bank is later unable to return those funds to you, the FDIC will step in and reimburse you for the amount lost, up to the $250,000 limit.

Note: Investment accounts holding stocks, bonds, and other securities are not FDIC insured, even if they are held through your bank. If your broker or bank fails you still own those securities and you can shift them to another account.

What Happens When a Bank Fails

When a bank fails and is unable to return depositor money, the FDIC steps in to help deal with the situation.

Bank failures are exceedingly rare. There were only 4 bank failures in 2020 and none at all in 2021. However, despite their rarity, they can still happen.

When a bank fails, the first thing the FDIC does is to try to complete the bank’s acquisition by another bank. For example, if Bank ABC failed, the FDIC may help Bank XYZ acquire it. If the acquisition goes through, everyone with accounts at Bank ABC now has accounts at Bank XYZ. They never lose access to their funds and simply have to start working with a new institution.

If the FDIC is unable to find another bank willing to acquire the failed one, it steps in and pays depositors directly. Customers of the failed bank can then open accounts at another bank of their choice.

Maximizing FDIC Insurance

Recall that FDIC insurance protects up to $250,000 per depositor, per ownership category, per bank.

If you’re in a fortunate enough position to have more than $250,000 to put in a bank account, you can receive more than $250,000 in protection with careful planning.

For Example

If you’re married, you and your spouse could each open an individual account, receiving $250,000 in insurance on each. If you then open a joint account together, you’d each receive an additional $250,000 of insurance for funds in the joint account for a total of $1 million in insurance.

If you’re not married or don’t want to use joint accounts, you can simply open accounts at multiple different banks. You receive $250,000 in coverage per bank. As long as you keep the balance in each account below that level, you’ll receive full protection.

Why Does the FDIC Exist?

The FDIC was created in 1933 to help build trust between consumers and the financial system.

Before the FDIC, depositors had no protection. If a bank failed, depositors lost their money. As a result, any rumor of trouble sent depositors rushing to withdraw their money. This often turned a rumor into an actual bank failure, as banks didn’t have enough cash to meet the withdrawals. Bank failures were common occurrences for many years.

The stock market crash of 1929 and the ensuing depression led to thousands of bank failures. As more banks failed, people rushed to take money out, which caused further bank failures. The cycle continued feeding itself and bank failures escalated.

Eventually, President Franklin D. Roosevelt declared a four-day bank holiday in March 1933 and signed the Banking Act of 1933 in June, creating the FDIC.

By protecting depositors against losses from bank failures, the FDIC helped instill confidence in the banking system and reduce the prevalence of bank runs, which are now virtually unknown. That, in turn, helped reduce the rate of bank failure.

What is a Bank Run?

A bank run occurs when many people go to a bank to withdraw money from their accounts. Typically, this happens due to fear that the bank is about to run out of money and fail. They’re named because crowds will run to the bank to make withdrawals.

Banks in the US operate using a fractional-reserve system. That means that banks only keep a fraction of the money deposited on hand. If a bank’s customers have deposited a total of $1 million, it may only keep $50,000 in the bank at any one time. The rest is lent out to help the bank generate income.

In general, the fraction the bank retains is sufficient to handle daily withdrawal requests and other typical business. However, when a bank run occurs, customers try to withdraw more than the bank has available, leading to the bank being unable to return all of its customers’ deposits.

Prior to the founding of the FDIC, bank deposits were not insured. If a bank failed, customers could lose some or all of the money they had deposited. This made bank runs far more common as people tried to recover their cash before their bank collapsed. These runs significantly contributed to bank failures during the Great Depression.

The FDIC has largely made bank runs a thing of the past because depositors are confident that their money isn’t at risk, even if their bank fails.

Conclusion

The FDIC is a government agency that was founded in the wake of the Great Depression to help build confidence in the American financial system. Like over Depression-era innovations, it continues to play a major role in the American economy and helps protect everyday people from issues with the financial system.

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What Are Fractional Shares? How Could They Benefit Investors?

Sat, 19 Nov 2022 19:00:47 +0200

Many high-quality companies have stock prices that are so high that even a single share is unaffordable for many investors. For example, a single share of Berkshire Hathaway costs, at this writing, over $424,000! Even if these companies are “cheap” in terms of valuation relative to fundamentals, it’s hard to buy them if you can’t afford a share. Fractional shares address this problem.

Let’s say, as an example, that you have $10,000 in cash that you’d like to invest in a variety of stocks. That’s a sensible approach, as diversification can help to reduce your portfolio’s exposure to single-stock risk.

So, you get a hankering for burritos and decide that you want to invest in Chipotle stock. You’re amazed to find out that, as of early October 2022, just a single share of Chipotle stock costs over $1,500. Then, your attention turns to car parts and you consider taking a small stake in AutoZone, only to discover that one share of AutoZone stock costs over $2,000!

Taking up 15% or 20% of your account with a single stock isn’t ideal for portfolio-diversification purposes. I guess you’ll just have to avoid companies with high share prices – or will you?

There’s a surprisingly simple solution that can make cost-prohibitive stocks more accessible to account holders of all sizes.

It took a while, but brokers have responded to the needs of smaller investors with a product called fractional shares. Don’t worry, I won’t take you back to fifth grade and quiz you on adding and subtracting fractions. Instead, we’ll ask and answer the question: What are fractional shares?

What Are Fractional Shares?

According to the U.S. Securities and Exchange Commission or SEC, a fractional share is “when you own less than one full share of a stock or other security.”

It’s pretty rare that people are referring to anything other than stocks if they’re discussing fractional shares, though. Stock brokers do offer fractional shares of exchange-traded funds or ETFs, as these trade similarly to stocks.

Think of going to an Italian restaurant when you’re craving pizza. If you’re by yourself, you probably don’t plan to eat an entire pizza. If the restaurant wants to stay in business, they’ll offer individual slices of pizza; likewise, responsive brokers are now offering slices or fractions of certain stock shares.

Thus, like a small slice of pizza, it’s much easier for a small account holder to digest one-tenth of a share of Chipotle or AutoZone stock than an entire share. Suddenly, those expensive stocks aren’t so cost-prohibitive anymore, and now just about anyone can participate in the growth potential of a broad variety of businesses.

Explainer: What Makes a Stock “Expensive”?

A stack that costs $1000 per share is more expensive than a stock that costs $100 per share, right?

Not really. For investment professionals, a stock is “cheap” not because of its share price, but because of its price relative to its fundamentals. A stock with a low per-share price can be expensive and a stock with a high per-share price can be cheap.

For example, if that $1000 stock belonged to a company with high revenue and earnings growth, no debt, and very attractive valuation ratios, an analyst would call the stock cheap, because its price is low relative to its value. If the $100 stock belonged to a company with slack or falling revenue and earnings growth, high debt, and weak valuation ratios, analysts would call it expensive.

Who Should Buy Fractional Shares?

Fractional shares aren’t only for investors with small accounts. They can be useful for portfolios of just about any size.

The SEC is correct in pointing out that “Fractional shares are a way to invest when you do not have enough money to purchase a full share of a particular stock.” Yet, that’s not the only scenario in which purchasing fractional shares would make sense. Even if you have a six-figure portfolio, you still might not want to allocate more than 0.5% of it toward any individual stock. In that case, buying half of a share of a more expensive stock would be an easy solution.

Or, let’s say you’re an adherent of a strategy called dollar cost averaging. This basically means investing a fixed dollar amount in a particular stock (or ETF, etc.) on a regular schedule, such as once per month. You might find it difficult to invest a specific dollar amount in a more expensive stock – but I’ll bet you know where I’m going with this. Just use fractional shares to effectively slice off a piece of a share and voila! You’re now able to invest that exact dollar amount you wanted to (or at least, pretty close to it).

Are Fractional Shares the Same as a Stock Split?

You might have heard about stock splits and think that this sounds a lot like fractional shares. They’re not quite the same thing.

Without delving into the finer details of stock splits, we can just say that these operations are initiated by the companies that issue the shares, not by the brokers that assist you in buying and selling the shares. If a company wants to make its stock shares more affordable, it can enact what’s technically called a forward share split. With this, the proverbial pizza is already cut into slices for everyone – no need to request a purchase of fractional shares from your broker.

For instance, Apple and Tesla have enacted forward share splits multiple times because their stocks went into the $700s, $800s, or even above $1,000. These companies did the slicing and dicing for you, but other companies choose not to enact stock splits even if their shares become expensive. That’s not a problem if your broker is willing and able to let you buy fractions of those pricey stocks.

Where Can You Buy Fractional Shares?

Not every broker offers fractional shares, and you’ll need to contact the customer service department of your broker to determine whether you’re eligible to purchase them. That said, as of October 2022, there are some U.S.-based brokers that appear to offer fractional shares to qualifying customers.

Here’s some good news: Many of the brokers who offer free or lost-cost self-directed trading also happen to offer fractional shares. These include some names that might be familiar to you: Charles Schwab, E-Trade, Robinhood, TD Ameritrade, Interactive Brokers, Fidelity, Merrill Edge, and Vanguard.

Not all stocks might be available for fractional share purchases. Individual brokers may place restrictions on fractional share purchases, such as requiring a minimum account size. Some brokers understand that fractional shares are often geared toward smaller account holders, and will therefore try to be more accommodating in providing this investment option.

If you’re shopping for a broker, look at your options and compare their rules on fractional shares.

What Are Fractional Shares? How Could They Benefit Investors?

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Get in on the Action with Fractional Shares

So now, you have the lowdown on an investment product that can help you implement strategies such as portfolio diversification and dollar cost averaging. Fractional shares aren’t just for small account holders, as anybody might opt to mitigate his or her exposure to a particular company (or companies, in the case of a fractional ETF share).

Thanks to some of the more responsive brokers, investors of all sizes can more easily purchase some pricey stocks even when the companies choose not to enact stock splits. It’s a step in the right direction as fractional shares can often make investing more accessible, so feel free to take advantage of the opportunity and try a few stock slices for yourself.

The post What Are Fractional Shares? How Could They Benefit Investors? appeared first on FinMasters.

October 2022 Inflation Survey: Impact and Responses

Fri, 18 Nov 2022 19:00:14 +0200

In July 2022 we ran a survey aimed at uncovering the ways that Americans were responding to the most serious episode of inflation since the 1980s.

The findings were striking: 95.7% of respondents reported that they were concerned and making adjustments to their spending patterns. Surprisingly, even Americans earning over $150,000/year reported feeling the impact of rising prices.

Over the ensuing months, inflation has settled in and become an enduring reality. The impact of rising prices has been multiplied by rising interest rates, making loans and credit cards more expensive at a time when Americans are least able to bear extra costs.

We decided to follow up our July survey with an updated look at the impact Inflation is having on American consumers and how those consumers are responding.

These are the results.

Key Findings

More than 88% of respondents across all income brackets stated that inflation has had a significant impact on their household budget. 48.93% said the impact was “high” or “very high”.
53.78%% have taken on additional debt, 27.89% reported putting more expenses on credit cards, and 23.18% reported delaying debt payments.
Approximately 90% of respondents reported that inflation has had a negative impact on their mental health. Respondents reported feeling stressed, worried, and anxious.
Paying bills was the largest source of stress, followed by interest rates, debt payments, and affording food.
82.5% of respondents reported that they were cutting back on holiday spending.
Electronics, jewelry and watches, and dining out are all cited as targets for cuts, a negative sign for producers and retailers in these sectors.

The Impact on American Budgets

We asked three questions aimed at determining how Americans are responding to soaring prices,

Did You Do Any Of The Following in the Last Six Months?

Three responses were the most common. 30.41% of respondents worked more hours, 28.86% sold personal belongings to make money, and 28.02% canceled a trip or vacation.

Slightly smaller numbers reported delaying paying debt, delaying buying a car, taking a second job or side hustle, cutting back or eliminating investments, and skipping medical appointments.

Did You Have to Borrow Money or Take Out Credit to Cover Ongoing Expenses in the Past Six Months? If You Did, What Did You Use?

53.8% of respondents took on more debt to help them deal with rising prices. 27.89% reported putting more money on credit cards, with smaller numbers reporting borrowing from friends and family and using personal loans, cash advances, buy now pay later plans, and loans from retirement accounts.

Respondents from all income groups reported high reliance on credit cards, ranging from 26% to 30%.

With interest rates rising rapidly, reliance on credit in general and credit cards in particular only adds to the financial burden, another indication of unsustainable responses.

If You Had to Borrow Money to Cover Ongoing Expenses in the Past Six Months, How Much Did You Borrow In Total?

Responses here were heavily proportional to income. Lower-income respondents ($50,000 per year and below) were most likely to report borrowing $500 or less, middle-income respondents ($50,000 to $150,000) typically reported borrowing $500 to $1000, and those earning over $150,000 borrowed $2000 to $5000.

Here’s more on how Americans are coping with inflation.

Inflation and Mental Health

The connection between financial stress and mental health is well documented. We wanted to know how Americans perceive the impact of rising prices on their state of mind.

Over the Past Six Months, How Has the Rising Cost of Living Made You Feel?

Only 9.75% of respondents reported no psychological stress. 50% to 60% of all income brackets reported feeling stressed, worried, or anxious, 10% to 20% reported ander, and 10% to 12% reported depression.

“All of the above” was a popular option for those who selected “other”.

What Were the Specific Causes of These Feelings?

The financial stress that Americans are feeling derive from concern over the price of necessities. 40.67% were worried about paying bills, 30.86% were concerned about being able to afford food, and 29.76% were stressed over the cost of housing.

33.7% cited credit card debt, another indication that rising interest rates will bring continued pain.

Did You Make or Plan To Make Cuts In Your Spending on Any of the Following?

This question was designed to determine whether Americans are reducing spending designed to help them cope with psychological stress.

27.05% planned to cut gym memberships, 15.56 on mental health apps or subscriptions, and 14% were cutting back on therapy.

59.05% did not plan to cut back on any of the options, possibly because they weren’t using them in the first place.

Here’s more on how inflation is affecting mental health.

Inflation and Holiday Spending

The year-end holidays are an important source of relief for many Americans and an equally important source of revenue for many businesses. We wanted to know how inflation would affect holiday spending.

Do You Expect to Cut Back on Holiday Spending This Year?

82.5% of respondents reported that they will reduce holiday spending this year. This ratio held up with minimal variation across all income and age groups.

Where Will You Cut Spending?

The leading areas for spending cuts were gifts for family members (48.61%) and gifts for friends (44.35%). 40% reported that they will cut back on holiday travel, while food and alcohol were selected by 30% each.

What Gifts are Most Likely to be Cut?

Electronics were the leading category selected for spending cuts (42.8%), followed by jewelry and watches (41.45%), cosmetics and perfumes (30.28%), sports equipment (27.89%), and toys (27.89%).

The reduced spending is likely to have a significant impact on businesses that depend on holiday spending for a substantial part of their earnings.

The Takeaways

Many of the findings of our inflation survey were expected and reflect predictable impacts of and responses to rising prices.

There were still some surprises. Notably, responses were extremely consistent across age and income groups. We expected that inflation would have a markedly lower impact on older and more affluent consumers. The survey results showed some minor variations but overall indicated that virtually everybody is affected by inflation.

Another takeaway was that continued inflation is likely to force more drastic measures. Many of the responses to inflation are not sustainable: there are only so many hours you can work and only so many items you can sell. Skipping debt payments and medical appointments can mushroom into higher costs down the line.

In addition, the heavy reliance on debt in general and credit card debt, in particular, is likely to generate magnified consequences down the line, as rising debt payments compete with household necessities for scarce financial resources.

We are not in a position to predict the future, but it’s safe to say that the impact of inflation is already high and is likely to increase exponentially if prices continue to rise, with potentially serious economic and political consequences.

About the Survey

The inflation survey collected responses from 1,549 individuals, geographically distributed across the US. 52.36% were female, and 47.64% were male.

38.34% earn less than $50,000 per year, 31.56 earn between $50,000 and $100,000 per year, 13.3% earn between $100,000 and $150,000, and 9.88% earn over $150,000. 6.91% of respondents preferred not to disclose their age.

20.92% of respondents were aged 18-29, 26.21% were 30-44, 28.21% were 45-60, and 28.21% were over 60.

Copyright Information:

All the data included in this study is available via the public domain. This means all statistics may be copied without permission. We do, however, appreciate citation as the source via a link.

The post October 2022 Inflation Survey: Impact and Responses appeared first on FinMasters.

Lexington Law vs. Credit Saint

Thu, 17 Nov 2022 19:00:42 +0200

People with bad credit retain credit repair companies to help them dispute entries on their credit reports and improve their credit scores. If you do choose to use a credit repair company, Lexington Law and Credit Saint will be among your top options. Both companies are established and highly visible players in the business.

Let’s take a closer look at how they stack up against each other.

Learn more: Before hiring any credit repair company you should look closely at your credit situation and decide whether it’s worth the cost. Our guide on when to hire a credit repair company will help you decide!

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Funding Stock Options: How to Exercise Options You Can’t Afford

Wed, 16 Nov 2022 19:00:31 +0200

Many employees of privately held companies are forced to leave potentially valuable shares on the table because they can’t afford to exercise their stock options. Many investors want to buy into promising companies while they are still privately owned, getting the best possible price. Funding stock options may solve both problems at the same time.

Let’s take a closer look.

Funding Stock Options: How it Works

Many private companies offer stock options to employees. These offers are designed to add to worker compensation and attract quality employees without costing the company badly needed cash.

A stock option is not a stock giveaway. The employee has to exercise the option, meaning they buy the stock. They often get a preferential price, but they still have to pay. If the employee doesn’t have the cash to exercise the option, it will eventually expire. The shares are left on the table and the employee is left out of any future gains.

Several companies specialize in providing financing for employees that want to exercise a stock option. They do this in one of two ways:

Linking employees with investors. Some companies broker a transaction between the employee and an investor who wants exposure to the company. The investor pays the cost of exercising the option and takes a percentage of the proceeds when the shares become liquid.
Using their own resources. Some companies engaged in funding stock options are structured as capital funds. They use their own money to finance the option exercise and take a percentage of the shares as payment when the shares become liquid. Many of these companies will also provide financing to employees who own shares.

If you’re an employee who wants to exercise an option but can’t afford it, or you want to convert shares you hold to cash, you can deal with either type.

If you’re an investor who wants to fund stock options as a tool to buy private company shares, you’ll need to work with a company that links investors to employees.

Funding Stock Options: How to Exercise Options You Can’t Afford

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The Benefits for Employees

Stock options sound like a great idea. You do your job and get your salary, and on top of that, you get company stock. If the company succeeds, that could be worth a lot of money. Stock options allowed many early employees of high-profile companies to become millionaires.

The only problem is that exercising those stock options costs money. It may be money that you don’t have, especially if you’re paying off student loans and other debts. It hurts to see your stock options expire because you couldn’t afford them, especially if they were part of the reason why you took the job in the first place.

EquityBee, which is engaged in funding stock options, estimates that around $60 billion worth of stock options are made available every year, and around 55% of that value is left on the table by employees that do not exercise options.

Finding an investor to fund the exercise of your options is an ideal solution. The investor will get part of any potential proceeds, but they also assume most of the risk. You get the shares and a part of what they earn (if anything) without putting up cash.

The Benefits for Investors

Buying private company shares allows an investor to take a position in a company before the share value is bid up by private trading. Traditionally this option has only been open to institutional investors or high-net-worth individuals who participate in venture capital funding rounds.

Private companies issue shares to institutional investors as a way of raising capital. They also offer shares, either directly or as stock options, to employees as part of their compensation.

It is difficult to buy shares that were issued to employees. These transactions typically have to be approved by the company, and companies aren’t always willing.

Funding stock options requires no company approval because the shares are simply being purchased by the employee as offered by the company. Financiers don’t buy the shares, they buy the right to a portion of the proceeds when the shares are sold.

The Companies that Make It Happen

These companies provide funding for exercising stock options, essentially as a loan. If the company is acquired or goes public, a specified number of shares goes to the investor who funded the loan. If the company does not provide an exit point or if the shares sell for less than the option’s strike price, the employee has no liability.

These are some of the companies engaged in funding stock options.

Equitybee

Equitybee specializes in funding stock options for employees of high-growth VC-backed startups. They have worked with over 1700 employees across multiple industries, many of whom have experienced successful exits.

Most companies on the platform are backed by prominent VC or private equity firms, have raised at least $30 million, and have completed at least one funding round.

Equitybee links private investors to employees looking for funding to exercise stock options and is a good choice if you are looking to use the option funding process to acquire stock. Investors need to pass an accreditation process. This is required by the SEC, as the securities involved are not registered.

SecFi

SecFi provides a range of services involving equity planning for startups and private companies and their employees. Aside from funding stock options, these services include equity planning, wealth management, tax planning, and various forms of financing.

SecFi provides financing for employees who want to exercise their options. The financing package covers all costs, including taxes. Employees can take this financing in the form of a loan with monthly payments or pay when the company exits.

SecFi currently serves around 30,000 employees and has provided roughly $700 million in financing for funding stock options.

The SecFi website is heavily employee-oriented and provides little guidance for investors interested in buying shares. Their investment branch, SecFi Capital, advertises access to “high-growth startups on track to go public”, but you’ll need to contact them for details.

LiquidStock

LiquidStock advances money to employees who want to exercise their options. Contracts are settled when there is a “liquidity event”, like an IPO, an acquisition, or any other event that makes the shares marketable. A fixed percentage of the shares are transferred to LiquidStock when there is a liquidity event.

If there is no liquidity event or the price is below the option strike price, LiquidStock takes the loss. You don’t have to cover the difference.

If you have exercised your options and are looking to convert the shares into cash, LiquidStock also lends money to private company shareholders with shares as collateral. You pay when there’s a liquidity event.

LiquidStock’s website does not discuss opportunities for investors to acquire shares.

ESO Fund

ESO Fund has been operating since 2012 and describes itself as “the oldest and largest employee equity company in the world”. They have handled more than 1000 transactions at over 500 companies.

ESO will fund option exercises and the associated excise taxes. Once your application is approved funding is available in as little as 24 hours. When the stock becomes liquid you’ll repay the initial investment plus a percentage of the stock.

ESO Fund also has liquidity solutions for employees who have already exercised options or received Restricted Stock Units (RSUs).

Like LiquidStock, ESO Fund works with their own capital and does not solicit outside investors.

Quid Capital Fund

Quid is designed to help employees at startups and private companies exercise their options or convert their shares to liquid assets. The company has worked with shareholders at a long list of companies, including Air BnB, Uber, Lyft, Palantir, Robinhood, Discord, and many others.

The model is straightforward. If you have options that you can’t afford to exercise, contact the Company. If they are willing to make a deal, they will advance the funds for the exercise and take repayment when the shares become liquid.

Quid will also provide liquidity options for employees who hold shares, also taking repayment when the shares become liquid. All risk is carried by the Company: if the shares don’t become liquid you have no obligations.

If You’re Buying

If you’re planning to fund stock option exercise as a way of buying private company stock, you should be familiar with the risks of pre-IPO investing. The company might not go public and there may never be a market for the shares. Even if the company goes public the shares may not increase in value.

You’ll have a limited range of options as a buyer: many of the companies listed here are not open to private investors. There are other ways to buy pre-IPO stock, but in most cases, you will have to meet the SEC’s accredited investor criteria.

There is never any assurance that a given platform will have available shares or option finance opportunities for any given company.

If You’re Selling

If you’re an employee with options you can’t afford to exercise, these companies can provide a solution. As with any financial deal, though, you should do your homework first.

The balance between the interests of the employee, the financier, and the broker (if any) is tricky and needs to be structured as a win-win-win agreement. All parties involved have to fully understand the terms and their obligations.

These arrangements remove all risk from the employee exercising the option. If the shares fall in value or don’t become liquid at all, the company or the investor eats the loss. That works for the employee, but you can also expect to pay a considerable price for a no-risk transaction.

Paying that price is probably reasonable if the alternative is letting your options expire: if that happens you gain nothing, and something is always better than nothing. If you do have other potential ways to exercise the options, consider using those first.

If you’re considering making a deal for shares you already own (a service many of these companies also offer) you’ll have to analyze the situation carefully. You will give up a substantial number of shares (remember, it’s a no-risk deal for you, and those don’t come free). If an IPO or other liquidity event is likely at any time soon and you have confidence in the future, you might be better off keeping those shares for yourself!

The post Funding Stock Options: How to Exercise Options You Can’t Afford appeared first on FinMasters.

How to Buy Boring Company Stock

Tue, 15 Nov 2022 19:00:25 +0200

When Tesla and SpaceX founder Elon Musk launches a new venture, investors pay attention. Investors have been wondering how to buy Boring Company stock since the Company’s launch in Dec. 2016.

The Boring Company intends to shake up urban transportation by moving it underground, making the construction and deployment of underground transport systems faster, cheaper, safer, and more efficient.

That goal has obvious appeal, and if the Company can pull it off it could have a remarkable future.

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5 Best Credit Karma Alternatives for 2022

Mon, 14 Nov 2022 19:00:10 +0200

Credit Karma offers many great features for free, including credit monitoring, credit scores, checking accounts, and more. But there are also plenty of Credit Karma alternatives that offer equivalent or even better credit monitoring and other financial services.

To help you find the best alternative that provides the features most important to you, we have gathered a list of Credit Karma’s top competitors and explored the services they are best at.

Compare Credit Karma Alternatives

Who is Credit Karma?

Credit Karma is one of the first credit monitoring websites created to offer free credit scores. Founded in 2007, they now provide various services, including credit monitoring, banking, and loan matching.

They have served over 100 million members and have excellent ratings on their mobile app. Unfortunately, they have poor reviews on their BBB page and have received a C rating from the Better Business Bureau.

What Services Do They Provide?

Credit Karma’s core business is credit monitoring. They offer free access to your TransUnion and Equifax credit reports and scores (Vantage). They can monitor those reports and alert you of any changes.

In addition to their credit monitoring services, they also have their Karma Money program. This includes online checking and savings accounts as well as their credit builder program that operates like a secured loan.

Some of the other services Credit Karma provides include:

Credit card matching
Loan matching
Mortgage matching
Instant Karma – a sweepstakes opportunity tied to their checking and savings accounts
Karma Drive – earn discounts on your safe driving
Educational resources

Credit Karma’s services are 100% free to the user: they earn money through credit card, loan, and insurance referrals. Your only potential costs include a 1% foreign transaction fee (checking account) and a deposit to secure your credit builder account.

Recent Legal Troubles

It is worth noting that Credit Karma has had some recent legal issues. This includes a lawsuit filed by the FTC, where Credit Karma agreed to pay $3 million to customers who were denied credit after receiving pre-approved claims from Credit Karma.

There was also a privacy issue with Plaid; the company Credit Karma uses to link to your external bank account(s). Plaid was accused of obtaining more account information than needed, including the login information for users’ bank accounts.

The $58 million dollar settlement against Plaid affected numerous Credit Karma customers as well as users of other apps that use Plaid’s services.

Who is Credit Karma Best For?

Credit Karma could be a good fit if you are looking for a free credit monitoring service that lets you monitor more than one credit bureau’s credit report.

It can also be a good choice for those who:

Want free checking and savings accounts
Need to build their credit
Want credit monitoring access on their phone
Are interested in comparing loan/insurance rates

However, Credit Karma will not be a good choice for those who are leary of their recent legal/privacy issues, those wanting more in-depth credit monitoring and identity monitoring services, or those looking for high-yield savings accounts.

5 Alternatives to Credit Karma

Credit Karma isn’t the only name in the game when it comes to credit monitoring or online banking services. That said, there are few other platforms that offer such a wide range of services.

So when looking at the alternatives, you’ll want to focus on the products/services that are most important to you.

Let’s take a look at how Credit Karma stacks up against some of its top competitors.

Credit Karma Versus 5 Alternatives

	Scoring model used	Credit bureaus pulled	Bank accounts	Credit-building feature	Upgrades (for a fee)
Credit Karma	VantageScore	TransUnion & Equifax	Yes	Yes	No
Credit Sesame	VantageScore	TransUnion, Experian, & Equifax	Yes (checking only)	Yes	Yes
Experian	FICO	Experian TransUnion* & Equifax*	No	Yes	Yes
CreditWise	VantageScore	TransUnion	Yes	No	No
Mint	VantageScore	TransUnion	No	No	No
MyFICO	FICO	Experian, TransUnion, & Equifax*	No	No	Yes

* access to credit reports from these credit bureaus available for a fee

1. Credit Sesame

Founded in 2010, Credit Sesame started out as a credit monitoring website. Their portfolio of products has since grown, yet most services remain free to use.

They remain unrated on the BBB site with mixed customer reviews at 3.5/10, with most of the negative complaints stemming from Credit Sesame’s frequent email adverts.

Features & Pricing

Credit Sesame’s primary service is its credit report and score monitoring service.

	Credit Bureau Monitored	Scoring Model Used	Identity theft protection	Rent reporting	Cost
Basic	TransUnion	VantageScore	No	No	Free
Premium	TransUnion, Experian, & Equifax	VantageScore	Yes	Yes*	$15.99/month

* only reports to Equifax & TransUnion

Credit Sesame does offer a 7-day free trial of their Premium account.

Credit Sesame also offers its Sesame Cash program, which includes a zero-fee online checking account. This checking account can then be used to fund a credit-builder account which lets you set your own utilization rate.

Learn more: See our full Sesame Cash review for more information on the credit builder account and other Sesame Cash features.

The other services Credit Sesame offers include:

Credit card matching
Insurance matching
Home value estimator
Loan matching
Educational resources

How do they compare to Credit Karma?

If you are looking for a company that offers a similar set of services to that of Credit Karma, Credit Sesame is your winner.

One area where Credit Sesame beats out Credit Karma is with their premium subscription options that let you monitor all 3 of your credit reports for a monthly fee.

However, Credit Sesame doesn’t offer a savings account like Credit Karma does, and their credit builder account reports like a credit card instead of a loan.

It is also worth noting that Credit Sesame was also impacted by the Plaid privacy lawsuit.

Visit Website

2. Experian

This credit bureau offers its own free credit monitoring service. And, being one of the 3 major credit bureaus, you’ll know that the credit information they display is the same as what appears on your full Experian credit report.

Features & Pricing

Experian has several free services and a few that require a small fee. Their basic credit monitoring service is 100% free and comes with:

Your Experian credit report
Your Experian FICO credit score (updated monthly)
Credit alerts
Access to bill negotiation services (for a fee unless you have a paid subscription)
Personal finance management tools
Credit card and loan matching services
Boost – for reporting utility payments, subscriptions, and rent

In addition to their free basic service, Experian offers several upgraded options for a fee.

	CreditWorks Premium	IndentityWorks Premium	IdentityWorks Premium Family
Price	$24.99/month	$24.99/month	$34.99/month
Free trial period	7 days	30 days	30 days
3 bureau credit reports and scores	monthly	quarterly	quarterly
Identity Monitoring	1 adult	1 adult	2 adults & up to 10 children
Additional Features	Score simulator, home and auto scores, etc.	Privacy scans, court record alerts, etc.	Privacy scans, court record alerts, etc.

In addition to the above services, all of the premium memberships also offer:

$1 million identity theft insurance
3 bureau credit monitoring
Experian credit lock
Daily Experian FICO score updates
Dark web scans

Which page you are upgrading from will determine whether you get CreditWorks Premium or IndentityWorks Premium, so be careful.

How do they compare to Credit Karma?

Experian beats out Credit Karma with access to full credit reports and FICO credit scores. Plus, free access to Boost (which does not use Plaid) for improving your credit score is an excellent resource.

Additionally, Experian offers advanced credit monitoring while Credit Karma does not; unfortunately, access is fee-based.

One downside to a free account on Experian is the various confusing upgrade pages. On a personal note, I use Experian, and the constant “upgrade now” pop-ups are very annoying.

If you want a free checking account, Credit Karma might be a better option.

One of the best potential credit monitoring moves is to use Experian and Credit Karma so you can have free coverage of all 3 credit bureaus.

Visit Website

3. CreditWise

This credit monitoring app backed by Capital One bank is 100% free to use and is already enabled for anyone using a Capital One credit card or other product. It is also a tool that is open to non-customers.

Features & Pricing

The CreditWise website and app give you access to your TransUnion credit report information and a VantageScore for free. In fact, all of the tools and resources provided are 100% free.

In addition to basic credit monitoring, your CreditWise account will come with features, such as:

Credit score simulator
Customized tips to improve your credit
Score tracker
Dark web monitoring
Credit product recommendations
Education resources

And, since CreditWise is backed by Capital One, you can explore all of their banking products, including checking accounts, auto loans, credit cards, and more. CreditWise will automatically be tied into any Capital One credit accounts you open.

How do they compare to Credit Karma?

Since CreditWise is already funded by Capital One’s other products, it is much less spammy than Credit Karma (and other competitors) which generate revenue by selling you additional products.

Plus, being linked to all of Capital One’s banking products gives it a leg up over Credit Karma which just offers checking, savings, and credit builder accounts.

That said, they only pull from TransUnion, and Capital One doesn’t offer any credit-building features. Additionally, Capital One has a partnership with Plaid and was impacted by the lawsuit.

Visit Website

4. Mint

Backed by Intuit, Mint is primarily a budgeting and personal finance management app. This app helps you manage all of your finances in one place, including credit cards, bank accounts, investment accounts, and more.

Features & Pricing

Mint’s features are 100% free except for their bill negotiation service offered through BillShark, which will cost you 40% of the savings they negotiate. I.E., if they save you $200, you’ll owe BillShark $80.

Mint’s free services include:

Budgeting
Subscription management
Investment tracking
Bill due alerts
TransUnion credit score (Vantage)
Credit monitoring
Salary estimator
Credit card & loan matching services
Educational calculators & resources

Mint also offers integration with your taxes if you use TurboTax.

How do they compare to Credit Karma?

If you are looking for a personal finance management tool that includes access to credit monitoring, then Mint could be a great choice. And, Mint uses Intuit’s technology to access your accounts, so they were not impacted by the Plaid lawsuit.

However, if your focus is on credit monitoring or improving your credit, then the information and tools that Credit Karma offers is the better choice.

Visit Website

5. MyFICO

The company that invented credit scores has its own credit monitoring service called MyFICO. Their unique service is one of few that will provide you with actual FICO scores instead of Vantage scores.

Features & Pricing

MyFICO’s access to credit scores and reports is done on a subscription basis. None of their services are free.

	Basic	Advanced	Premier
Credit Bureau Pulled	Experian	Experian, TransUnion, & Equifax	Experian, TransUnion, & Equifax
Update Frequency	Monthly	Quarterly	Monthly
Identity Monitoring	No	Yes	Yes
Price	$19.95/month	$29.95/month	$39.95/month

In addition to the above features, all of MyFICO’s subscriptions come with:

$1 million identity theft insurance
Alternative FICO scores (i.e., auto scores)
Score simulator
Online Community
Educational resources

MyFICO also offers one-time credit reports and scores at $19.95 for a single bureau and $59.85 for all 3 bureaus.

It is also worth noting that MyFICO does not offer any kind of trial period, nor do they offer a refund period.

How do they compare to Credit Karma?

If your focus is on credit and identity monitoring and you don’t mind paying a fee, then MyFICO might be the best choice.

All subscriptions include full reports and FICO credit scores, which neither Credit Karma nor most of their competitors offer. Plus, their thriving online community is a real plus. Credit Karma shut down their own community in 2021.

The downside, of course, is the price. Credit Karma is free, but MyFICO is not. And, despite the wealth of advice and resources, MyFICO does not offer banking or credit building accounts like Credit Karma does.

Visit Website

Final Thoughts

With Credit Karma, you never have to worry about paying a dime. But that doesn’t mean their services will be best to meet your needs. If you are looking for some basic, free credit monitoring and loan comparison services, then Credit Karma could be a good fit.

On the other hand, Mint would be a better choice for managing your finances, and Experian and MyFICO might be better for monitoring and protecting you against identity theft.

Finding an alternative to Credit Karma is easy, but finding the alternative that is the best fit for you, is worth some extra consideration.

The post 5 Best Credit Karma Alternatives for 2022 appeared first on FinMasters.

Americans Are Falling Deeper in Debt as Inflation Continues to Rise

Fri, 11 Nov 2022 19:00:47 +0200

Over 88% of Survey Respondents Report a Significant Impact on Household Budget

We almost forgot about inflation. For over 25 years the annual increase in the Consumer Price Index has been below historical averages. For most of that time, inflation has held near or below 2% a year, a barely noticeable level.

Those days are gone. 2022 has seen inflation soar to levels unseen since the 1980s, as pandemic-driven supply chain crunches and Russia’s war on Ukraine combine to hold the supply of goods well below soaring post-pandemic demand.

Source: Trading Economics

The Federal Reserve’s response has been to push interest rates up, a conventional anti-inflation measure that has only increased the stress on consumers who have resorted to loans and credit cards to make ends meet as prices outstrip wages.

The response of consumers – many of whom are dealing with high inflation for the first time in their adult lives – has been more diverse. We wanted to know more about how Americans are coping with inflation, so we designed a survey to find out.

Key Findings

Over 88% of respondents stated that inflation has had a moderate, high, or very high impact on their family budgets.
The restaurant business is likely to take a hit: over 65% of respondents said they were cutting back on eating out…
Other major targets for spending reduction include apparel, groceries, and groceries.
Over a third of respondents are committing less money to savings.
30% of respondents reported working more hours to keep up, and 28.86% have sold personal items to make money. 23.18% have delayed paying debts.
53.78% have taken on additional debt, with 27.89% reporting that they have put more money on their credit cards.
Even respondents with incomes over $150,000 a year reported significant changes to spending, borrowing, and investing habits.

Survey: The Impact of Inflation on the American Budget

How has inflation affected the personal finances of American households? Let’s take a closer look.

How Big of an Impact Have Rising Prices Had on Your Household Budget Over the Last Six Months?

Over 88% of respondents stated that inflation has had a moderate, high, or very high impact on their family budgets. 48.93% said the impact was “high” or “very high”, and 39.48 said “moderate”.

Respondents aged 18-29 were most likely to report a “moderate” impact, at 48.46%, and least likely to report a “very high” impact, at 14.51%. Responses across other age groups were extremely consistent.

Variations across income levels were relatively low. Respondents earning over $150,000/ year were most likely to report a “moderate” impact (43.79%) and least likely to report a “high” or “very high” impact (34.64% combined), while those earning under $50,000/year saw 36.87% reporting a “moderate” impact and “high” and “very high” combining for 54.55%.

That disparity is expected, and the main surprise is that it isn’t larger.

Which of the Following Expenses Have You Cut in the Past Six Months to Save Money?

Almost all respondents reported cutting expenses, with only 8.01% saying that they did not.

The runaway leader in this category was dining out, cited by almost ⅔ of the respondents. That is expected, as it’s a minor sacrifice to make for most individuals, but it’s not a positive sign for the restaurant industry and its suppliers.

Apparel, Groceries, and Travel/Vacations were close behind, each cited by between 44% and 49% as a target for spending cuts. Gas (33.44%) and savings (34.8%) were one tier down.

Recreation, charitable giving, and cosmetics and personal care items were all selected by between 27% and 30% of respondents, while 20.53% reported placing less money into investments.

Relatively small numbers – less than 20% – reported cutting back on utilities, medical care, education, and insurance.

These responses were remarkably consistent across age and income brackets. Younger respondents and those earning less than $50,000/year were most likely to be cutting back on essentials like gas and groceries, presumably because there is less discretionary spending for them to reduce.

Individuals earning over $100,000/year are most likely to be reducing investments, most likely because they are the ones most likely to be making investments in the first place.

Those earning below $50,000 (36.87%) and from $50,000 to $100,000 (38,45%) are most likely to be cutting savings, which was reported by only 26.14% of those earning over $100,000.

Did You Do Any Of The Following in the Last Six Months?

Here we provided a menu of possible responses to inflation. The most common selections were “worked more hours” (30.41%), “sold personal belongings to make money” (28.86%), and “canceled a trip or vacation” (28.02%).

Another cluster of responses clustered around the 18% to 23% bracket: “delayed paying debt”, “delayed buying a car”, “taken a second job or side hustle”, “stopped investing or invested less”, and “skipped medical appointments”.

“Skipped buying medication”, “skipped paying bills”, and “delayed buying a home” drew fewer responses, between 12% and 13% each. 18.4% selected “none of the above”.

There were largely predictable age-based disparities. People over 60 were least likely to have worked more hours, taken on a side hustle, or delayed buying a home, and 31.41% of that bracket selected “none of the above”. People from 18-44 were most likely to work more hours or take on a side hustle.

Responses like “stopped investing or invested less”, “delayed buying a car”, “canceled a trip or vacation”, “skipped buying medication”, and “skipped medical appointments” showed extremely similar results across all age brackets.

Higher-income individuals were least likely to skip paying bills and most likely to have stopped or slowed down on investing, but apart from that, responses were remarkably consistent across income lines. It might be hard to believe that 30.07% of people earning over $150,000 worked more hours, 33.33% sold personal items to make money, and 22.88% delayed paying debt, but those are the results we got!

Did You Have to Borrow Money or Take Out Credit to Cover Ongoing Expenses in the Past Six Months? If You Did, What Did You Use?

53.8% of respondents reported having to borrow money or put more debt on revolving credit lines to cope with expenses. The most common form of borrowing, cited by 27.89% of respondents, was putting more money on credit cards, followed by borrowing from friends and family at 16.33%.

Smaller numbers of respondents reported using personal loans (12.%), cash advances (10.26%), buy now pay later plans (9.8%), and loans from retirement accounts (9.23%), while 5% or fewer reported using payday loans, title loans, and pawnshops.

Older voters were less likely to lean on credit, with 51.26% of the 45-60 bracket and 58.64% of the over 60 bracket reporting that they had not borrowed, as opposed to only 36% to 37% of the younger respondents. Reliance on credit cards sat between 27% and 32% for all brackets except 60+ (23.56%).

Younger consumers were much more likely to borrow from family and friends.

Respondents across all income brackets leaned on credit cards to an almost identical degree: between 26% and 30%. Lower-income voters, probably including many younger voters, were more likely to rely on loans from family and friends.

People with incomes over $150,000 were most likely to borrow from retirement funds or use personal loans. They also reported by far the highest use of payday loans, at 12.42%. We can’t see any explanation for that!

If You Had to Borrow Money to Cover Ongoing Expenses in the Past Six Months, How Much Did You Borrow In Total?

Most respondents borrowed between $500 and $1000 (12.14%), followed by between $1000 and $2000 (10.52%) and less than $500 (9.68%). Much smaller numbers reported borrowing between $2000 and $5000 (6.52%) and over $5000 (5.68%).

Responses to this question broke down heavily along income lines. Respondents earning under $50,000/year were most likely to have borrowed under $500, those earning $50,000 to $150,000 tended toward $500-$1000, and a majority of those earning over $150,000 borrowed between $2000 and $5000.

The Takeaways

What struck us most about the way Americans are dealing with inflation was how unsustainable most of the responses are. Working more hours and cutting back on expenses are logical responses, but there are only so many hours you can add, and only so many expenses you can cut. Trimming savings leaves even less cushion against unexpected events.

Delaying debt payments and bill payments is not a solution, and it often makes matters worse, leading to falling credit scores, debts in collection, and higher credit costs when people have to borrow again.

A particular concern is the large number of people turning to credit cards as a solution. With interest rates soaring, higher credit card balances are just going to be a bigger drag on budgets, drawing money away from basic necessities.

If inflation continues, consumers will need to adjust further and in less obvious directions. We can’t say what those will be, but we’ll do our best to find out!

About the Survey

The survey collected responses from 1,549 individuals, geographically distributed across the US. 52.36% were female, and 47.64% were male.

20.92% of respondents were aged 18-29, 26.21% were 30-44, 28.21% were 45-60, and 28.21% were over 60.

Copyright Information:

All the data included in this study is available via the public domain. This means all statistics may be copied without permission. We do, however, appreciate citation as the source via a link.

The post Americans Are Falling Deeper in Debt as Inflation Continues to Rise appeared first on FinMasters.

10+ Holiday Spending Statistics and Facts for 2022

Fri, 11 Nov 2022 19:00:24 +0200

We all enjoy the holiday season, and we try to make it as memorable and enchanted as possible each year. But all this enchantment comes with a cost. Holiday spending can turn the most wonderful time of the year into the most expensive.

Let’s take a look at just how much Americans spend on the holidays, what they spend on, and who spends the most.

Jump to:

What Is Stagflation? Should I Be Worried About It?

Thu, 10 Nov 2022 19:00:32 +0200

Sometimes, combining two things can make something great; other times, the result can be less than ideal. The concept of stagflation is a case in point, as it amalgamates two already worrisome economic scenarios to create a situation with the worst features of both.

While stagflation isn’t pleasant when it happens, learning about it shouldn’t be such a scary proposition. As we unpack stagflation and consider some historical examples of it, we can better understand its significance while, hopefully, preparing for what could at some point happen again.

The “Flation” in Stagflation

So, let’s start at the beginning: What is stagflation, anyway?

Stagflation is a compound concept that combines a stagnant economy (i.e., a recession) with high inflation.

So, when considering stagflation vs. inflation, just remember the idea of set and subset: Stagflation by definition involves inflation, but inflation doesn’t usually include recessionary conditions, so not all inflation involves stagflation.

Since we have one word and two separate but sometimes related concepts here. Perhaps it’s best to start with the second concept first: inflation.

In its most basic terms, inflation describes an increase in the prices of the things we buy. This creates an effective decline in the value of the money you’re using: the same amount of money buys less.

Inflation, at least in the U.S., is typically expressed as a percentage. How much did the prices of commonly purchased goods increase, compared to where they stood a year ago? This is calculated using the growth rate in the Consumer Price Index, or CPI. This is provided each month by the Bureau of Labor Statistics (BLS) – the same government agency that also provides monthly unemployment figures, but we’ll touch upon that in a moment.

So, if the August 2022 CPI growth rate was 8.3%, that’s how much more expensive food, fuel, shelter, and other essential products generally cost in America compared to August 2021. The Federal Reserve, which moderates the flow of U.S. dollars to the nation’s big banks, prefers to see the rate at 2%, so the 8.3% figure is an expression of unusually high inflation.

In other words, the “-flation” in stagflation isn’t just inflation; it’s unusually elevated inflation in a particular geographic region, compared to its usual or expected rate. Thus, inflation, and therefore stagflation, only makes sense within a specific context.

When the Economy Loses Its Flow

Then, there’s the other part of stagflation: the stagnant economic conditions.

If stagnant waters are ones that aren’t flowing like they ought to be, then a stagnant economy similarly isn’t advancing or developing. The money isn’t flowing throughout the economy because people aren’t buying products like they would during a more robust economy. And, when people cut back on purchases, businesses suffer and sometimes, this leads to a deep, persistent regional economic downturn commonly known as a recession.

Technically, the U.S. isn’t in a recession until a non-profit institution called the National Bureau of Economic Research (NBER) calls the current economic conditions a recession. There’s no numeric formula provided for this; rather, the NBER characterizes a recession as involving a “significant decline in economic activity that is spread across the economy and lasts more than a few months,” with such factors as “real personal income less transfers, nonfarm payroll employment, employment as measured by the household survey, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, and industrial production” taken into consideration.

Most likely, the NBER didn’t declare a recession in August of 2022 despite the high inflation rate because, at that time, U.S. unemployment was relatively low at 3.7% of the measured population^[1]. This was determined by a government entity that’s already familiar to you now: the BLS.

In contemplating what causes stagflation, then, one must consider an interrelated web of unfortunate factors.

If inflation remains persistently high, this could lead to recession and therefore stagflation if the inflation crimps spending and borrowing activity – two linchpins of a robust, thriving economy. This, in turn, could lead to hiring freezes and layoffs, which would typically be reflected in a rising unemployment rate – another telltale sign that the country may be entering into a recession and/or stagflation.

When Opposites Combine

Under normal conditions, inflation and stagnation are opposites that we wouldn’t expect to see at the same time.

Inflation occurs when there are too few goods and services available to buy – too much money chasing too few goods – and buyers bid the prices of goods up. The natural response for producers is to make more goods, which tends to cut unemployment. Inflation is typically a sign of an overheated economy, where demand exceeds supply.

Recessions typically occur when demand for goods is low. Consumers stop buying, manufacturers cut back, and unemployment increases. A recession is normally a deflationary condition, where the economy cools off.

Stagflation brings these two natural opposites together. This can happen in some circumstances, but it’s relatively unusual.

Stagflation in the 1970s: An Imperfect Storm of Adverse Conditions

There have been notable historical examples of stagflation throughout the ages, including Japan’s so-called “lost decade” of the 1990s (though of course, that example was outside of the NBER’s purview to officially declare it recessionary). In the U.S., however, people typically think of the nation’s economic conditions during the 1970s as the definitive example of stagflation.

What caused stagflation in the 1970s? As usual, it’s difficult to pinpoint a specific incident that sparked the stagflationary chain reaction. One contributing factor may have been the Nixon administration’s “closing of the gold window”: the U.S. dollar, once pegged to gold, was now declared valuable by fiat or government decree. This enabled the government to print and spend money more freely, which evidently led to an oversupply of dollars and hence the devaluation of those dollars.

The actual impact of this may have been less than some speculate. Between the cost of the Vietnam War, Johnson’s “Great Society” programs, and foreign banks effectively creating dollars by lending more than they had in reserve, the dollar supply had far outrun US gold reserves well before Nixon formally dropped the link.

There were certainly other, concurrent contributing factors, not the least of which was high gasoline prices prompted by OPEC member nations constraining the flow of petroleum to the U.S.

By the end of the decade, stagflation was a household term: U.S. inflation approached 14.5% and unemployment topped 7.5% during the summer of 1980^[2].

In hindsight, we can take cues on how to beat stagflation from the Paul Volcker-chaired Federal Reserve of the early 1980s. The Federal Reserve deliberately slowed down the economy by raising the nation’s benchmark interest rate to very high levels, plunging the U.S. into a painful recession but eventually suppressing inflation to a more manageable level. Without the high inflation rate, money could flow more freely throughout the economy, and stagflation was tamed.

It’s Not Always About Policy

We tend to think of economic events as products of government policy, but there’s a lot that happens in the economy that does not involve the government.

Another factor driving 1970s stagflation involved demographic shifts: the primary economic activity of the American family at that time was putting the baby boomers through college, which involved large expenditures without production and greatly constrained demand.

Beginning in the late 70s and early 80s, the bulk of the baby boom was moving out of college and getting their first jobs and their first credit cards. At the same time their parents, who were still in the workforce, began catching up on the buying they’d put off while the kids were in college.

That surge in demand had a major impact on reducing stagnation, but why didn’t it push higher inflation?

Part of the answer is that US imports grew from $294 billion in 1980 to $630 billion in 1990, providing a rising supply of lower-priced goods to soak up the new spending power that was driving the economy out of stagnation.

Economies are complicated and there’s almost never a single cause for their movements!

Take a Vacation From the Fear of Stagflation

The term “stagflation” reappeared in public discourse in 2022. Economic growth has been largely stagnant, debt levels are high, and an asset bubble is unwinding, all conditions we usually associate with recession.

At the same time inflation has reached levels not seen since the early 1980s, driven largely by production and supply chain disruptions that have kept goods off the market and kept consumers bidding for a limited supply of goods.

So is it stagflation?

Not quite. Inflation is real and there are signs of stagnation, but unemployment remains extremely low and production continues to recover. There is a chance that the economy will sink into recession, but economists expect that a recession would bring inflation rates down.

It’s possible that inflation could remain elevated even as the economy slows, generating 1970s-style stagflation, but that’s a possibility, not a certainty.

Among the important takeaways from the example of the 1970s is that, no matter how bad stagflation may get, it will always come to an end sooner or later. The damage will be done, but nations eventually heal and people put their lives back together.

Some nations have also responded to economic crises in very destructive ways. This typically occurs not because of the economic dislocation, but because people respond to the dislocation by embracing extremist political ideologies, often leading to internal or external conflict. As long as nations remain strong and keep to their principles they usually recover and prosper.

So, there’s no need to obsess over whether we’re in a period of stagflation right now or whether we’re about to enter into stagflation. Instead, we can choose to learn from history’s vital lessons and evolve as nations so that hopefully, we can avoid the errors of generations past.

The post What Is Stagflation? Should I Be Worried About It? appeared first on FinMasters.

Best Lending Club Alternatives for 2022

Wed, 09 Nov 2022 19:00:11 +0200

With online institutions like Lending Club, a personal loan can now be approved and funded within minutes. And because they don’t have to support brick-and-mortar locations, they can afford to offer larger loans at lower interest rates.

But Lending Club isn’t the only company offering this kind of service. There are many alternatives to Lending Club for both personal loans and other online banking/lending services.

Let’s take a look at how Lending Club stacks up against several of its competitors to determine which offers the best products and services.

Who is Lending Club

Lending Club offers a lending marketplace where borrowers’ loans are purchased by institutional investors. This allows Lending Club to offer a wide variety of loans with competitive rates. They’ve been in business since 2007 and currently have a 4.57/5 rating on the Better Business Bureau website.

That said, in July of 2021, Lending Club settled a lawsuit with the FTC, which filed the lawsuit over a lack of transparency on loan origination fees and false approval guarantees.

What Services Do They Provide?

The primary service Lending Club offers is loans.

	Personal Loans	Accion Opportunity Fund (business loan)	SBA Loans
Loan amount	$1,000 – $40,000	$5,000 – $500,000	Up to $15 million
Repayment terms	36 – 60 months	12 – 60 months	Up to 25 years
APR	8.3% – 36%	5.99% and up	undisclosed
Fees	Origination fee of 2% – 6% of loan value	Origination fees	Guaranty fee, annual service fee, and prepayment penalties.
Requirements	Decent credit or a co-borrower	1 year in business with $50,000 in annual sales	FICO credit score of 660

Lending Club is a preferred Small Business Administration (SBA) lender.

In addition to their personal and business loans, Lending Club offers a variety of other services, including :

Personal banking accounts
Business banking accounts
Auto refinance loan matching service
Patient Solutions – a loan program offered through your medical provider

Note: Prior to 2021, Lending Club offered a peer-to-peer lending marketplace. This marketplace let individuals invest in the loans Lending club offered.

I.E., you could invest $200 in another person’s $10,000 loan and earn your money back plus interest as the loan was paid off.

Lending Club suspended this open marketplace at the end of 2020.

Who is Lending Club Best for?

Those who would benefit the most from a relationship with Lending Club include:

Individuals with good credit
Those willing to add a co-borrower
Big businesses looking for high-dollar loans
An individual who wants their loan and checking account in the same place

Lending Club is not going to be a good choice for those looking for high-value personal loans, those with poor credit, or those with brand new businesses.

Best Lending Club Alternatives

Considering this, let’s take a look at 4 of Lending Club’s top competitors.

Upstart – Best for Poor Credit
One Main Financial – Best for Customer Service
Sofi – Best for Range of Lending/Banking Products
Prosper – Best for Peer-to-Peer Lending

When choosing Lending Club’s alternatives, we looked at competitors that offered a similar set of products and/or beat out Lending Club in at least one area, i.e., personal loans for low-credit individuals.

While we focus on lenders that provide personal loans, we will also look at the other products and services they offer and use a uniform set of criteria to compare those products, such as interest rates and repayment terms.

Compare Lending Club Alternatives

Company	Products/Services	Loan Maximums	APRs & Fees	Reviews
Lending Club	Personal loans, business loans, and medical loans partnership	$40,000 on personal loans $65,000 on medical loans $5milllion on business loans	8.3% to 36% personal 5.99% + business 3.99% to 30.99% medical	4.6/5 BBB
Upstart	Personal loans, business loans & auto refi	$50,000 for personal loans $200,000 for business loans	5.6% personal undisclosed for business and auto refi	1.2/5 BBB
One Main Financial	Personal loans	$20,000	18% – 35.99%	2.8/5 BBB
Sofi	Student loans, personal loans, mortgages, and loan matching service	$100,000 for personal loans no maximum on student loans	7.99% personal 2.99% student 5.372% mortgage	1.2/5 BBB
Prosper	Personal Loans, HELOC & P2P Lending	$40,000	6.874% HELOC Up to 33%+ personal	1/5 BBB

Best for Poor Credit

1. Upstart

Self-proclaimed as one of the first AI lending marketplaces, Upstart claims to be able to approve loans with less default risk for their partner banks. This allows them to offer loans with competitive interest rates to a wider range of customers (poor credit, no credit).

Pricing & Features

Upstart offers 3 different kinds of loans: personal loans, auto refinance loans, and business loans.

	Personal	Auto Refi	Business
Loan range	$1000 – $50,000	$9,000 – $60,000	$5,000 – $200,000
Repayment terms	36 months or 60 months	24 – 84 months	Minimum 12 months
APR rates	5.6% – 35.99%	undisclosed	undisclosed
Fees	Origination fee possible	No fees	Origination fee

On personal loans and auto refis, Upstart supports numerous credit and income situations. Their minimum credit score requirement is 300, and they can sometimes approve you when you don’t have a credit score. Plus, even those who are self-employed can apply for a loan.

A low minimum credit score doesn’t mean everyone gets approved. Your approval and APR will be based on your banking history and other alternative data.

For their business loans, your business will need to have been in existence for at least 1 year, and you’ll need to personally guarantee the loan. That means you are personally liable for the loan if the business can’t pay it back.

How do they compare to Lending Club?

When compared to Lending Club, there are few areas where Upstart excels. This includes :

Lower interest rates on personal loans
Higher loan amounts for personal loans
Better approval odds for those with poor credit
Auto refi options

When it comes to business loans, however, Lending Club beats out Upstart with more loan options and higher loan values.

Best for Customer Service

2. One Main Financial

One Main Financial is a lender with more than 1400 brick-and-mortar locations nationwide.

This institution has one primary focus, issuing personal loans that aren’t strictly dependent on your credit score.

Warning: It is worth noting that the BBB has posted an alert on their page to warn customers of recent attempts of scammers posing as One Main Finacial and stealing money from people’s accounts.

Pricing & Features

One Main Financial offers two types of credit products: personal loans and credit cards.

	Personal Loans	BrightWay credit card	BrightWay+ credit card
Loan value/credit limit	$1,500 – $20,000	Up to $500	Up to $3000
Repayment terms	24, 36, 48, or 60 Months	—	—
APR	18% – 35.99%	26.99%	26.99%
Fees	Origination fee (flat fee or percentage of loan value)	Up to $65 annual fee	$0

The personal loans offered by One Main Financial can be used for a variety of reasons, including debt consolidation, home improvements, and even vehicle purchases.

One Main Financial offers two credit cards designed to help you build credit. The cards earn 1% cash back on all purchases and allow you to increase your credit limit or decrease your APR after each 6-month period of on-time payments.

How do they compare to Lending Club?

The key area where One Main Financial beats out Lending Club is their service to those with poor credit:

Loans are offered to those with poor credit
Credit cards are available for those wanting to improve their credit

Plus, having brick-and-mortar branches means a greater degree of customer service, which is reflected in their overwhelmingly positive reviews.

The downside is that One Main Financial has much higher interest rates and lower loan values when compared to Lending Club.

Best for Range of Lending/Banking Products

3. Sofi

Back in 2012, Sofi started out offering student loan refinancing and has since grown to offer a wide variety of services, including loans, mortgages, and investment accounts.

A self-proclaimed one-stop shop for all your financial needs, Sofi has over 4 million members.

Pricing & Features

Sofi offers a wide range of loan and refinancing options, including personal loans, student loans, and mortgages.

	Personal Loans	Student Loans	Mortgage
Loan Amount	$5,000 – $100,000	$1,000 and up (no max)	$100,000 and up
Repayment Terms	24 – 84 months	5, 7, 10, or 15 years	10, 15, 20, or 30 years
APR	7.99% and up	2.99% – 13.35%	5.372% and up
Fees	No fees	No fees	Lender fee and 3% minimum downpayment

In addition to the loans detailed above, Sofi offers the following products and services:

Student loan refi
Auto loan refi matching service
Bank accounts
Business loan matching service
Investment accounts
Credit card
Insurance matching service
Crypto trading

How do they compare to Lending Club?

Sofi beats out Lending Club with:

A wider range of products and services
Higher value personal loans
More flexible repayment terms
Fewer loan fees

Unfortunately, Sofi does not offer small business loans as Lending Club does. Instead, they offer a business loan matching service.

Best for Peer-to-Peer Lending

4. Prosper

Prosper is an online lender offering a variety of loans and credit lines. Founded in 2005, they have lent out more than $21 billion.

Prosper is also one of the last peer-to-peer lending marketplaces open to individual investors. This investment platform allows their loans to be funded by regular people instead of just big banks.

Pricing & Features

Prosper offers 3 types of credit: personal loans, home equity lines of credit (HELOC), and a credit card.

	Personal Loans	Home Equity Line of Credit	Credit Card
Loan Amount/ credit limit	$2,000 – $40,000	$50,000 – $500,000 or 90% of your home’s value	$500 – $3000
Repayment Terms	24 – 60 months	10 years	—
APR	Up to 33%+	Starting at 6.874%	21.24% – 32.24%
Fees	Origination fee of 1% – 5%	Closing costs	$39 annual fee

In addition to its lending products, Prosper offers peer-to-peer investing. This program allows individuals to purchase portions of a borrower’s loan. For instance, if someone borrows $10,000, you could purchase a $200 portion.

As the borrower pays back the loan, you receive a portion of the payment. So long as the borrower pays back the full loan, you will receive back your investment plus a portion of the interest charges.

Investors can start with as little as $25 and invest in multiple loans at one time.

Note: This investment option is currently only available in 30 states.

How do they compare to Lending Club?

Prosper offers personal loans with similar interest rates and credit requirements as Lending Club.

Where Prosper excels is with its peer-to-peer investing marketplace, a service Lending Club closed to individual investors in 2020.

However, if you are looking for business loans, you’ll want to stick with Lending Club.

Bottom Line

When searching for alternatives to Lending Club, it’s important to keep in mind why Lending Club is not a good fit for your needs.

Do you need a personal loan but have poor credit? Then Upstart or another lender might be a better choice.

Do you want in-person service on your loan? Then One Main Financial might be a better choice.

We can’t tell you which lender is the best. But, by evaluating Lending Club and its alternatives, we can help you decide which is the best lender for you.

The post Best Lending Club Alternatives for 2022 appeared first on FinMasters.

Industry Primer: Biotech

Tue, 08 Nov 2022 19:00:02 +0200

In the previous industry primer article, we covered the pharmaceutical industry. This article will cover a closely related sector, biotechnology. Biotechnology companies also mainly operate in healthcare but their methods are radically different from those of the pharmaceutical industry.

One of the things that launched the strength in biotech is when the pharmaceutical industry itself got a little slow.
Louis Navellier, Chairman and Founder of Navellier & Associates

Biotech vs Pharmaceutical

Pharmaceutical companies are an offshoot of the chemical industry. They use chemical molecules to address health issues.

Biotechnology companies use biological compounds and processes to achieve their goal. This means that biotech products are much more complex than pharmaceutical drugs. When the average drug might be made of a few dozen atoms, a protein or a DNS strand will be made of tens of thousands, sometimes millions of atoms. Cell therapies even use entire cells, several billion times more complex than pharmaceutical products.

Because biotechnology is defined by its method first, it extends beyond healthcare applications. It can include the production of biofuels, bioplastics, fermentation, pollution control or remediation methods, farming technologies, etc. Still, the largest part of the sector is dominated by human health applications, as this is a very large and high-margin sector.

Because of the difference in its products, biotech can address problems that pharmaceutical companies could not. Notably, the industry really went beyond industrial applications like fermentation when Genentech first produced artificial insulin. This invention would go on to save millions of lives.

Regulation and Clinical Trials

When it comes to human health, the process for biotech companies is very similar to the one followed by the pharmaceutical industry. Before reaching a patient, a new treatment goes through an extensive clinical trial. If the trials are successful, the FDA (Food and Drug Administration) may approve the new treatment.

I described each stage in more detail in the pharmaceutical industry primer, but here is a quick reminder:

Clinical Trials 101

To limit the risk of potentially lethal surprises, all new drugs must pass through a strict sequence of clinical trials. They go through the following successive phases:

Preclinical: Tested on cells or animals only, to avoid a lethal error in human trials.
Phase 0: Tested on just a few healthy humans, low concentration if possible, to check if animal and lab safety profiles apply to people as well.
Phase I: Tested in a medically relevant concentration on a larger number of healthy people.
Phase II & III: This is when actual patients suffering from a medical condition join the trials to determine the effectiveness of the product. The results of these tests determine whether the FDA will approve the product.
Phase IV: Also called surveillance, this happens after the drug is approved. Ongoing surveillance aims at detecting any issues that were not detected in the clinical trials.

Source: biosourceconsulting.com

Intellectual Property and R&D

Both pharmaceutical and biotech companies rely heavily on patents to defend their innovations, acquired through prolonged and very expensive R&D.

Because biotech companies are usually built on scientific discoveries, the sector tends to be more startup-heavy than pharmaceuticals, which are dominated by huge corporations. This also results in the sector spending even more of its money on R&D than the pharmaceutical industry, with R&D spending typically in the 40%-60% range.

Most biotech startups will have one idea or technology they try to develop. The success of the company will therefore heavily rely on how solid the science is.

Because of this, this may be a field even more technical than classical pharmaceuticals. It also means that production can be a lot more complicated and expensive, unlike chemical drugs where the cost per unit excluding sales and R&D is very small. Because of the inherent complexity of the processes, biotech patents are also granted for a longer period than pharmaceutical patents.

On the good side, this reliance on unique technology has the advantage of making the competition a lot less intense than for classical drugs. Replicating the effect of a drug can be done with slightly different compounds, or even the same one once the patent expires. But a very complex protein or a proprietary cell line can be almost impossible to replicate or imitate.

Sales of chemical drugs are always at the mercy of generic drug manufacturers as soon as their patents expire. But biotech products are generally safer from patent expiration, even if the analog to generic drugs, biosimilars, exists.

Investing in Biotech

The key metric for most biotech companies will be their expected burn rate. Because most will be pre-revenue and spending on unproven treatments, they are far from making any money. The sector is usually first supported by VC (Venture Capitalist) money, and then by public capital after an IPO. A proper calculation of future costs and dilution of shareholders will also be important.

Due to this, the sector is also sometimes criticized for harboring too many “scam” companies, perpetually raising money before publishing disappointing results. I would not call this criticism completely unfounded, but it is often blown out of proportion. Incertitude is simply the price we pay for investing in such a speculative sector. Even the most honest companies and the most promising ideas can hit unexpected issues.

Another metric should be the size of the total addressable market (TAM). A treatment that may be used by 10,000 people per year has radically different profit potential from a treatment that could be used by 10,000,000 people a year. Of course, unrealistic TAMs are often the target of critics of the biotech industry.

For investors, an extra difficulty is that clinical trial results will often be binary:

Good = next phase can be launched or even better, treatment should be approved by the FDA soon.

Bad = this is a scientific dead end, and most of the money invested is lost.

Such binary outcome result in extreme volatility, with individual stock often going up or down by 30%-70% in a day, depending on how good or bad the latest published news are. This is definitely not a sector for the faint of heart or beginner investors.

Biotech companies are often very specialized on the scientific side. Most will prefer to keep advancing the science rather than handle the difficult task of commercializing the treatment themselves, which requires dedicated salespeople, contacts with doctors and hospitals, negotiation with health insurance companies, etc.

So it is quite common for successful biotech companies to follow one of these paths:

Get acquired by a large pharmaceutical company.
Sell the intellectual property for a specific discovery to a large pharmaceutical company.
Sign a licensing agreement for the discovery, sharing future revenues in exchange for support on finishing trials and commercialization.

Many biotechs will search for such a partner just before phase III clinical trials, as this is the most expensive stage, but also the least likely to lead to failure. This reduces the risk for the pharma partner while avoiding dilution for the biotech’s shareholders.

Promising Sectors and Technologies

When looking for promising biotech, I feel there are a few fields more promising than others.

Orphan Diseases

Some diseases affect just a few people and have been so far impossible to treat well with conventional medicine. Treatments for such diseases are offered preferential pricing, or sometimes research grants and patent exclusivity by the FDA. Because they are not concerning a large population, it might also be a less competitive segment.

The main thing here is to look for truly innovative, life-saving treatment, usually leveraging a technology that did not even exist 5 years ago. If older technology could have solved the problem, it would have likely been done already. Still, stay aware that by definition, unproven new ideas will also have outcomes that are very hard to predict.

Very Common Unsolved Problem

I said the same for pharmaceutical companies, and it holds as well for biotech. Some sicknesses might be treatable with biotech, which can mimic, enhance or fully replace faulty biological mechanisms, instead of just chemically activating the body’s cells.

Some of the most promising sectors that are both unsolved and affecting millions of people are for example:

Diabetes
Alzheimer’s
Parkinson’s
Cardiovascular diseases
Cirrhosis (liver damage)
Dementia
Paralysis

Successful therapies of any of these would be enormously profitable.

Non-Medical Biotech

Biotech is larger than medical applications. Other fields can offer very large potential markets with far less regulation.

Here is a list of sectors I think can be completely disrupted by biotech innovation:

Biofuel production (notably from algae or cyanobacteria)
Farming and Forestry (vertical indoor farming, biocontrol for crops diseases, soil biology, etc…)
Material sciences (vegan alternative to leather, bioplastics, factory-made silk, recycling process, etc…)

Because they seem more “mundane” or “boring” compared to solving cancer or Alzheimer’s, these efforts could be more likely to provide undervalued stocks.

Specific Technologies

Lastly, a way to invest in biotech could be to focus on the promises of a specific technology instead of an application. For example:

Genomics (a topic we covered extensively in our last Illumina report)
RNA technologies: this includes mRNA vaccine and other RNA technology, but also RNAi.
Cell therapy: using healthy or modified cells to replace deficient ones.
Bioprinting: the artificial assembly of cells, tissues, or even full organs.
Gene editing: this includes “trendy” tech like CRISP, and other methods to modify the genome of living cells as well.
Synthetic biology: the creation of biomaterial or compounds not found in nature.

This is a strategy that lends investors who are quite well-versed in the science part of the equation, which might help them pick a winner in the sector.

Possible Investment Strategies

There are a few large independent biotechnology companies, notably Amgen, that have a diversified portfolio of new products in the R&D pipeline. The list can include also other companies we previously covered in our reports, notably Regeneron and Vertex.

Still, as most biotech investments will be for pre-revenue startups, diversification is crucial to building any biotech portfolio, especially when considering the very high failure rate of clinical trials. Untested technologies, new materials, biofuels, and other biotech products are equally risky.

In that respect, the biotech sector is very similar to VC investing. The idea is to spread the portfolio over dozens of different companies and aim for a few to do a 10x or x100 return.

The good news is that in 2022, biotech is rather out of favor, after a period of feverish speculation. This means that valuations are probably more reasonable than they used to be.

Another way to bet on biotech is to invest in pharmaceutical companies with a large biotech portfolio. For example, the first large biotech company, Genentech, is now part of Roche.

Or you could also bet on equipment manufacturers and suppliers to the industry. This can even be narrowed down to specific technologies, like genomics or cell therapy.

In any case, because of the highly technical nature of the industry, it will be best to either diversify massively (directly or through a fund or an ETF) or learn enough about the science to make more enlightened choices. Accredited investors might also back VC funds specialized in early-stage biotech startups.

Conclusion

The biotech industry is a highly profitable one as a whole. It is also growing very quickly and providing tremendous improvement to millions if not billions of lives. It also benefits greatly from the digital revolution, which provides access to cheap genome data, imagery, and computing power.

The difficulty for investors is that this profitability comes from extremely variable and hard-to-predict individual outcomes. So maybe more than finding the right individual idea or making a good analysis, biotech investors will need to sharpen their risk management skills.

Nevertheless, this can be a highly rewarding sector. Biotech companies are also not particularly sensitive to overall economic conditions, as most of the sector income is from health insurance payments or niche industries.

Valuation and enthusiasm for the sector are known to ebb and flow over long 5-10 year cycles, so a degree of market timing can help as well. If biotech valuations are reaching an all-time high across the board, better stay away for a bit.

Currently, biotech valuations remain in a slump, so this might be the time to pay attention again to the sector, especially considering a generally gloomy macro outlook.

Industry Primers
The process of analyzing a company varies considerably from industry to industry. Many industries have their own vocabularies and specific concerns that investors need to consider. This series of articles looks at specific industries and at industry-specific factors that affect investments. The goals are to highlight specific risks, clarify confusing terminology and explain industry-specific metrics for valuation. These methods complement the usual evaluation process, they don’t replace it.

The post Industry Primer: Biotech appeared first on FinMasters.

Is Silver a Good Investment?

Mon, 07 Nov 2022 19:00:00 +0200

It’s been disparagingly called the poor man’s gold and it’s often left by the wayside in favor of pricier and seemingly more prestigious investable metals. Silver often gets short shrift in the resource realm – after all, what Olympic athlete wants to win a silver medal? But reputation aside, is silver a good investment?

Mineral mavens shouldn’t put silver on the scrap heap. It’s a surprisingly essential and versatile metal with enduring value and appeal. Plus, silver’s price properties should appeal to risk-tolerant traders of all account sizes. So, let’s put the pedal to the metal and discover why silver truly deserves its label as a precious metal.

Silver Has Many Real-World Applications

If gold is for holding, silver is for using. You can also hold silver as an investment, but comparatively speaking, silver has a wider range of applications. There’s a reason people call silver an industrial metal. It’s used extensively by multiple industries throughout the economy.

According to the Silver Institute, silver is used in solar panels, electrical switches, and chemical-producing catalysts, and can be found in nearly every computer, mobile phone, and automobile^[1]. It’s durable and highly conductive of electricity, which makes silver ideal for coating electrical contacts, such as the ones found in printed circuit boards. Silver can help to reduce the need for wires as silver ink will provide an electrical pathway when it’s painted on a non-metal surface.

Then there are the traditional uses of silver in dental fillings, jewelry, silverware, and various antiques and collectibles.

Throughout the ages, gold may have gotten top billing but silver never really lost its shine. In the modern era, though, silver should always be in demand as long as people are buying electronic gadgets. As governments and private industry ramp up their 5G network spending, silver continues to play a role in building out the critical infrastructure.

Industrial use of silver creates ongoing demand that supports the price.

Silver Is Part of the Vehicle Electrification Movement

There’s another use of silver that’s so important, it deserves its own section. Many of today’s investors want exposure to the fast-emerging electric vehicle market. Sure, one can achieve this by purchasing shares of individual automakers, but this may turn out to be a risky proposition. On the other hand, investors might choose to own something that electric vehicle manufacturers need: silver.

Silver is ideal for electric vehicle components due to its conductivity, oxide resistance, and durability in harsh operating environments. Silver is used in many vehicles’ electrical control units; this is true for traditional internal combustion engine cars as well as modern electric vehicles.

Where the rubber really meets the road, however, is silver’s use in batteries that are used in electric vehicles, as well as the stations that charge these batteries.

Silver and the electric vehicle movement go hand in hand, and the numbers bear this out. As the Silver Institute reports, battery electric vehicles consume an estimated 25 to 50 grams of silver each, and hybrid vehicles consume around 18 to 34 grams of silver; meanwhile, internal combustion engine cars only consume roughly 15 to 18 grams of silver.

The net result has been and should continue to be, staggeringly strong demand for silver in the electric vehicle industry. 2021 automotive-market silver consumption was projected to reach 61 million ounces; this industry is anticipated to consume nearly 90 million ounces of silver annually by the year 2025^[2].

The Silver Price Moves Fast

Silver tends to exhibit faster price action than gold. If you’re more of a “slow and steady wins the race” kind of investor, holding gold might be the way to go.

Consider the math behind some of history’s biggest price moves in precious metals. From the 2008 low to the high in 2011, the gold price gained 166% – not too shabby^[3]. However, that’s nothing compared to silver’s mind-blowing 448% gain during the same time frame.

Yet, the silver sword is double-edged; what moves up fast can also drop fast. Thus, while gold lost 44.6% of its value from the 2011 high to the 2016 low, silver shed an eye-watering 71.8% of its value during that time.

That volatility can be risky, but if you time your entry and buy at a low point in the price cycle, it can also be an advantage.

Silver Could Provide a Good Hedge Against Inflation

Inflation is currently among the most pressing concerns among consumers and investors alike. As currencies such as the U.S. dollar lose value year after year, holding cash becomes a less appealing proposition for the long term.

This is where silver shares a common characteristic with gold and some other minerals: it’s resistant to currency inflation, and can even benefit from inflation. A historical example would be the inflation-intensive 1970s, during which the silver price rallied from $15 per ounce to $130 over a ten-year period^[4].

Of course, past performance doesn’t guarantee future returns, so don’t count on a repeat of silver’s stunning 1970s surge. The idea here isn’t to fantasize about life-changing gains in silver during high dollar inflation, but rather to consider silver as an asset that’s resistant to inflation and therefore a relative safety net when the dollar’s value falls. Besides, Morgan Stanley observes that “silver tends to rise more than gold with rising inflation and a falling dollar” due to silver’s “greater industrial demand”. Again, silver’s greater utility makes it even more useful when the currency loses its value.

There is a downside as well. Aside from the inherent risk of volatility and asset price declines, silver (like any precious metal investment) will not pay interest or dividends: your potential gain lies solely in asset price appreciation. This makes it important to buy at a low point in the price cycle and to take profit if it’s there to be taken.

Silver is much more than gold’s underappreciated cousin. It’s cheap, fast-moving, inflation-resistant, conductive, versatile, and crucial to the global trend toward electric vehicles. If you’re willing to cope with volatility feel free to go for the gold standard of industrial metals and stack some silver in your investment portfolio.

The post Is Silver a Good Investment? appeared first on FinMasters.

HELOC vs. Home Equity Loan

Sat, 05 Nov 2022 18:00:50 +0200

If you own a home, you likely have a lot of money tied up in your home equity. If you want to use that equity without selling the home you’ll face a choice: a home equity line of credit or HELOC vs. a home equity loan.

Let’s take a look at the differences and which might suit your purposes best.

What is a HELOC and How Does it Work?

A HELOC is a home equity line of credit. It is a flexible loan that you can use to borrow against the equity you’ve built in your home.

Like it says in the name, a HELOC is a line of credit. You can use the credit line when you need to and only make payments based on the money you’ve drawn from the line of credit. If you need to draw from your HELOC multiple times, you have that option. If you want to let it sit with no balance, but ready to use when needed, you can do that too.

A HELOC is like a credit card. You can use it to borrow money up to a set limit and draw money as many times as you’d like and whenever you’d like, so long as your balance doesn’t pass the limit.

Typically, a HELOC has two phases:

The draw period. You can take money from the line of credit during this time. The required payments usually just cover the accrued interest, though you’re free to make payments toward principal too. A common draw period length is ten years.
The repayment period. After the draw period, you enter repayment. You can no longer take funds from the line of credit and must make full interest and principal payments until you pay off the line of credit. The length of this period can vary but is often about twenty years.

HELOCs usually have variable interest rates, which means the interest you pay can change over the life of the loan based on the interest rate market.

Pros

There are many advantages to using a HELOC over a home equity loan.

Flexibility. With a HELOC, you have the freedom to draw funds from your equity as you need to. You don’t have to have a specific purpose or amount in mind. They also last for years, letting you be prepared for future needs.
Only pay interest on your balance. If you don’t draw money from your HELOC, you won’t pay interest. Some lenders charge maintenance fees, but if you find a lender that keeps fees low, you could have easy access to cash for a very low cost.
Set your repayment term. You can work with your lender to choose a repayment term that works for your budget. You can also choose to start repayment early while you’re still in the draw period.

Cons

HELOCs are not perfect, so it’s important to understand their drawbacks.

Variable rates are unpredictable. HELOCs typically have variable interest rates. If rates rise significantly, you could find your loan becoming more expensive or potentially unaffordable.
Overspending risk. HELOCs make it easy to take cash out of your home, and until the draw period expires the payments will be minimal. That makes it easy to overspend.
Payment can increase at the end of the draw period. During the draw period, your lender will likely only ask you to pay the interest that accrues. When the draw period ends, you’ll have to start making full loan payments. If you’re not ready for the start of the repayment period, and the corresponding higher payment, you might have trouble affording the larger payments.
Your home is collateral for the debt. If you can’t pay you could face foreclosure.

What is a Home Equity Loan and How Does it Work?

A home equity loan is a more traditional loan that relies on your home as collateral.

When you get a home equity loan, the lender gives you a lump sum of cash. You then make regular monthly payments toward the loan until the balance is paid in full. The loan can have a fixed or variable interest rate and the amount that you can borrow is based on the value of your home and how much equity you’ve built.

While HELOCs work like credit cards, giving you flexible access to cash, home equity loans are more like other loans, such as personal loans, where you get a one-time infusion of funds. This makes them better for large, one-time expenses.

Because home equity loans are secured by collateral (your home), interest rates are competitive and less dependent on your credit score than rates on an unsecured loan.

As of July 2022, the average rate for a 15-year home equity loan of $30,000 is 6.91%. The average personal loan rate at the same time was 13.5%-15.5% for a person with a credit score of 690-719.

Home equity loans are often used for debt consolidation, due to their low interest rates, their ability to offer competitive interest rates even to people with average credit scores, and their relatively easy availability (if you own a home).

Pros

Low, fixed rates. Home equity loans will let you borrow money at a fixed interest rate. Using your home as collateral also reduces the risk for the lender, making it one of the cheapest ways to borrow money.
Interest may be tax deductible. If you use HELOC or home equity loan funds for home improvements, you may be able to deduct interest on your taxes. This is a big deal because home equity loans are a popular way to fund home improvement projects.
Long terms. Home equity loans can have terms ranging from five to thirty years, letting you customize your payment and ensure it fits in your budget.

Cons

Less flexibility. A home equity loan gives you a single lump sum of cash. If you need to borrow more against your home equity, you’ll need to apply for another loan.
Pay interest on the whole loan starting immediately. If you use a home equity loan to borrow money, you pay interest on the full balance immediately, even if you have some of the proceeds sitting in your bank waiting to get used.
Your home is collateral for the debt. If you can’t pay you could face foreclosure.

Which Is Right For You?

HELOC vs home equity loan… what’s best for you? Both are useful tools for homeowners that want to turn their equity into spendable cash. However, they excel in different situations.

HELOCs are best when you need flexibility, aren’t sure of the precise amount you’ll need to borrow, or will need access to funds multiple times. For example, you might use a HELOC to fund a project that needs funding in multiple phases or have irregular income and expenses and want access to cash quickly if the need arises.

Home equity loans are best when you know how much you need to borrow and need it all at once. That makes them ideal for funding large projects or one-time expenses, such as paying for a home improvement or consolidating a large amount of debt.

If you’re facing the HELOC vs home equity loan question, be sure to consider the disadvantage they share. Your home is collateral for the loan, and if you fail to pay you could face foreclosure. If you are sure that you will be able to pay back what you borrow, review the pros and cons of each loan type and choose the one that best fits your needs.

The post HELOC vs. Home Equity Loan appeared first on FinMasters.

Term Life Insurance vs. Whole Life Insurance

Fri, 04 Nov 2022 18:00:24 +0200

Most people don’t like thinking about insurance but it is very important to have. Life insurance is especially important if you have loved ones that you need to take care of in the event that the unthinkable happens to you. However, you may have trouble deciding between term life insurance vs. whole life insurance.

Both term and whole life insurance offer a death benefit to your surviving family, but they work in very different ways, so it’s essential to understand the difference between the two.

What is Term Life Insurance?

Term life insurance is the simpler of the two different types of life insurance. It’s also the less expensive type of policy to purchase.

When a term life policy, you select a policy amount and length, also called the term.

For Example

You might choose to purchase a $500,000 policy with a term of twenty years.

Each month during those twenty years, you’ll get a bill from the insurance company. So long as you keep paying those bills, you’re covered.

Should you die, your heirs will get $500,000 from the policy.

After twenty years, the policy ends. You stop getting bills but are no longer insured.

How much you pay for a term life policy depends on many factors, including your age, sex, and whether you smoke.

These policies are good when you’re trying to protect against specific liabilities, such as a mortgage or paying for childcare, that your family might struggle with if you died.

Pros

Lower cost. Premiums for term life policies are cheaper and typically remain the same throughout the life of the policy.
Customizable. You can select the term and the amount of insurance to purchase.
Simplicity. Term life insurance is simple and easy for most people to understand. Pay your bill and your family gets a payment if you die.

Cons

Not permanent. Once the term ends, you lose your coverage. You’ll have to buy a new policy, which will likely cost more now that you’re older.
No value unless you die. If you (hopefully) survive through the term of your insurance policy, you won’t get any value from the plan. Buying insurance is like gambling against yourself.

What is Whole Life Insurance?

Whole life insurance is a more complicated form of life insurance. Unlike term life insurance, whole life insurance is a permanent life insurance plan. So long as you keep up with the premiums, you’re covered for life.

Whole life insurance also has a cash value component. When you pay your monthly insurance premiums, a portion of that payment goes into your whole life insurance account. That amount can grow over time. You may also receive dividends from your insurer, which you can take as cash or use to increase your policy’s value.

Once your whole life policy reaches a certain value, you have the option to borrow money against the policy or to surrender your policy and give up the insurance in exchange for cash.

Like term life insurance, the death benefit is guaranteed, even if your policy hasn’t built up significant value yet. However, if you start borrowing against the policy and don’t pay back those loans, it can reduce the amount of the death benefit.

Whole life insurance costs more than term life insurance, but the cash value it builds can be appealing to some.

Pros

Permanent insurance. Your whole life insurance policy lasts until you die. It won’t expire as term policies do. All you have to do is keep making your monthly premium payments.
Builds cash value. As you make payments toward the policy, your insurance policy gains value. You can borrow against the policy’s value or surrender the policy for a lump sum. This differs from term life where your premium payments don’t help you build value.

Cons

More expensive than term life. The monthly premiums for whole life insurance can be much higher than for term life insurance.
Complexity. Understanding exactly how your policy works, how it builds value, and when you can access its value, can be complicated. That can make it hard to know if you’re getting a good deal.

Term Life vs. Whole Life Which Is Right for You?

Deciding between term life vs. whole life requires thinking about your financial situation and your reasons for buying insurance. Both types of insurance can help protect your family but they excel in different situations.

For example, term life policies are ideal for people who want to protect against a specific liability or for a specific period of time. A new parent might choose to buy a twenty- or thirty-year policy to help protect their children in the event that they die. Once their children are grown, an insurance policy to help pay for childcare and college is no longer necessary.

A similar situation is in the early days of owning a home with a spouse where a term policy can protect the surviving spouse from being unable to afford mortgage payments.

A whole life policy, on the other hand, is best for someone who wants guaranteed insurance for life. It can be difficult and expensive to renew term life policies as you age, so buying whole life insurance is a good way to stay covered for life.

Whole life insurance can also be a good choice for higher income people who want to reduce their tax burden. Whole life policies can gain cash value, much like an investment. Those increases in value aren’t taxed until you take money out of the policy or surrender it, making it a way to defer taxes.

Before deciding on which type of policy to buy, it’s a good idea to consult a financial advisor. They can help you come up with a financial plan and consider the ins and outs of both types of insurance.

The post Term Life Insurance vs. Whole Life Insurance appeared first on FinMasters.

FinMasters

6 Best Alternatives to Savings Accounts to Make More Money

5 Best LegalZoom Alternatives for 2022

Payday Loan Scams: Common Scams and How to Deal With Them

How Scammers Get Your Name

Signs of Stolen Information

Check Their Required Payment Methods

Look for Posers Claiming They Are Lawyers

Don’t Give Out Personal Information

Stand Up to Threats

Don’t “Return” Money Deposited in Your Account

Beware When They Call With an Offer

Don’t Pay an Upfront Fee

Don’t Feel Ashamed

How to Report a Scam

Alternatives to Payday Loans

Advances on Your Paycheck

Borrowing From Your Family and Friends

Create a Debt Management Plan

Debt Settlement Companies

Payday Alternative Loans

Calculate “Legitimate” Payday Loan Interest Rates

Conclusion

Root Insurance Review: Is It Worth Using? (2022)

Root Insurance

Pros

Cons

Buy this Product

10 Best Chime Alternatives for 2022

What is the FDIC?

How Does the FDIC Work?

What is FDIC Insurance and What Does it Cover?

What Happens When a Bank Fails

Maximizing FDIC Insurance

Why Does the FDIC Exist?

What is a Bank Run?

Other Post-Depression Changes to the Financial System

The Minimum Wage

Unemployment Insurance

Social Security

Conclusion

What Are Fractional Shares? How Could They Benefit Investors?

What Are Fractional Shares?

Who Should Buy Fractional Shares?

Are Fractional Shares the Same as a Stock Split?

Where Can You Buy Fractional Shares?

Get in on the Action with Fractional Shares

October 2022 Inflation Survey: Impact and Responses

Key Findings

The Impact on American Budgets

Inflation and Mental Health

Inflation and Holiday Spending

The Takeaways

Lexington Law vs. Credit Saint

Funding Stock Options: How to Exercise Options You Can’t Afford

Funding Stock Options: How it Works

The Benefits for Employees

The Benefits for Investors

The Companies that Make It Happen

Equitybee

SecFi

LiquidStock

ESO Fund

Quid Capital Fund

If You’re Buying

If You’re Selling

How to Buy Boring Company Stock

5 Best Credit Karma Alternatives for 2022

Who is Credit Karma?

What Services Do They Provide?

Recent Legal Troubles

Who is Credit Karma Best For?

5 Alternatives to Credit Karma

Credit Karma Versus 5 Alternatives

1. Credit Sesame

2. Experian

3. CreditWise

4. Mint

5. MyFICO

Final Thoughts