One of the main problems with the credit system is that people with bad scores receive less access to credit and higher interest rates. Both push them toward potentially predatory forms of lending, such as tribal loans.

Tribal interest rates are among the highest on the market, and they often trap people in a cycle of neverending debt. Here’s what you should know about them, including how they work, the problems with using them, and the best alternatives.

In this post:

• What Are Tribal Loans?
• Should You Ever Take Out a Tribal Loan?
• What Happens When You Don’t Pay Back Tribal Loans?
• Is Tribal Lending Illegal?
• Tribal Loans vs. Payday Loans vs. Personal Loans
• Best Alternatives to Tribal Loans
• How to Get Out From Under Tribal Loans

What Are Tribal Loans?

Tribal loans are a version of payday or installment debt offered by lenders who claim immunity from state lending regulations via ownership by or association with a Native American tribe.

Tribal loans are typically short-term, online loans with small to medium balances and carry interest rates above typical legal limits.

Because federally recognized tribes are sovereign nations, they can operate under tribal law without interference from state governments. Tribal lenders partner with these tribes and claim immunity by extension, which they use to get around legal protections for consumers.

Companies offering tribal loans always claim to be wholly owned by a Native American tribe. They have to make that claim to be immune to state law. Many of them are actually operated by outsiders who have nothing to do with the tribe and are simply using it as a front.

Tribal lenders often have to respect federal law. It’s the basis for their immunity. Unfortunately, federal regulations often do little to protect borrowers. State governments are generally responsible for limitations on interest rates, loan sizes, and repayment terms.

Like payday loans, tribal loans are accessible to just about anyone, even with bad credit. There are no credit checks during underwriting, and borrowers usually only need a little income to qualify. They’re also quick to close, as borrowers often get their proceeds within a single business day.

They pay a massive price for the privilege, though.

Tribal interest rates regularly reach the high triple digits. Think somewhere between 300% and 800% APR. For reference, the legal limit is 36% in around a third of the United States^[1].

Should You Ever Take Out a Tribal Loan?

With very few exceptions, taking out tribal loans is a painfully expensive mistake. Forgive me for getting on my soapbox, but the rent-a-tribe strategy might be the most despicable lending scheme in existence.

First, tribal lenders take advantage of Native American tribes that struggle financially. The lenders usually give them a small percentage (1% to 2%) of their lending operation’s proceeds for the use of the tribe’s sovereign immunity.

They then use that privilege to abuse consumers with poor credit whose backs are against the wall. Typically, they’re people who need a little cash to pay for something like a car accident or put food on the table.

Often because they can’t qualify for other forms of financing, these people resort to tribal loans and end up paying interest rates that nobody could keep up with, even over the short term.

When someone can’t repay these loans, they often pay for a rollover to push the deadline back, which traps them in an endless cycle of debt. That’s illegal in many states, but of course, tribal lenders don’t follow those regulations.

What Happens When You Don’t Pay Back Tribal Loans?

Because of their overwhelming costs, tribal loans tend to have a high default rate. Some users try and fail to keep up with their loan payments, while others see the ridiculous interest rate and give up, perhaps rationalizing their choice after learning the loan is illegal under state law.

When this happens, tribal lenders will make attempts to collect, just like a payday lender. They may do any or all of the following:

• Cash your post-dated check
• Debit your account directly (multiple times, if it fails)
• Threaten you with a lawsuit, arrest, or wage garnishment 
• Harass you via constant phone calls or emails, even at odd hours
• Threaten or attempt to contact your family or employer to report your debt

They will always try to charge your account and take your money directly first. If that fails, they’ll attempt to scare you into paying by harassing or threatening you. While these tactics are understandably effective, most of their threats are probably empty.

If a tribal lender violates state regulations or operates without a license, it’s unlikely that they could ever get a ruling against you in a legitimate court. 

They may try to convince you to obey the laws of their “tribal court,” but they can’t use that to enforce any wage garnishment against you, and they definitely can’t arrest you or send you to jail.

Most tribal lenders do not report payment activity to the three credit bureaus, but defaulting on one may still hurt your credit. Lenders can sell your account to a debt collections agency, which may show up on your credit report.

Is Tribal Lending Illegal?

Unfortunately, tribal lending is something of a legal battleground. It’s true, Native American tribes do have sovereign immunity, but that doesn’t necessarily mean all tribal lenders can legally ignore state or federal laws.

Tribal Loans: What Are They, and Should I Get One?

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In 2016, the Supreme Court of California held that some tribal lenders do not have a sufficient connection to their Native American tribe to warrant the use of their tribal immunity. It ruled that lenders must prove their connection to benefit from tribal immunity, as many only fill out some forms, which isn’t enough.

In addition, both the Federal Trade Commission and the Consumer Financial Protection Bureau have successfully sued tribal lenders for garnishing wages without the order of a legitimate court or otherwise collecting on loans that break state regulations.

Cases like these indicate the increasing likelihood that the government will eventually eliminate the tribal lender strategy as an effective way around the law.

Tribal Loans vs. Payday Loans vs. Personal Loans

Here’s how tribal loans compare to payday and personal loans.

*These are just a range for typical loan terms. Your results may vary.

As you can see, tribal loans are somewhere in between a payday loan and a personal installment loan. They typically claim to be a superior financing option for people who would otherwise use payday loans because their longer repayment terms give borrowers more time to come up with their payments.

However, because their interest rates are higher, borrowers frequently find them harder to afford than payday loans in reality. The longer loan term just gives more time for the interest to accumulate.

Of course, a personal loan is generally the best option of the three, but borrowers with bad credit will struggle to qualify for one.

Best Alternatives to Tribal Loans

Though tribal loans aren’t a viable solution, they bring up a real problem in America: People with bad credit need financing, too, often for emergency expenses. However, they don’t qualify for traditional debt.

Many predatory lenders use their captive customers’ needs to charge them as much interest as possible. However, there are options out there that are more affordable while still accessible to people with low credit scores.

A couple of examples include:

• Secured credit cards: These accounts are best for people with no credit history, but they work for those who have made mistakes too. Because you must put down a deposit equal to your credit limit, lenders are more comfortable financing risky borrowers this way. With timely payments, you can avoid interest costs entirely.
• Paycheck advance apps: If you have a stable income but need a few hundred dollars or so, these apps can give you an interest-free advance on your paycheck. They generally do not check credit and often cost nothing to use, though some charge a small monthly fee.

If you experience an unexpected financial emergency and find yourself without any savings to fall back on, these are better borrowing alternatives than tribal loans. Of course, they’re not going to support you forever, and no amount of debt is ever as affordable as a solid emergency fund.

Learn More: If you have bad credit, start building a better score as soon as possible. Not only will it benefit your short-term borrowing rates, but it’s a necessity for any long-term accounts, like a mortgage. Use these strategies to starting building credit today: 5 Most Effective Ways to Start Building Credit.

How to Get Out From Under Tribal Loans

While it’s always better to avoid taking out tribal loans in the first place, some people only learn that lesson after they’re already stuck with the debt.

If that’s true for you, look into lending laws in your state, the specific terms of your debt, and who monitors the tribal loans in your state. Everyone’s situation is different, and you’ll need a good understanding of these factors to navigate your path to debt freedom.

Next, it’s always best to consult with a lawyer who has experience with cases like yours. That’s the easiest way to get rid of tribal loans as safely as possible, and if you can afford it, it’s always the way to go.

Your lawyer might suggest coming to an arrangement with your tribal lender, in which case they would usually forestall debits to your bank account until you can come up with a payment plan.

Note that borrowers who complain to their tribal lenders about their products may receive surprisingly favorable responses. For example, the answers to complaints on the Better Business Bureau page for Evergreen Services show that the lender often erases debts in full.

Some lenders don’t want to deal with the hassle of pursuing borrowers who put up a fight, especially if they complain publicly. Because of this, it’s usually worth raising the issue.

Your lawyer may suggest fighting the loan. Usually, that involves:

• Informing your creditor that you will no longer be paying your loan because it’s illegal.
• Closing the bank account you used for the loan and opening a new one.

Whichever option you decide to pursue, don’t let your tribal lender’s scare tactics rush you into anything. Do your due diligence, take your time at each step of the way, and get expert help whenever possible.

Learn More: If you’re struggling to keep up with your debts, you’ll probably also find it difficult to afford a lawyer. Here are some ways to get free or low-cost legal assistance: How to Get Free Legal Help.

Do you have any questions about tribal loans? Let us know in the comments below!

The post Tribal Loans: What Are They, and Should I Get One? appeared first on FinMasters.

Webull is a popular zero-commission brokerage. Users rave about the user-friendly mobile app and the market information it provides. Millions of investors are using the app. But how does WeBull make money? For that matter, how does any zero-commission broker make money?

Let’s take a closer look.

What Is Webull?

Webull is a relatively new entry in the zero-commission brokerage business. The Company launched its mobile app in 2018 and had 11 million registered users by 2020.

Webull offers many of the same features that characterize most no-fee brokers. There are no trading commissions. There are no per-contract, exercise, or assignment fees on options trades. Webull does not have a minimum balance for accounts. They introduced fractional shares in June 2021.

The Webull app gets very positive reviews for its well-planned interface and ease of use. The app offers large amounts of market data for free, and it’s easy to find what you want. A more advanced data package is available for an additional fee.

Webull offers a social media feature that allows investors to discuss investments and trade information.

As with many zero-fee brokers, many consumers wonder how WeBull makes money. The question matters. If you know how a company makes money you can detect potential conflicts of interest. Not knowing how a company makes money leaves users wondering whose interests the company really serves.

What Do Brokers Do?

A stock market is, of course, a market. Some people want to sell, and some want to buy. Each stock, ETF, or other security is a product.

What makes stock markets uniquely complex is that the price of each product fluctuates constantly. Each product has three key figures:

• The “Bid” or “Offer” is the amount that a buyer is willing to pay.
• The “Ask” is the amount that a seller is willing to accept.
• The “Spread” is the difference between the bid and the ask.

A heavily traded security may have thousands of bids and thousands of asks in play at any given moment, with a constantly shifting spread between the two.

It’s impossible for a stock buyer to dive into the market as an individual, find someone who’s willing to buy or sell a particular security, and negotiate a price. Stockbrokers fill that function. If you want to sell, they find a buyer. If you want to buy, they find a seller.

Once upon a time, the main source of income for a broker was a per-trade commission. In the late 1980s, the average commission was around $45 but could range into the hundreds for larger trades. Today increasing numbers of brokers charge no commission at all.

So how does WeBull make money? How does any broker make money?

Even in the commission era brokerages had other sources of revenue. Those sources have now taken over completely. Here they are, one by one.

Interest on Cash Balances

Almost everyone who has a brokerage account keeps some cash in their account. Investors hold a cash balance so that they will be able to buy securities they want without having to sell an existing holding first.

The cash you hold in your account earns a small amount of interest. Let’s say that’s 0.25%. The brokerage will then pool your cash with their other cash and place it in short-term investments. Because the broker has a large and continuous sum to invest, they will get a better rate.

Let’s say the broker gets 1.25% on their investment. The 1% difference between what they earn and what they pay you is their profit.

We don’t know how much WeBull earns from interest income. The company is privately held and does not have to report its sources of income. We do know that in 2019 several major brokerages earned more than 50% of their revenue from interest.

We can assume that WeBull earns a significant amount of income from interest.

Payment for Order Flow

Most brokers do not buy and sell stocks themselves. They outsource this function to companies called market makers or internalizers. These companies handle huge volumes of trades and make their money from arbitrage. You’ve heard that word, but what does it mean?

Arbitrage: the practice of buying and selling in different markets at the same time and taking advantage of price differences.

A picture is worth a thousand words:

The difference between those prices is profit for the market maker. The market maker needs trades to earn that profit, so they pay the broker for a flow of orders. That is payment for order flow.

Every seller gets a little less than they might have and every buyer pays a little more than they might have. That is a hidden “fee” that traders pay for the ability to trade fast and easily.

Payments for order flow have increased dramatically, becoming a major source of income for the brokerage industry.

Payments for order flow have recently come into question, as they operate to the disadvantage of both buyers and sellers. Some brokers have been accused of conflict of interest because their desire to maximize payments for order flow could lead them to compromise the interests of investors.

Essentially you are still paying a commission, it’s just bundled into the process instead of appearing as a separate line item. If you’re wondering how WeBull makes money, that’s part of the picture.

Interest on Margin and Short Trades

Like most brokers, Webull allows qualified investors to trade on margin and to make short trades. In both cases, the broker earns interest income.

Margin Trades

Margin trades are a way for investors to purchase securities with borrowed money. The investor uses a portion of their own cash and the broker lends the rest. Once the securities are in the brokerage account they serve as collateral for the loan.

Brokers charge interest on the money they lend for margin trades. These are Webull’s interest rates on margin loans:

These are competitive rates and many brokers charge more. They are still a part of how WeBull makes money.

Short Sales

Investors who believe that a stock will fall in price can short the stock. They borrow shares of a stock from their broker. When the expected decline in value occurs, they purchase the shares at a lower price and use those to bay pay back the borrowed shares.

How does #Webull make money?

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Webull states that “The cost associated with a short sale is the fee for borrowing said stock. This fee changes every day for every available stock and is charged on a daily basis.“

Premium Information

Webull offers a substantial range of market data for free, and most new or relatively basic investors will be satisfied with the basic package. For day traders and more sophisticated investors, Webull offers the “Level Two Advance” package.

The Level Two Advance package is a partnership with Nasdaq TotalView and gives access to more detailed moment-to-moment trading information.

This package is free to Webull users and costs $1.99 per month after that. Webull does not disclose subscription revenue or the revenue split between Webull and Nasdaq TotalView, but if 10% of Webull’s 11 million users (at the start of 2021) subscribe the total revenue would be over $2 million a year.

That’s how WeBull Makes Money

So there you have it. Interest on cash holdings, payment for order flow, interest and fees on margin trades and short sales, and premium subscriptions. That’s how WeBull – and every other zero-commission broker – makes money.

The post How Does Webull Make Money? appeared first on FinMasters.

Monitoring your credit limit is an important part of financial planning. It will affect how much you spend per month, how often you make payments toward your debt, and what credit accounts you use to make your purchases.

If you’re not actively tracking your debt balances in relation to your credit limit, you could incur unnecessary expenses or cause damage to your credit score.

Here’s what you should know to prevent these things from happening.

In this post:

• What is a Credit Limit?
• How Is Your Credit Limit Determined?
• How Much of Your Credit Limit Should You Use?
• Can You Go Over Your Credit Limit?
• What Is the Average Credit Limit?
• What Causes Changes to Your Credit Limit?
• How To Avoid Credit Limit Reduction

What Is a Credit Limit?

Your credit limit is the maximum balance you can have on revolving debt like credit cards and lines of credit. It can refer to the maximum balance for each of your accounts or all of them combined.

Your credit limit has significant implications for your fundamental financial processes like budgeting, saving money, and paying bills.

For example: If you owe $900 on a card with a credit limit of $1,000, you’ll have to pay the balance down before you can use the account to buy your next $200 batch of groceries.

Available Credit vs. Credit Limit

Your available credit and credit limit are similar concepts, and it’s easy to confuse them. Here’s how they differ.

Your credit limit is the maximum amount you can borrow on a credit account at any given time. It’s generally a fixed amount, and your lender should notify you if there’s any change to it.

Your available credit is the amount of borrowing power you have left until you reach your credit limit. It will increase when you pay off debt and decrease the more you use.

For example: Say that you owe $800 on a card with a $1,500 limit. Your available credit would be $700 since you can spend that much more before hitting the maximum balance on the card.

How Is Your Credit Limit Determined?

Your lender will assess your creditworthiness before deciding whether to issue you a card and how much they are willing to let you borrow. They’ll consider the same factors to make both decisions. This process is called underwriting.

First, they’ll pull your credit report and calculate your credit score. Most credit cards target a specific credit profile. For example, they might be for people with:

• No credit
• Fair to good credit
• Very Good to Excellent credit

If your score is at the low end of the card’s approval range, you may get a low limit. If your score is toward the high end of the card’s target credit range, the lender will be more likely to give you the maximum available for that card.

Cards aimed at people with lower credit scores generally have lower maximum credit limits.

Lenders will also consider other factors like your income, cash reserves, employment stability, and more. Generally, a stronger financial position will encourage your lender to give you a higher limit.

If you barely meet a lender’s requirements, they may give you the account but with a low credit limit. If you pass with flying colors, they’ll approve you for a higher limit to encourage you to use the account.

Lenders may also be more or less willing to extend high credit limits due to macroeconomic factors or their own financial condition. You might run into stricter lending standards if interest rates or lender liquidity is low.

How Much of Your Credit Limit Should You Use?

While your lender will let you borrow up to 100% of your credit limit, they won’t be happy if you use that much. Using too much of your credit limit is a warning sign to creditors, and it will likely damage your credit score.

Your outstanding debt balances give a lot of insight into your borrowing habits when you compare them to your total credit limit.

The metric lenders use to assess your use of credit is the credit utilization ratio. To calculate it for yourself, divide your outstanding debt balances by your total credit limit.

You’ll often hear that you should keep your credit utilization below 30%, but lower is always better. Your score will see the most benefits if you can keep it between 1% and 10%.

While a 0% credit utilization ratio is better than one above 30%, you risk creditors thinking you’re not using the account, which isn’t optimal.

Keeping your credit utilization below 10% doesn’t mean you can only ever use 10% of your borrowing power. Just make payments to keep your balance below 10% on the day your lender reports to the credit bureaus. That’s usually on your statement date, the last day in the billing period.

Can You Go Over Your Credit Limit?

If you’re wondering what happens if you try to spend more than your limit, the chances are that your purchase will simply be declined. That can put you in a tough spot if it’s a necessary expense and you have no other recourse.

What is a Credit Limit, and How is it Determined?

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However, it might be the best outcome you could reasonably hope for because the alternatives are even less desirable.

For example, your lender might automatically consider your credit account to be in default. That can significantly damage your credit score and even cause the lender to increase your interest rate or monthly payment.

They could also charge you an over-the-limit fee, similar to an overdraft fee. However, the Credit Card Act of 2009 requires lenders to let you opt-in or out of these. If you haven’t, your transaction won’t go through, and they won’t be able to charge you.

What Is the Average Credit Limit?

It’s tough to compare your credit limit to that of the entire consumer population because the average varies considerably when you account for factors like age, income, and location.

For example, take a look at the average figures by age for each generation below^[1].

As you can tell, there’s a significant discrepancy between each group. The difference between the generation with the highest credit limit (Baby Boomers) and the lowest (Gen Z) is a whopping $31,857.

Your credit limit tends to correlate directly with your age, though there is a slight reversal among the most elderly.

There is a similar effect when you examine the typical credit limit by location. For example, New Jersey has the highest average in the United States at $37,845, while Mississippi has the lowest at $21,676. That’s a difference of $16,169.

Bottom line, don’t worry too much about how your credit limit compares to your peers. If you’re struggling to stay within your credit limit despite budgeting efficiently, it might be worth checking to see if you have room for an increase. Otherwise, it shouldn’t matter much.

What Causes Changes to Your Credit Limit?

While your credit limit is fixed at any given time, it will change over time depending on how you use your credit. If you’re responsible, your lender will usually reward you with a higher credit limit.

The increase will usually happen automatically, but you can also request an increase if you feel like you’re demonstrably more creditworthy than you were when you opened an account.

How To Avoid Credit Limit Reduction

Just as responsible use of your revolving credit will cause your credit limit to improve over time, making mistakes may cause your lender to lower it.

To avoid credit limit reduction, follow the best practices for using credit cards wisely. That includes making payments on time and in full, as well as keeping your credit utilization low.

Your credit card issuer probably calculates credit utilization on the last day of your billing period, but not necessarily. Make sure you know when it happens so you can control the balance they report to the credit bureaus.

Your lender can also decide to lower credit limits for a group of borrowers in response to less favorable economic conditions or a loss of liquidity. If your credit limit decreases without warning, make sure to reach out and ask why.

Monitor Your Credit Limit

Keep a close eye on your credit limit and use it to guide your spending and monthly payment habits. If you don’t know your limit already, you can find it pretty easily through your card issuer’s website.

Do your best to keep your credit utilization within the single digits toward the end of your billing period. Consider setting up an autopay toward the end of each month to prevent payments from slipping through and your balances from creeping up.

Learn More: The 15/3 credit card payment method can help you keep your credit utilization where you need it to be. Check out our guide to the strategy here: The 15/3 Credit Card Payment Hack: How, Why, and When It Works.

Do you have any questions about the credit limit? Let us know in the comments!

The post What Is a Credit Limit, and How Is It Determined? appeared first on FinMasters.

A home loan is the most significant chunk of debt most Americans ever borrow, by a large margin. The average mortgage debt is roughly $208,185, while student loans and auto loans average just $38,792 and $19,703, respectively^[1].

When you’re considering taking on such a large amount of debt over such a long term, even a slight interest rate reduction can lead to massive savings. A rapid rescore is one way to get a quick rate cut if you don’t like a lender’s initial offer.

Here’s everything you should know about rapid rescores, including how they work, who they help, and how to get one.

In this post:

• What is a Rapid Rescore?
• What a Rapid Rescore Can’t Do
• When Does a Rapid Rescore Make Sense?
• How Much Does a Rapid Rescore Cost?
• How to Do a Rapid Rescore
• How Long Does a Rapid Rescore Take?
• Should You Use a Rapid Rescore?

What is a Rapid Rescore?

The rapid rescore process accelerates updates to your credit report, usually to boost your credit score after making positive changes that lenders haven’t reported yet. Consumers often use it to lower their interest rate on a time-sensitive loan like a mortgage.

What a Rapid Rescore Can’t Do

A rapid rescore is only helpful in specific situations. A rapid rescore is not credit repair. It won’t affect your actual credit history or change what belongs on your report. It only updates the record so that your credit score reflects your most recent activities.

A rapid rescore will not cause negative items to age off your credit report any faster.

For example, if you’ve missed a payment or defaulted on a loan, it will remain on your credit report for seven years from the date of the first missed payment. If you’ve filed for bankruptcy, it will still show for up to ten years. Rescores won’t have any effect on the clock.

Learn More: Items stay on your credit report for a fixed amount of time. Find out how long you can expect them to last with this handy guide: How Long Do Items Stay on My Credit Report?

When Does a Rapid Rescore Make Sense?

Not every mortgage borrower will benefit from a rapid rescore. In fact, most people probably won’t. A rapid rescore is only profitable if there is a discrepancy in your credit report that, if updated, would increase your score enough to lower your interest rate.

How Much Does a Rapid Rescore Cost?

Rapid rescores aren’t free, and they get more expensive the more changes you need to make. The price correlates directly with the number of accounts and the number of credit reports you need to adjust, as it’s usually between $20 and $50 per account for each credit bureau.

However, the Fair Credit Reporting Act prohibits lenders from charging borrowers for this service, so if you request a rescore, your mortgage lender will have to eat the cost. Because of this, not every lender offers rapid rescore services.

Before you reach out to your lender to request one, make sure you know precisely what you need to update. If you ask for a rescore of unnecessary accounts and artificially inflate the cost for your lender you may end up with even worse terms.

Make sure to check your Experian, Equifax, and Transunion credit reports to confirm that the desired update is missing on all of them. The information on each credit report is often similar, but it might not be identical.

Lenders don’t have an obligation to share your activity with any credit bureau, so you don’t want to assume that what’s true of one is true of the rest.

If you’re only considering borrowing from one mortgage lender, you may be able to ask which credit report they use and only update that one, which could lessen the price and increase your chances of acceptance.

How to Do a Rapid Rescore

Unfortunately, it’s impossible to do a rapid rescore yourself. You can’t reach out directly to the credit bureaus to ask for one, so it’ll have to be something you do through your lender. If they offer rescore services and agree that you’ll benefit from one, then they can make the request on your behalf.

Here’s how to go about a rapid rescore from start to finish to get the most out of it.

First, review your credit report and determine if there are any inaccuracies. Are there any accounts you’ve paid off or paid down that aren’t reflected there yet? If so, then you can discuss them with your lender to see if updating for those changes would make a dent in your interest rate.

If there are no discrepancies, you’ll need to make some before a rescore would do you any good. The best option is to make significant payments toward your outstanding debt, but don’t spend so much that you’ll struggle to pay closing costs on your loan.

Next, gather documentation of the discrepancies between your credit report and your actual credit history. You may need to provide proof of payment on your end, evidence of receipt from your creditor, or both.

At this point, you can reach out to your mortgage lender and negotiate a rapid rescore. They should be able to tell you if one would save you anything on your interest rate or not. If they tell you that it might help, but they don’t offer rescore services, you can consider working with a different lender.

Try to avoid standalone rapid rescore companies and only request a rescore from a lender you trust. Any third party who offers the service is likely a scammer, especially if they ask you to pay for it.

How Long Does a Rapid Rescore Take?

Traditionally, credit score updates take 30 to 45 days. A rapid rescore should process between 3 and 5 business days after the date your lender submits all the necessary information.

Of course, the length may vary, so you’ll have to discuss the specifics with your lender to get a concrete answer for your situation.

Should You Use a Rapid Rescore?

A rapid rescore can be a handy way to boost your credit score when you’re in the middle of negotiating a mortgage agreement, but it’s not going to be the right fit for everyone. It’ll only help you if it fixes enough harmful discrepancies to lower your interest rate.

It’s theoretically possible to execute a rapid rescore and hurt your credit if it turns up a negative item that wasn’t showing before, but it’s unlikely. Your lender would probably just decline your request.

If you’re not in a rush to get a mortgage, you’re probably better off improving your credit score via the slow and methodical way. You can make a much more significant change in your interest rate by solidifying your payment history and reducing your debt for a year than you could by making one lump sum payment.

Your funds are likely to be limited during mortgage closing anyway, and your outstanding balances are only worth 30% of your score. A holistic approach that targets each of your credit score factors will be much more effective.

When in doubt, talk to your mortgage lender and ask for guidance. If you don’t like their answer or still have questions, you can always get a second opinion.

Do you have any questions about rapid rescoring? Let us know in the comments!

The post What Is a Rapid Rescore, and How Do You Get One? appeared first on FinMasters.

If you already have a good credit score, or you’re close to getting a good credit score, you’ll be eager to step up from “good” to “very good” or even to “excellent”. One step up in your credit score can unlock lower interest rates, better mortgage terms, and larger credit lines with better features and rewards. 

Your credit score is a reflection of your financial health, and having a good credit score can make it easier to get a loan or secure financing. With the strategies outlined here and a little patience, you could increase your credit score by 100 points or more. Here’s how.

In this post:

• The Best Ways to Improve Your Credit Score
• How to Improve Your Credit Score Fast
• Improve Your Credit Score In 30 to 60 Days
• Improve Credit Score in a Year
• How Long Does It Take to Improve Your Credit Score?

The Best Ways to Improve Your Credit Score

There are 5 main factors that make up your credit score. Each of these factors can be used to improve your credit score.

1. Payment history
2. Amounts owed
3. Credit history
4. Credit mix
5. New credit

Payment History

The single most important way to improve your credit score is by paying your credit cards, installment loans, and any other credit line on time. The key is consistency. Since on-time payments account for 35% of your credit score, this is one of the easiest ways to improve your credit score. 

In the case of credit cards, you only need to make the minimum payments for them to be counted as on-time payments and have a positive effect.

Payments that are more than 30 days late are usually reported to credit bureaus. To avoid late payments, you can set up automatic payments of the minimum payment amount on each of your credit cards, as long as you are careful not to overdraft from your bank account. 

An extended history of on-time payments is one of the most effective ways to build your credit score. 

Amounts Owed

After payment history, the amounts you owe will have the biggest impact on your credit score. The amount owed accounts for 30% of your credit score. Lenders measure this not just as the total debt, but also by the credit utilization ratio. This is the amount of your total revolving credit limit that you are using. 

Generally, you will want to keep your credit utilization ratio below 30%. That means if you have a total credit limit of $10,000 on your credit cards, you will want to avoid carrying more than $3000 in debt.

People with credit scores of 795 and above use an average of only 7% of their available credit.

There are several ways to lower your credit utilization ratio:

• Pay off debt. The lower your balances are, the lower your credit utilization will be.
• Ask for a credit limit increase. A higher limit means lower utilization.
• Redistribute debt. Using an installment loan to consolidate your credit card debt will drop your credit utilization and could lower your interest rate.
• Open a new line of credit. A new credit card will add to your limit and reduce your credit utilization.
• Keep old cards open. Unless they carry an annual fee, it’s a good idea to keep those old cards. Their credit limits add to your total limit and lower your utilization.

Remember that both your total utilization and your per-card utilization matter. Try not to bring the balance on any card above 30%. Lower is better!

Credit History

While you cannot retroactively open a credit card or line of credit to improve your credit history, you can become an authorized user on someone else’s card. If you have a friend or relative with good credit history willing to add you to their oldest credit card, the additional time of good credit will give your credit score a boost. 

While some people will attempt to do the same through buying tradelines, we don’t recommend it. If you want to increase your credit history length, which makes up 15% of your credit score, the best way to do this is by being added as an authorized user by someone you know with a good credit score. You can do this for a temporary boost, such as when applying for a mortgage, or long-term for a sustained credit boost.  

You can also maintain your credit history by keeping old accounts open. Don’t close old credit cards unless they have an annual fee!

Credit Mix

Your credit mix takes into account the different lines of credit. A good credit mix includes both revolving lines of credit, like credit cards, and installment loans, like student loans, auto loans, and mortgages. 

To improve your credit mix, consider what you already have. If you only have credit cards, getting even a small installment loan, such as a credit builder loan, can improve your credit mix. If you only have installment loans like student loans or auto loans, adding a credit card or store line of credit will improve your credit mix. 

Since credit mix makes up only 10% of your credit score, this is not the most important factor to consider. But if you’ve already improved the other areas, this is a way to further boost your score. Every bit counts

How to Improve Your Credit Score No-Nonsense Strategies That Work

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New Credit

Opening a new credit card is one strategy to improve your credit score, but only if you do it strategically. Too many new accounts or hard inquiries can hurt your credit score. Avoid opening more than two to three accounts per year to avoid being penalized, and try to spread them out. 

Once you have an account open, try to keep it open even if you do not use the card. This will increase your total available credit and improve your credit utilization ratio. 

How to Improve Your Credit Score Fast

If you’re looking for an immediate boost to your credit score, you have a few options:

1. Pay off credit card debts
2. Pay installment debt on time
3. Be added as an authorized user
4. Ask for a higher credit limit
5. Use Experian Boost and eCredable Lift
6. Dispute innacurate information on your credit report

Pay Off Credit Card Debt

Paying off any credit card balances is good for both your credit and your finances. Your credit utilization will drop and you won’t be paying interest!

Keep Up With Installment Debt

There’s generally no advantage to your credit in paying off installment loans early. A loan that’s paid will still be on your credit record, but active accounts have more impact than paid accounts. You want to be sure to make every payment on time, but keeping that live installment loan on your record will help your credit more than paying it off early.

Become an Authorized User

If you are added as an authorized user to someone with good credit and a longer credit history, you can get an instant credit score boost. If you have a credit history of 10 years, and a friend has a credit history of 20 years and a higher overall credit score, being added to one of their cards will double your credit history length, instantly improving your credit score. 

Ask for a Higher Credit Limit

Asking for a higher credit limit can improve your credit score quickly. If your credit card has a limit of $5000, ask for an increase to $7000 or $8000. This can instantly reduce your credit utilization ratio and increase your credit score.

Use Experian Boost and eCredable Lift

Experian Boost and TransUnion’s eCredable Lift can help you improve your credit score by giving you credit for paying utilities and other bills on time. Anyone who regularly pays for utilities or streaming services can use Experian Boost and eCredable Lift to boost their credit score, even if it is already “good”. Both services are free!

Check Credit Reports

Be alert to get your free credit reports from Experian, Transunion, and Equifax. Learn how to read a credit report. If you spot any incorrect or inaccurate information, use the dispute process to have them removed.

Knowing your credit reports will help you know how much work you have to do to improve your credit. If you have legitimate late payments, chargeoffs, or collection accounts on your record you can help by paying the accounts off, but they will remain on your record for seven years from the date of the first delinquency. That sounds like a long time, but older accounts affect your credit score less than newer ones, so the impact of those old black marks will fade as time goes by.

What Not to Do

Many people who are eager to improve their credit embrace methods that are risky or ineffective. Some even fall victim to credit repair or debt relief scams.

If anyone promises that they can improve your score instantly or remove legitimate items from your credit report, be careful. It’s easy to make promises but hard to deliver on them, and you may end up spending money for nothing.

There are legitimate credit repair companies but also many that are less legitimate. do your research carefully before hiring someone to improve your credit, purchasing tradelines from someone else, or using other shortcuts.

In general, it’s not a good idea to spend money to improve your credit score. If you open a new credit line, only use it to buy things that you need and would have bought anyway. If you get a new credit card or keep an old one just to help your credit, be sure you’re not paying annual fees for those cards. Getting a credit line at an online store that sells overpriced goods is a poor way to build credit.

You want your spending to work for you, not against you!

How To Improve Your Credit Score In 30 to 60 Days

The best way to improve your credit score in 30 days is to use the strategies to instantly improve your credit score. Your 30 to 60-day credit score boosting checklist:

• Debt: Pay off as much credit card debt as possible. If not all, try to get the credit utilization ratio below 30%, lower if possible. Make installment loan payments on time.
• Credit Limit: Ask for a higher credit limit with each of your credit card companies.
• Credit History: If you know someone, like an older relative, with good credit history, ask to be added as an authorized user. 
• Experian Boost/eCredable Lift: Regardless of your credit score, you can use Experian Boost and eCredable Lift to increase your credit score. 
• New Credit: If you haven’t opened a new line of credit in at least 3 months, opening a new line of credit will increase your total credit limit and can increase your credit score. 

Be sure to make all payments on time and focus on paying off as much debt as possible. These strategies together will show a boost in your credit score in 30 to 60 days. 

How to Improve Credit Score in a Year

If you have a year to improve your credit score, first follow all the strategies above. Be sure to make all credit card and loan payments on time. 

With a year to plan, you can open two new credit cards in the first 6 months of the year to increase your total available credit.

Diversify your credit mix. Try to have at least one revolving line of credit, like a credit card, and one installment loan, like an auto loan, student loan, or credit builder loan.  

Finally, near the end of the year, after paying on time and decreasing debt throughout the year, you can request an increased credit limit again. 

How Long Does It Take to Improve Your Credit Score?

How long it takes to improve your credit score depends on your individual credit history and situation. Many people can see improvement in as little as a month. 

Research from FICO shows that it can take 3 months for credit to return to its previous level after closing a credit card account, maxing out a credit card, or applying for a new credit card. Late mortgage payments can affect credit scores for 9 months, while missed or defaulted payments can decrease credit scores for 18 months. 

If you’ve had any of these situations, you can expect your credit score to gradually increase over 3 to 18 months. 

The time it takes to change your credit score is heavily affected by the amount of information in your credit file. If you have a thin credit file with a small number of accounts, any change, even a small one, will have a noticeable impact. If you have many accounts and a long credit history it will take more time and effort to change your score.

How Long Does It Take To Improve Your Credit Score 100 Points?

Depending on your personal financial situation, you can improve your credit score by 100 points in as little as 30 to 60 days. Consistently follow the steps we explained here. Long term, you will see the results and a steady increase in your credit score. 

Do you have any questions about how to increase your credit score? Let us know in the comments below!

The post How to Improve Your Credit Score: No-Nonsense Strategies That Work appeared first on FinMasters.

What is a market bubble? The simple answer is that a market bubble happens when the price of an asset rises to a level high above its fundamental value.

That simple answer is not satisfactory, because the “fundamental value” of an asset isn’t always clear. It’s hard to find two investors who agree on what a “high” asset value is.

It may be hard to define exactly what a bubble is, but most investors know we had two of them quite recently: the dot-com bubble of the late 90s and the real estate bubble of the mid-00s. In both cases, values soared and many investors made money. Then they crash, many investors lost money, and the economy sank into recession.

Today asset values are once again at historic highs. Is it a bubble? If it is, when will it burst?

Nobody can give conclusive answers to these questions, but understanding the bubble phenomenon will help us form educated opinions. Let’s take a closer look.

The Anatomy of a Bubble

Asset prices rise because people buy the asset. That’s true whether we’re talking about real estate, stocks, cryptocurrency, or tulip bulbs. Of course, people buy assets all the time. To inflate a bubble you need a sudden and sustained surge of buying.

That requires three things.

• Liquidity. People can’t buy assets unless they have liquid cash. Periods of low interest rates and relatively easy access to credit often help to kick off a bubble.
• Confidence. Bubbles typically begin during periods when people perceive the economy to be healthy and their prospects to be good.
• Excitement. The perception of a revolutionary change or an emerging “new paradigm” often drives high-risk investing behavior.

These ingredients are not some explosive recipe that instantly expands into a bubble. Even when conditions are right, a bubble grows in stages. This chart shows a typical bubble pattern.

The peak of the bubble is often called a “Minsky Moment”, after economist Hyman Minsky, whose theories on the movement of an economy from stability to instability to crisis are central to our understanding of bubbles.

A Minsky Moment can be a relatively minor event. If asset prices are stretched far beyond any rational construct of value and valuations are supported largely by borrowed money, any trigger can burst the bubble.

Opportunities and Risks

A bubble produces both risks and opportunities. People who were holding assets at the start of the bubble or purchased them relatively early in the upswing can earn huge profits if they sell before the peak.

Many people are sucked into the frenzy late, often driven by FOMO: the fear of missing out. They take the worst hit, as they often buy at high prices and cling to their assets as the values plunge.

Cashing in on a bubble requires discipline and a cool head. It’s not easy to sell assets when the value is soaring every day and everyone around you is scraping together money and even borrowing to put more into the market. That’s still the best time to sell, and wise and wealthy investors have known through the ages. 

“Buy on the sound of the cannons, sell on the sound of the trumpets”

Attributed to Nathan Rothschild (1777-1836)

“Be fearful when others are greedy, be greedy when others are fearful.”

Warren Buffet

Both quotes deliver the same message: buy in the “despair” phase and sell in the “mania” phase.

Bubbles Aren’t Universal

Most bubbles are focused on one asset or asset type. Other assets may languish ignored, or even fall in value as investors liquidate other holdings to raise cash to put into the fashionable investment of the moment.

For example, look at this chart of three stock indices during the late 90s dot-com boom. The tech-heavy NASDAQ soared to the heavens and then dove into the pit, while the broader S&P 500 and the Blue Chip Dow Jones Industrial Average showed relatively minor fluctuations.

This happens because bubbles are essentially psychological phenomena, not economic phenomena. From an economic perspective, there is no reason to buy an asset if the price exceeds the value. 

People buy into a bubble because of belief. Investors set valuation aside, and buy simply because they are convinced that someone else will always be willing to pay more. Even professional money managers get sucked into the frenzy as clients demand the “exponential returns” they are hearing about in the media.

Great Bubbles Through History

Market bubbles are as old as asset markets. Here’s a look at some classic examples.

Tulipmania

The first recorded bubble occurred in the Netherlands in 1636 and early 1637. The Netherlands was the trading capital of the world at the time, with the world’s highest per-capita income and well-developed financial markets. Speculation in tulip bulbs reached such a fevered pitch that a single bulb had the same price as 5 hectares of land. Traders embraced futures contracts and other forms of derivatives. Prices collapsed, and many speculators were left holding bulbs and contracts that were effectively worthless.

The South Sea and Mississippi Bubbles 

These speculative surges peaked in 1720. Both were driven by fevered and often wildly exaggerated stories of the riches that state-sponsored trading companies would reap from explorations in North and South America. Investors piled in and shares soared to extraordinary values until the bubbles burst.

The Roaring 20s

The emergence of new technologies dominated the 1920s: automobiles, aviation, railroads, refrigerators, and many others were becoming popular. Consumer credit, available for the first time to many people, drove demand for goods and poured borrowed money into the stock market. Stock prices plummeted in 1929, kicking off the Great Depression.

The Dot Com Bubble 

The tech bubble of the late 90s was driven by the emergence of the baby boom generation into their peak years of earning and spending the end of the cold war, and the emergence of a new generation of technologies. Investors poured money into tech stocks, and by the late 90s, it was common to see IPOs of companies with no products or revenues, just an exciting story. Conventional stocks languished as investors focused almost exclusively on tech and internet-related stocks

The Real Estate Bubble 

The recession following the dot com bubble was relatively mild, as the Federal Reserve lowered interest rates to near zero and flooded the economy with liquidity. Much of that liquidity poured back into asset markets, and speculation in real estate, in particular, pushed prices rapidly higher. By the peak of the bubble, lenders were making “NINJA” mortgages – no income, no job – purely on the belief that property values would rise even more, and financial institutions were packaging arcane forms of mortgage-backed securities. When prices crashed many property owners were left holding loans that far exceeded the value of their properties, and defaults and foreclosures peaked.

Each of these bubbles was different from its predecessors in some way. Variety is a key driver of bubbles. Because every bubble is different, speculators, politicians, and regulators can tell themselves that this time will be different, that this really is a new paradigm.

People like bubbles, and that makes them hard to spot. Investors make money. Small investors make large gains and feel smug, satisfied, and superior. Jobs multiply, tax revenues soar, and politicians are happy. Anyone who questions the prevailing euphoria is accused of spreading “FUD”: fear, uncertainty, and doubt.

Can You Spot a Bubble?

If you could identify a bubble, you’d be in a great position to make money. Looking back at the stock charts of past bubbles is an exercise in “woulda coulda shoulda”: buying at the right time and selling at the right time could have made anyone rich.

Unfortunately, nobody can reliably say what stage a bubble is in or when a bubble will burst. There is no certainty, but there are signs.

Prices Exceed Value

The definition of a bubble is an excess of price over value. That’s often difficult to determine, because “value” isn’t always clear. It is fair to say that a stock or market sector is in bubble territory when prices exceed any rationally supportable construct of value.

What is a Market Bubble and How Can You Recognize One?

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One of the simplest guides to stock value is the price/earnings or P/E ratio. It is normal for fast-growing companies to have higher than average P/E ratios: people are paying for future expected earnings, not current earnings. 

P/E ratios soaring to extreme levels is a sign that investors are setting rational valuation aside. People are no longer paying for assumed earnings, they are simply assuming that because the stock is popular and has a high profile, somebody will be willing to pay more for it.

Hype is Everywhere

Hype is a defining characteristic of a bubble. Stories of instant millionaires and incredible gains proliferate. Newly successful investors will proudly share their infallible recipes for instant success. Investing is a sure thing, you just put your money in and watch your gains roll out.

I used to refer to what I called “the barbershop theory of investing”: when your barber starts talking about an asset class, sell it at once. When literally everyone is putting all their spare money into an asset class, there’s no room left for growth because there’s no new buying power left.

Bubble hype often features claims that “everything is different this time”. It’s a “new paradigm”; investing has been “democratized” and the secret to making money is no longer limited to the rich. It’s easy to believe when you want to believe. Media, politicians, and even some investment professionals join in the chorus until it becomes a collective delusion.

Asset Prices Exceed User Capacity

Not all bubbles involve stocks. A stock market is inherently speculative: everyone is buying with the expectation of selling at a profit. When that speculative approach extends to asset classes like real estate, assets may be priced out of reach of people or businesses who need them.

Real estate prices may rise to the point where people who need a place to live can no longer afford them without going into excessive debt. That’s a good sign that prices are being driven by speculative demand, not user demand. 

When people are willing to take on excessive debt (relative to their income) because they are sure the asset will keep gaining value, you’re probably in a bubble.

When “flipping” becomes a household word, and people are borrowing money to buy “off plan” units in buildings still under construction or in planning, you’re certainly in a bubble.

Borrowed Money Flows into Markets

Debt is both the fuel and the downfall of many bubbles. You can’t pump up a bubble without money: people need money to buy assets. 

When market returns are high and interest rates are low, it seems logical to borrow money and put it in the markets. If you’re paying 4% a year on your debt and gaining 15% a year – or more – on your investments, the difference is pure profit.

The problem is that debts come due. Sooner or later, an investor has to pay off debt for a losing investment. They do that by selling other investment holdings. Those sales drive prices down, and other investors have to do the same. 

You can’t “HODL” (hold on for dear life) if you need the money to avoid default on a debt. As more investors are forced to sell to meet obligations prices can plummet, leaving some investors unable to cover debts even by selling other holdings.

One indicator to watch is margin debt: credit extended by brokers to customers who want to buy stocks.

As you can see, margin debt peaked before both the 2000 and 2008 market crashes, and it’s currently near all-time highs.

Margin debt isn’t the only way investors borrow money to buy stocks, but if margin debt is peaking it’s a good indication that borrowed money is pouring into the markets. Because margin debt is callable – the lender can demand repayment in full – it is a type of debt that’s uniquely able to kick off a downward spiral.

Don’t Get Caught

Nobody wants to stay on the sidelines during a bubble: there’s too much money to be made. Nobody wants to be the one left without a chair when the music stops. We don’t know when the music will stop, which makes bubble investing a gamble.

Here are some ways to put the odds in your favor.

• Keep your head. A bubble is first and foremost a psychological phenomenon. When everyone else is going crazy, stay grounded and remember that it will end. 
• Never swim after a ship that’s already sailed. Investors flock to high-performing stocks: FOMO is real. Remember that the goal is to buy low and sell high, and you can’t do that if you buy high. No investor gets them all. Look for another ship.
• Don’t be afraid to take money off the table. If you have a tidy profit on an investment, there’s nothing wrong with selling some or all of a position. You may forego some gains if it keeps rising, but a bird in hand is worth two in the bush.
• Profit isn’t profit until it’s realized. It feels great to say that your portfolio is up xyz%, but until those gains are locked in, they aren’t real.
• Consider defensive strategies. Defensive investment strategies won’t gain as much as aggressive strategies, but they will protect you in a downturn. If you feel that markets are approaching bubble territory, putting part of your portfolio in defense mode makes sense. Methods like stop-loss orders can help protect an aggressive portfolio.

None of these methods will guarantee that you won’t take losses if a bubble bursts. Stock markets don’t offer guarantees. They do offer ways to improve your chances of emerging intact or with minimal losses.

You Can Beat the Bubble

Hyman Minsky, who we mentioned earlier, wrote one of the defining statements about bubbles:

“Stability leads to instability. The more stable things become and the longer things are stable, the more unstable they will be when the crisis hits.”

Hyman Minsky

Stability breeds both confidence and capacity. When people feel secure they take risks, and when they are financially stable they have the means to take risks.

Minsky understood what many investors and politicians don’t want to accept: the danger phase is not the collapse of a bubble, but the expansionary phase that comes before the bubble. 

That’s hard for many people to accept because bubbles are fun. Everybody makes money and everyone feels smart. Tax revenues soar, the populace is content, and political leaders are popular. That euphoria makes it almost impossible to implement policies to constrain a bubble.

Government agencies and the mass of investors may not be able to recognize a bubble or act to constrain it. You can still recognize one yourself and act to maximize your gains and control your losses. If you succeed, you can turn the bubble to your advantage.

What are your thoughts on market bubbles? Do you agree with our analysis? Let us know in the comments below!

The post What is a Market Bubble and How Can You Recognize One? appeared first on FinMasters.

Credit utilization is the percentage of your total available revolving credit that you are actually using at any given time. It is an important number to understand because it is a key factor in calculating your credit score. Improving your credit utilization ratio is one way to improve your credit score.

This factor accounts for up to 30% of the weight in calculating your credit score.

Here is everything you need to know to optimize this critical part of your credit score.

In this post:

• How Do You Calculate Credit Utilization Ratio?
• How Does Credit Utilization Affect Your Credit Score?
• What Is a Good Credit Utilization Ratio?
• When is Credit Utilization Calculated?
• Ways to Improve  Your Credit Utilization Ratio
• FAQs

How Do You Calculate Credit Utilization Ratio?

Credit utilization is based on revolving credit: credit cards and other short-term lines of credit that are not paid on a set schedule. It does not include mortgages, student loans, or auto loans which are considered long-term installment loans. Revolving credit carries over month to month without a predetermined payment date. 

A revolving credit account usually has a credit limit. That is the maximum amount you can charge on the account. The percentage of that limit that you use is an indication of financial responsibility.

If you are using a low percentage of your credit limit, you are demonstrating responsible use of funds. If you max out your cards, you’re demonstrating the opposite.

There is a simple formula: Divide your total debt on revolving credit by your total available credit limit on your revolving accounts. 

Total Debt / Total Credit = Credit Utilization Ratio

Use the Calculator

Here is an easy way to do the calculation. This calculator will do it for you! You can check the calculator regularly to see your credit utilization rate improve as you pay off credit cards and other revolving credit debts. 

Here’s the calculator:

Go to the full page to view and use the calculator.

A better credit utilization rate will have a significant impact on your overall credit score. Unlike the other factors in your credit score, improvements will have a positive impact on your credit score within one billing cycle. A higher rate can also push your credit down in one billing cycle.

How Does Credit Utilization Affect Your Credit Score?

Your credit score is made up of a number of factors, including credit utilization rate, payment history, inquiries, public records, credit history, and credit mix. Your credit utilization ratio makes up around 30% of your total credit score. Even with perfect payment history, long credit history, and a good credit mix, your credit score could be reduced by a high ratio. 

A credit utilization rate under 30% is acceptable. Under 10% is good, and under 5% is excellent.

A credit utilization under 30% will not have a negative impact on your credit score. 

This ratio is calculated for each individual credit card or line of credit and as a total. That means that the rate on each credit line or credit card can affect your score. Even if your overall utilization is low, one maxed-out card can harm your credit.

What Is a Good Credit Utilization Ratio?

Aim to keep your balances under 30% of your total available credit. This will keep you firmly in the “good” category. Regularly paying credit cards on time will improve your ratio (and reduce your interest payments).

What Is Credit Utilization, How It's Calculated and How to Improve It

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Research from Experian shows that users with good credit scores (740 to 799) have an average credit utilization of 12.47%. Users with credit scores of 670 to 739 average 32.6%.^[1]

When is Credit Utilization Calculated?

Credit card companies usually report to credit bureaus once a month, or once during every 30-day billing cycle. This usually happens about 7 to 15 days after the statement closing date, but that varies with the card issuer. 

Payments made or changes to total credit are reflected in 30 to 60 days. If you have paid off a significant portion of debt on revolving credit, expect to see it in your credit score in about a month, depending on when the institution reports and when the credit score is updated.  

If you have a high balance on a card at the time the card company reports, you could see your ratio spike even if you pay that balance in full on or before the due date.
You can avoid this by keeping your balances low or by making several payments each month.

Ways to Improve  Your Credit Utilization Ratio

There are five ways to lower your credit utilization.:

1. Pay off debt
2. Redistribute debt
3. Open a new line of credit
4. Ask for a credit limit increase.
5. Keep old cards open.

Here is how to use each of these.

1. Pay off Debt

Paying off debt is the simplest and most effective way to improve. In addition to paying off credit card debt, focus on paying off any other revolving lines of credit like store loans or layaways. 

2. Redistribute Debt

If it is not possible to pay off debt in the short term, another strategy is to redistribute debt. You can do this by transferring a balance to a different credit card. Ideally, aim to have no single card with more than 30% of total available credit. That means if the credit card has a line of credit of $10,000, try to put not more than $3000 on it. 

Make a strategy before you add expenses or additional debt. If you have to make a charge you won’t be able to pay off right away, try to put it on a credit card or line of credit that does not already have 30% of total available credit in debt.

3. Open a New Line of Credit

When you open a new line of credit, such as a credit card, you get two advantages. First, it increases the total available credit. Second, many credit cards offer 0% interest for a set period of time after opening. This is typically three months to a year. This gives you an opportunity to make a balance transfer, improve your credit utilization rate, and avoid interest while paying off debt. 

Opening too many lines of credit in a short space of time can hurt your credit score. But, if you haven’t opened a credit card for some time, this is an effective strategy. 

4. Ask for a Credit Limit Increase

One of the fastest ways to lower your credit utilization is to ask your card issuer to increase your credit limit. Many card issuers are willing to add a bit to your limit, especially if your payment record is good.

If you had a card with a $5000 limit and your balance was $2000, your ratio would be 40%, not so good. If your card issuer increased your credit limit to $8000, the same balance would give you a rate of 25%, much better.

You’ll need to resist the temptation to spend more with that higher limit. That won’t help!

5. Keep Old Accounts Open

If you have old credit cards you aren’t using, don’t close them. They will add to the average length of your credit history, and their credit limits will add to your total and help your credit utilization.

The only exception to this rule would be cards with an annual fee. If you’re paying to keep a card that you aren’t using it might not be worth the benefits you gain.

FAQs

The Bottom Line

Credit utilization is a key part of your credit score. It’s also a part of your credit score that you can control and change. If you’re looking to improve your credit score, lowering your credit utilization rate is one of the most effective ways to do it.

The post What Is Credit Utilization, How It’s Calculated and How to Improve It appeared first on FinMasters.

Your Debt-to-Income ratio (DTI) is the percentage of your gross income that goes to monthly debt commitments. A high debt-to-income ratio signifies to lenders that you may be unable to take on more debt, which makes you a lending risk. A low DTI demonstrates the ability to take one more debt and still cover your daily expenses. Lenders use the DTI to assess the risk of lending to you.

In this post:

• How to Calculate Debt-to-Income Ratio
• What is a Good Debt-to-Income Ratio?
• DTI: Loan Requirements
  • DTI for a Mortgage
  • DTI for a VA Loan
  • DTI for FHA Loans
  • DTI for Conventional Loans

How to Calculate Debt-to-Income Ratio

You can calculate your DTI in a few simple steps. Here is how to do it:

1. Add up all your monthly debt payments. This includes mortgage payment or rent, student loans, auto loans, child support, alimony, insurance premiums, and minimum credit card payments. 
2. Note your gross monthly income. This is your income before taxes or expenses.
3. Divide the debt calculation from step 1 by the gross monthly income from step 2.

The result is your debt-to-income ratio.

If that seems confusing, or you don’t want to get out a calculator, you can use our simple DTI calculator.

Go to the full page to view and use the calculator.

What is a Good Debt-to-Income Ratio?

A good debt-to-income ratio is under 35%. That means that you should be able to easily pay off monthly debt while managing other expenses with your income. Lenders prefer a figure of 35% or less when considering loan eligibility. With a low DTI, lenders see you as someone able to comfortably manage additional debt payments.

A debt-to-income ratio between 35% and 49% is still considered ok but carries a greater risk. It demonstrates that while you are managing debt, there is room for improvement. Lenders may require additional eligibility requirements in this case, such as a larger down payment, a co-signer on the loan, assets, or proof of cash reserves. 

What Is a Debt-to-Income Ratio (DTI) and How is it Calculated?

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As a rule of thumb, no more than ⅓ of your monthly income should go to housing expenses. This matches with the FHA guidelines of up to 31% DTI for mortgage or housing payments specifically. The lower your DTI, the more opportunities are available to qualify for loans and get better interest rates. 

It is a good idea to work on lowering your DTI to 30% or less. That’s not just about qualifying for loans. A low DTI means you have more disposable income to build savings and invest. It provides security in the case of unforeseen circumstances and ensures that your debt does not get out of control. 

DTI: Loan Requirements

If you plan to get any type of loan, from a mortgage to an auto loan, VA loan, or FHA loan, lenders will consider your debt-to-income ratio. Here are the ideal DTI ranges for different types of loans. With this information and our DTI calculator, you can assess your qualifications before you apply. 

DTI for a Mortgage

Mortgage lenders prefer a debt-to-income ratio of 30% or lower. The upper maximum DTI for loan consideration is 43%. This will vary with the individual lender. Some institutions, such as community credit unions, may be more lenient in DTI requirements. 

Lenders will also look at how much of your income is currently going to service a mortgage or rent payments. Ideally, 28% or less of your income will go to a mortgage or rent in order to qualify for an additional mortgage or loan. 

Just because the maximum debt-to-income ratio is 43%, you will not necessarily get approved for a mortgage with that DTI. Lenders will also consider your credit score, cash reserves, salary, and other assets before making a lending decision. 

DTI for a VA Loan

VA loans are somewhat more lenient than traditional mortgages. With a VA loan, you can have a DTI of 41% or less. That means that if your income is $5000 per month, you can have debt payments up to $2050 and qualify for a VA loan. 

However, loan approval is not guaranteed with any DTI. A lower debt-to-income ratio, a high credit score, and some assets or savings will help you qualify for a VA loan. 

DTI for FHA Loans

The Federal Housing Administration (FHA) sets maximum debt-to-income ratios on their loans to ensure that borrowers are able to meet mortgage payments and cope with the additional expenses associated with homeownership. The FHA guidelines are designed to prevent buyers from purchasing homes they cannot afford. 

The FHA looks at two debt-to-income ratios: 

• Mortgage payment to gross monthly income.
• Total fixed payments to gross monthly income.

The mortgage payment to gross monthly income ratio is based on the size of your housing payment. In addition to the principal and interest, this includes insurance, mortgage insurance premiums, homeowners’ due or fees, and escrow for taxes. 

The maximum amount to qualify for an FHA loan is 31% for the mortgage-to-income ratio.

The total fixed payment-to-income ratio is the same as the standard DTI ratio calculated above. It takes into account all types of debt in addition to mortgage debt. The maximum DTI to qualify for an FHA loan is 43%.

FHA Exceptions

In certain cases, FHA loans do allow for greater flexibility. If the borrower makes a substantial downpayment, can demonstrate large savings or cash reserves, or has an exceptional credit score, a lender has the flexibility under FHA rules to justify loan approval even with a higher DTI ratio. 

If you anticipate lower housing expenses at some point, you can ask the loan officer to calculate your DTI based on that lower number, allowing a greater possibility of loan approval. This is especially true if you expect to be able to pay off a significant portion of the loan within a few years, due to business gains, inheritance, or sale of another property. 

DTI for Conventional Loans

For a conventional loan, a debt-to-income ratio of up to 45% is usually considered acceptable. In exceptional cases, a DTI of up to 50% will be accepted by some lenders. This is usually in the case of large cash reserves and a high credit score. 

This does not mean you will certainly be approved for a loan with a DTI of 45%. It means that your loan could be considered for approval with a DTI of 45% or 50% if the rest of your financial profile is solid.

Understanding your DTI ratio will help you set budgets and plan for your financial future. Understanding your DTI will prepare you to be in the best position for loan approval to purchase a new home, build a business, or take advantage of other growth opportunities.

The post What Is a Debt-to-Income Ratio (DTI) and How Is It Calculated? appeared first on FinMasters.

Most of us would like to know more about credit. It’s a key part of personal finance, and it can be either a huge asset or a terrible liability, depending on how you handle it. Many people start trying to learn more but stall out when they encounter terms they don’t understand. To help you past this hurdle we’ve put together this list of common credit terms that you should be familiar with.

Glossary of Credit Terms:

1. Credit
2. Revolving Credit
3. Charge Cards
4. Installment Credit
5. Service Credit
6. Credit Bureaus
7. Credit Report
8. Credit Score
9. Credit Utilization
10. Credit Inquiry
11. Collections
12. Credit Monitoring
13. Authorized User
14. Dispute
15. Credit Mix

1. Credit

Credit is money that someone (like a bank or credit card company) lets you borrow. You must sign an agreement committing you to pay them back on a set schedule, usually with interest. It is essential to understand that credit is all about your level of responsibility and reputation. You are giving your word that you will pay back whatever you borrow.

There are four basic types of credit:

1. Revolving credit
2. Charge credit
3. Installment credit
4. Service credit

Each serves a different purpose and works in a different way.

2. Revolving Credit

Revolving credit gives you the ability to spend continuously on a credit line while making regular payments. You can spend up to a fixed limit. You make monthly payments against the balance.

Usually, there is a relatively low minimum payment that allows you to keep the account in good standing. The unpaid balance “revolves” into the next statement period. You can keep spending on the credit line while you make payments.

Credit cards are the best-known form of revolving credit. A home equity line of credit or HELOC is another form of revolving credit.

3. Charge Cards

These cards look the same as traditional revolving credit cards and are used in precisely the same way. The difference is that you have a fixed period, usually 30 days, to pay the full amount.

If you have a $15,000 credit limit that you maxed out on your charge card, you will only have to the next billing cycle (usually 30 days) to pay this balance in full, or it will be considered late. You can continue to use the charge card once you have paid the balance.

Charge cards usually require excellent credit and a substantial income.

4. Installment Credit

Installment loans give you a fixed sum of money, which you pay back according to a set schedule. Student loans, car loans, and mortgages are all installment loans.

You will usually pay a fixed sum every month until the loan is paid off. The period during which the loan is paid off is called the loan term.

You will pay interest on an installment loan. Many loans also have origination fees and other closing costs, which you must pay at the start of the loan period.

5. Service Credit

Many people don’t think of service credit as a form of credit, but it is. Things like your Netflix Account, Amazon Prime, your electric bill, or cell phone plan are all types of service credit. They provide you with services and allow you to pay for the services later.

6. Credit Bureaus

People who are thinking of extending credit want to know how much risk a borrower poses. There’s a system in place for evaluating borrower risk, and the three major credit bureaus are at the heart of that system.

These three companies – Experian, Equifax, and TransUnion – keep detailed records of your credit accounts. These records are called credit reports. The information in your credit reports is reported by your creditors.

Not all creditors report to all three credit bureaus, so your three credit reports may be slightly different.

There are other credit reporting bureaus, but most of them serve niche industries. Experian, Equifax, and TransUnion are the ones you need to be aware of.

The Consumer Financial Protection Bureau has a complete list of credit reporting agencies (PDF).

7. Credit Report

Your credit report is like a report card, but instead of showing grades, it gives you and potential lenders an overall picture of your reputation and responsibility with other lenders.

​This report is going to show several things like: 

• ​All Of Your Accounts – You can view all of your accounts that are open or closed on your report.
• Account Balances – You can see any balances you owe.
• Credit Limits – It will show all of the credit limits for each account.
• Your Payment History – It will show if your payments are on time or if they are late.
• Average Age Of Accounts – This shows lenders how long you have been using your credit. 
• Hard & Soft Inquiries – A list of anyone who has requested your credit report.

​This is what a credit report looks:

8. Credit Score

Your credit score is a number rating derived from the information in your credit report. It summarizes the probability that you will default on a loan. The lower the score, the more likely you are to default.

There are two major providers of credit scores: FICO and VantageScore. The way they analyze the information in your credit report is similar, but there can be significant differences. Each of these companies provides different types of scores designed for different types of lenders.

Most free credit score providers use VantageScore, but most lenders use FICO. If you get your credit score from a free provider it may not be the same score lenders see.

Below is a breakdown of the critical factors that make up a score:

As you can see, Payment History and Credit Utilization are the most critical factors and the ones you can most control.

9. Credit Utilization

Credit utilization is the percentage of your available credit that you actually use.

For example, if your first credit card has a $1,000 limit and you haven’t used it, your credit utilization for that card is 0%. If you spend $500 of the $1,000, then your credit utilization is now 50%.

Lower credit utilization is better. Many experts recommend keeping your credit utilization below 30%. Consumers with FICO score above 795 have an average credit utilization of only 8%

Credit utilization is based only on revolving credit. Installment loan balances do not contribute to your credit utilization.

Use our credit utilization calculator to see what your ratio is.

10. Credit Inquiry

When you apply for new credit, potential lenders request your credit report and credit score. They use this information to decide whether they want to offer you credit, and on what terms.

There are 2 types of Inquiries, a “soft pull” and a “hard pull.”

A “hard pull” or “hard inquiry” happens when you apply for credit. These inquiries require your permission. When you sign a loan or credit card application you give the lender permission to request this information.

Hard inquiries affect your credit. The impact of a single hard inquiry is small, but a series of inquiries looks as if you’re desperate for credit, a sign of financial distress.

If you are shopping for a loan or credit card, keep all of your applications within a 15-day period. The credit bureaus will recognize that you are shopping and record only one hard inquiry.

A “soft pull” or “soft inquiry” is a less aggressive request for credit information. When you ask for your own credit report, that’s a soft inquiry. Companies that are seeking to prequalify you for credit or insurance can make soft inquiries.

Soft inquiries have no impact on your credit.

When you review your credit report you will see lists of hard and soft inquiries. Check for unauthorized hard inquiries. They could indicate that someone else is applying for credit in your name.

11. Collections

If you are unable to pay your bill and your account is closed due to non-payment, your debt is probably going to be sold to a collection agency.

These agencies exist solely to collect the money that was owed to your original creditor. Some of these collection agencies are retained by the original creditor, but most of them have just purchased your debt.

A collection agency will report a collection account to the credit bureaus. That can do serious damage to your credit.

A collection agency is required to tell you the amount of the debt and the name of the original creditor. Always ask the collection agency to verify the debt. Debt collectors are not allowed to use abusive or deceptive collection practices. Know your rights!

12. Credit Monitoring

Your credit report is often the first place you’ll see signs of identity theft. If you aren’t watching, you could miss them.

Credit monitoring will alert you to any changes in either your credit report or to your score. This gives you the ability to stay on top of any type of identity theft that could happen.

Credit monitoring also allows you to keep an updated copy of your credit report so that you can review it. Many monitoring services also provide you with regular access to your FICO score.

Learn more: Credit Monitoring: What Is It and Do You Actually Need It?

13. Authorized User

A credit cardholder can add another person to their card as an authorized user. Many card issuers will report the authorized user as a separate account. That makes authorized user status a great way to establish a credit record.

If you’re asking someone to add you to their card as an authorized user, be sure that person is a responsible spender. Their spending will also be part of your record!

14. Dispute

Many credit reports contain errors. These errors can harm your credit.

If you see something on your credit report that doesn’t belong there, you can challenge it using the dispute process. The credit bureaus are required to investigate and respond to your disputes.

Think of a dispute as to your way to defend yourself if a creditor puts incorrect information on your credit report. You can dispute any item on your credit report at any time.

If your dispute is verified the item will be removed or corrected. If the credit bureau finds that the information is accurate, it will not be changed. .

If it doesn’t look right or if you don’t remember it, dispute it!

15. Credit Mix

Your credit mix describes the different types of credit on your credit report. These can include:

• Credit Cards
• Installment Loans
• Mortgages
• Auto Loans
• Merchandise Accounts
• Store Credit Cards

When you have several of these accounts on your credit report, it is considered to have a good credit mix. You should try to have both revolving credit and some form of installment credit on your record to boost your credit score.

This is Just a Start

These terms are the basics, and there’s a lot more to learn about credit and the way it’s discussed. Start by understanding these terms, and look up any others that you don’t understand.

If you don’t understand something, ask someone or look it up online. That’s part of the learning process, and the learning process is a core part of building better credit!

The post 15 Important Credit Terms and Definitions You Need to Know appeared first on FinMasters.

Americans overall have better credit than ever before: the average American credit score hit a record 710 in 2020. Despite that achievement, credit problems are still common.^[1] Approximately 21% of consumers were denied a credit card, loan, or residence lease last year because their credit score was too low.^[2] If you’re having credit issues, the 15/3 credit card payment hack might help.

While increasing your credit score usually takes months, some tricks can give you a quick boost in the right circumstances. The 15/3 credit card payment hack is a good example. Here’s what you should know about it, including how, why, and when it works.

What is the 15/3 Credit Card Payment Hack?

The 15/3 credit card payment hack is a credit optimization strategy that involves making two credit card payments per month. You make one payment 15 days before your statement date and a second one three days before it (hence the name).

Your statement date is the last day of your credit card billing period, upon which your card issuer will send you a summary of your activity and your balance due. Billing periods usually last around 30 days, though they don’t necessarily correspond with calendar months.

Note that your statement date is separate from your payment date, which is the day you must pay off your statement balance to avoid incurring interest charges. It’s usually 20 to 25 days after your statement date (20 days is the legal minimum).

Why the 15/3 Credit Card Payment Hack Works

If you execute it correctly, the 15/3 credit card payment hack can improve your credit score, but it’s not necessarily for the reasons you might think. Here’s what you should know about its effects.

The Misconception: Double the Payment History

Some people claim that the 15/3 credit card payment hack lets you report two payments each month to the credit bureaus instead of one. Theoretically, that would speed up the rate at which your payment history improves.

That would provide a significant increase to your credit because payment history is worth 35% of your score under FICO methods.

Unfortunately, that’s not how it works. No amount of extra payments will provide any added benefit to your payment history.

If you think about it, that would be completely unfair. After all, why would you stop at just two payments a month? If that was how it worked, you could divide your monthly payments into 30 and make one every day of the billing period to supercharge your results.

The number of payments you make in a month says nothing about your creditworthiness. Your creditors only care whether or not you pay what you owe on time and in full.

Whether you make one monthly payment the day before it’s due or 20 payments spread over your billing period, it won’t make a difference. In this regard, the 15/3 credit card payment hack will not help you.

The Reality: Reduced Credit Card Utilization

While it won’t double your payment history, the 15/3 credit card payment hack can help you reduce your reported amounts owed, which is worth 30% of your FICO score (making it the second-most important factor).

The 15/3 Credit Card Payment Hack: How, Why, and When It Works

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More specifically, it reduces your credit card utilization ratio, which is the percentage of your available credit that you’ve used to make purchases at any given time. It equals your outstanding balance divided by your credit limit.

Credit card companies typically report your utilization ratio on your statement date to the credit bureaus, and the 15/3 payment schedule encourages low balances on that date.

In general, the lower your ratio is, the better your credit score will be. If you show lenders that you max out your credit cards each month and consistently carry around a utilization ratio nearing 100%, it would suggest you’re more likely to overspend, miss a payment, or default.

A popular rule of thumb is that 30% is the maximum ratio you can get away with, but the ideal is usually between 1% and 10%. Note that a 0% ratio might not be optimal, but it will still be far better than a high ratio. Consumers with FICO scores over 795 have an average 7% credit utilization rate.

Both your total and per-card utilization ratios matter. If you have multiple credit cards, use this credit utilization calculator to determine the best approach to paying off your balances.

When Does the 15/3 Credit Card Payment Hack Work?

The 15/3 credit card payment hack works best for people who pay their balances off every month (those who carry a long-term balance won’t benefit much because their ratio would still be high) but only focus on doing so before the payment is due.

Unfortunately, that can lead to you showing high utilization ratios each month, even if you’re perfectly responsible with your credit. For example, let’s revisit that same scenario from above.

Should You Use the 15/3 Credit Card Payment Hack?

Truthfully, the 15/3 credit card payment hack is unnecessary. You won’t benefit from making two payments, so you can use any payment schedule that keeps your utilization ratio between 1% and 10% on your statement date.

Remember, though, that your highest priorities should always be to make your monthly payments on time and avoid interest charges. Don’t get so caught up in managing your utilization that you mess up the timing and miss your payment date.

If you’re currently unable to get your utilization ratio to appropriate levels because you can’t afford to pay off your balance each month, consider reaching out to a free credit counselor for help creating a budget and payment plan.

If you take a year to pay off the average credit card debt at the average interest rate ($5,315 at 16.22%), then it would accrue almost $500 in interest over that period.^[3,4] Prioritize your credit card balances. If you need help, contact a credit counselor today!

Do you have any questions about the 15/3 credit card payment hack? Let us know in the comments below!

The post The 15/3 Credit Card Payment Hack: How, Why, and When It Works appeared first on FinMasters.

Some individuals don’t want to be in a fast-paced work environment. That preference may be a result of anxiety or stress, or it may just be a personal preference. Either way, slow-paced jobs offer a solution. These jobs offer the potential to earn an income without the rush or hustle. If you’re an introvert, if you suffer from anxiety, or if you just have a low stress tolerance or prefer to work independently, these slow-paced jobs let your talents shine, without wasting energy.

In this post:

• Slow Paced Jobs Lowest in Stress
• Slow Paced Jobs for Introverts
• Slow Paced Jobs Where You Can Work With Others
• Highest Paid Slow Paced Jobs

Slow Paced Jobs Lowest in Stress

If your main priority is to get out of the rat race or keep your stress under control, these jobs are for you. They rarely require rigorous deadlines or high-stress situations, which is helpful for people struggling with anxiety or other issues. 

Pharmacy Technician 

As a pharmacy technician, your role will include dispensing prescriptions to customers or healthcare professionals. You will also be responsible for filling and pricing prescriptions and obtaining a pharmacist’s approval, as well as completing patient paperwork. This position often requires a minimum of a bachelor’s degree, but there are possibilities for on-the-job training for high school graduates. 

The average annual salary for a pharmacy technician is $32,000. 

Researcher

As a researcher, you will work alone or in a team to uncover new knowledge, technologies, or applications in a chosen field. This can include the compilation of previous research or new research analysis. Due to the long or flexible time deadlines, being a researcher is generally a very low-stress job. An undergraduate degree in a chosen field of research is a minimum requirement, while advanced degrees are usually preferred. 

The average annual salary for researchers is $81,000.

Florist 

If you love working with flowers, becoming a florist can be a fulfilling slow-paced job. A degree is not required to become a florist. The skills you will need include creativity, design, organizational skills, and some customer service skills. Previous experience with flower design is a plus. Growth opportunities are available in owning your own store or building a franchise. 

The average annual salary for florists is $28,000. 

Mechanic

If you enjoy working with cars and machinery, becoming a mechanic is a slow-paced job that doesn’t require a degree. You will oversee maintenance inspections, repairs, assemble mechanical components, and perform repairs. There is growth potential in both a supervisor role or in owning your own mechanical shop, as well as through specialization in sports or racing car repairs. 

The average annual salary for mechanics is $57,000.

Audiologist

Audiologists are healthcare workers who specialize in diagnosing and treating issues related to the ear. This includes hearing issues, tinnitus, balance problems, and more. Being an audiologist is one of the most low-stress jobs in the healthcare field. A postgraduate degree in audiology is required. 

The average annual salary for audiologists is $81,000.

Baker 

If you love to bake or make bread, becoming a baker can be a rewarding and relaxing career. The simple daily rhythm is especially soothing to those with anxiety. You can choose to work in a bakery, open your own shop, or sell your goods to restaurants, other bakeries, or online. Becoming a baker doesn’t require any degrees and only basic training in how to prepare bread and other baked goods. 

The average annual salary for bakers is $30,000.

Slow Paced Jobs for Introverts

Here are some low-stress job ideas where you can work alone or with very little interaction, while still earning a great income.

Archivist

An Archivist works with valuable documents of historical significance including photos, maps, letters, manuscripts, and motion picture footage. A degree in history, records management, or a related field is usually required. Attention to detail and excellent organizational skills are essential to becoming an archivist, while a love of history or certain historical periods can make it a thrilling career. 

The average annual salary for Archivists is $54,150. 

Drafter

A drafter converts architectural designs into technical drawings and 3D rendering using computer software. Drafting is a slow-paced job that requires technical skills but offers many quiet hours of work. While you may occasionally interact directly with clients, most of the work will be done in a quiet office with plans from architects or engineers. 

The average annual salary for drafters is $57,960.

Jeweler

If you enjoy working with precious stones and metals, this could be an ideal slow-paced job for you. Jewelers are responsible for creating, cleaning, and repairing jewelry as well as valuing precious gems and items of jewelry. Artistic and design senses, a keen eye, and attention to detail are some of the qualities that make a jeweler shine. 

The average annual salary for jewelers is $38,000.

Landscape Designer

If you enjoy being outside and working with nature, becoming a landscape designer can be a fulfilling career path. There are no degree requirements, although a degree in horticulture, landscape maintenance, or plant biology will open more doors. Many landscape designers start off working for landscaping companies or golf courses before branching off on their own.  

Responsibilities revolve around the design and maintenance of outdoor spaces. An understanding of local plants and climate, as well as a creative and aesthetic vision, will make you stand out as a landscape designer.

The average annual salary for landscape designers is $71,000. 

Writer

If you possess a strong command of English or another language, you could have a career as a writer. Most writers are freelance workers, giving you the freedom to choose your hours and your jobs. Proficiency in a variety of writing styles and excellent communication skills will set you up for success. 

The average annual salary for writers is $48,000.

Accountant

Accounting requires an extreme level of attention to detail and patience. You can get accounting jobs with a company or work independently. Most of the work is slow and methodical, making it a classic slow-paced job. Tax season for accountants is historically stressful, but you have the option to control the number of clients you take on and limit the total workload. 

The average annual salary for accountants is $79,000. 

Slow Paced Jobs Where You Can Work With Others

If you want a slower pace, but love to be with others, these jobs give you the joy of social interaction and a community work environment without the stress. 

Massage Therapist

If you love to help others and use the healing power of touch, becoming a massage therapist may be the right slow-paced job for you. There are certifications available for various massage therapy techniques, as well as degrees in massage therapy, although these are not a requirement. Consider working in a shared workspace with other massage therapists, or opening your own studio. 

The average annual salary for massage therapists is $47,000. 

Physical Therapist

Physical therapists will use exercise, massage, and training plans to help individuals recovering from injury or surgery. This is a physically active career, making it ideal for someone who enjoys being on their feet, moving, twisting, and bending for much of the day. You’ll need an advanced degree as a physical therapist.

The average annual salary for physical therapists is $91,000. 

Librarian

Librarians are responsible for maintaining a library’s book collection and stock materials, as well as planning library programs, managing staff, and helping visitors locate books. If you feel soothed by the quiet environment of a library, this is one of the slow-paced jobs that allows you to work with others in a very peaceful environment.

The average annual salary for librarians is $56,000. 

Medical Sonographer

A medical sonographer operates lab imaging equipment necessary for medical tests. As a medical sonographer, you will be interacting with patients throughout the day, but in a quiet and peaceful environment. Medical sonographer jobs are available in diagnostic labs, medical offices, and hospitals. You will need a degree in medical imaging for this career. 

The average annual salary for medical sonographers is $78,000.

Highest Paid Slow Paced Jobs

Data Scientist

Data Scientists are responsible for presenting data in a clear and comprehensive manner to guide business decisions. This field requires a background in mathematics or computer science, but a Master’s degree in a related field is also applicable. The field of data science is growing faster than almost any sector, making it one of the slow-paced jobs with the highest income and growth potential.  

The average annual salary for data scientists is $126,000. 

Astronomer

Astronomers spend the majority of their time analyzing data, testing theories, writing research papers and research proposals. Most astronomers work in a team, but individual research takes the majority of the time. A Ph.D. is required in some cases, but even a bachelor’s degree in a physical science such as physics or astronomy can be a gateway into a career in astronomy. 

The average annual salary for astronomers is $115,000. 

App Developer 

An application developer works quietly and often independently, developing apps to solve everyday problems. You can develop your own app, or choose to work either individually or with a team in companies of all sizes. This is a career with nearly unlimited growth potential.

The average annual salary for an app developer is $100,000. 

All of these careers combine relaxing work environments with the possibility of financial stability and long-term growth. 

Always remember that while a slow-paced job might alleviate a condition like anxiety, there’s no substitute for professional help! If your anxiety has a negative impact on your working or personal life, don’t try to manage it on your own. Learning about anxiety and getting the help you need can make a difference.

The post 15+ Best Slow Paced Jobs to Get Away From Stress While Earning a Living appeared first on FinMasters.

Banks can be intimidating. We know we need them, but there’s always a sense that there’s more going on there than we know about, and it’s easy to wonder if you’re using the right bank for you. If you’re thinking about getting your first bank account, if you’re wondering whether you should change banks, or if you’d just like to know more about banks and what they do, this guide to banking basics is for you.

1. What do Banks Do?

Banks provide financial services. Those services fall into two main categories.

• Banks accept deposits into checking, savings, and investment accounts. Banks may pay you interest on some of these deposits. They may also charge you fees for some services.
• Banks make loans of multiple types: mortgages, car loans, personal loans, and many pore. Banks charge interest and fees on the loans that they make.

Your bank will also help you make payments, transfer money, and carry out other financial transactions.

Most banks now have online services and some banks are entirely online. In many cases, you will rarely, if ever, have to physically visit the bank’s premises.

2. There Are 4 Main Types of Banks

All banks provide similar services, but there are different types of banks with services geared toward different types of customers.

• National banks are the big players that everyone’s heard of. They have huge branch networks, sophisticated online services, and a wide range of services. They may also be oriented toward large commercial clients and may not be the best choice for small depositors.
• Local banks have fewer branches and the branches are usually concentrated in one region. They do not have the range of products and services that national banks have, but they may be more accessible and more friendly for small clients.
• Credit unions are not profit-making businesses. Depositors own credit unions, and they vote for management and policy decisions. They often offer limited products and services but they tend to pay higher interest on deposits and charge lower fees and interest rates on loans than conventional banks.
• Online banks exist entirely online. Becuase they don’t have the overhead of physical branches they often charge low interest on loans, have low fees, and pay high interest on deposits. They may not be the best choice if you need or prefer the option of talking to a live person.

None of these types is better or worse than the others. You’ll need to choose the type of bank that best suits your individual needs.

3. There are Different Types of Bank Accounts

Banks offer different types of deposit products. These are some of the most common types of bank accounts.

• Checking accounts are for everyday transactions. They often have paper checks and a debit card associated with them. There are usually no transaction limits. Checking accounts usually do not pay interest, and they may charge fees for some services. These accounts are for money you will spend, not money you want to save.
• Savings accounts are for short-term savings. They pay interest, but usually at a relatively low rate. There will usually be a limit on the number of transactions you can make per month.
• Certificates of deposit let you deposit a fixed amount for a set period of time. You commit the money for that time and receive a higher interest rate in return. You may forfeit some or all of the interest if you withdraw the money before the set period is over. These accounts are a great way to save for a specific event.
• Money market accounts are similar to savings accounts but with higher interest rates. You’ll need to maintain a relatively high minimum balance. You may be able to make withdrawals, but if you fall below the minimum deposit you’ll pay a penalty.
• Individual Retirement Accounts or IRAs are a way to save for retirement. Your money is typically placed in a range of investments. You’ll receive tax benefits, which vary with the type of account. Learn more about retirement accounts here.

Before you open an account, think about the type of service you need. Many customers choose to have more than one account.

Banking Basics: 9 Essential Things to Understand About Banking

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4. Bank Deposits are Protected

The Federal Deposit Insurance Corporation protects bank deposits from loss if the institution fails. Insurance for credit union deposits comes from the National Credit Union Administration, state agencies, or private insurance companies.

Deposit insurance covers losses up to $250,000 per depositor. A joint account will have $500,000 in losses covered. Always verify that your bank or credit union has deposit insurance.

5. Banks Charge Fees

Banks charge various fees. It’s one of the ways they make money. Understanding bank fees and checking the fees your bank charges can help you minimize the cost of banking.

• Maintenance fees are fees a bank charges simply to hold an account. Look for a bank that does not impose maintenance fees.
• Minimum balance fees are imposed if your account balance falls below the account’s minimum required balance. Look for banks with low minimum balances, especially for checking accounts.
• Overdraft fees are charged if you write a check that your account balance won’t cover. This often happens if you write a check before a deposit you made has cleared. These fees average over $30 per overdraft.
• Overdraft protection fees come with overdraft protection. Your bank agrees to cover any overdraft, but you pay a monthly fee for that protection. If you keep a substantial balance and don’t overdraw your account, you won’t need the protection.
• Returned deposit fees hit you if you deposit a check that is returned for insufficient funds.
• Debit card transaction fees may be charged when you use your debit card in transactions. Avoid these fees if you often use your debit card for shopping.
• ATM fees are charged if you use an ATM outside your bank’s network.
• Paper statement fees are designed to encourage you to view your bank statements online. You’ll pay a fee to have a paper statement sent to you.
• Savings withdrawal fees will be imposed if you make more than the permitted number of withdrawals from a savings account in a hgiven month.

Many other fees are possible, including cashier’s check fees, lost card fees, inactivity fees, and others.

If you’re shopping for a bank, be sure to get a clear list of the fee structure for each bank you’re considering. Note the fees that could affect you and do what you can to select the bank with the lowest fee structure. Each individual fee might not sound like a lot of money, but they can add up fast and become a significant cost.

6. Not Everyone Can Get a Bank Account

We think of opening a bank account as a simple process, but some applications are denied. This may happen because the bank was unable to verify some of your identifying information. It can also happen if you have a previous history of overdrafts or unpaid bank fees.

If a bank won’t let you open an account, ask why. You may have simply made a mistake in the application. If a bank turns you down because of an issue in your past, you should ask for details. If a bank turns down your application because of information from a reporting agency you are entitled to a copy of your file.

Some banks offer “second chance accounts” with limited functions for customers with bad records. You may be able to open an account with an online bank, and a prepaid debit card offers many features that you would normally get from a bank account.

7. You Should Always Check Your Bank Statements

Once you have an account, you will receive a monthly statement from your bank. Some banks still mail paper statements, but many banks now use online statements.

The statement is a list of all deposits, withdrawals, and charges, interest payments, and fees during the statement period. Always read your statement thoroughly. Errors can happen, and unexplained entries could be a sign of fraud or identity theft. Reading your bank statement is also a great way to stay familiar with your finances and spending patterns.

8. You Can Automate Some Transactions

Many employers will pay your salary with an automatic transfer into your bank account. You can also set up automatic “pull” payments from your bank account to make recurring debt payments or pay recurring bills. Just be sure you have enough in your account to cover automated payments!

Automatic transactions can be a great way to simplify your financial life.

9. Your Banking Needs Will Change

You’ll probably start out with a simple checking account. As you get older and your financial life gets more complicated, you may need other types of accounts. You may also need to borrow money.

Remember that you can do business with more than one bank. There’s nothing wrong with keeping your checking account at a local credit union, opening a high-interest savings account at an online bank, and taking out a loan from a specialist lender. As your banking needs evolve, consider other alternatives to your current setup. Checking your options whenever you have new needs will help you get the best deals.

Knowledge is Power

Knowing the banking basics is part of understanding banks and how they work. The more you know about your bank and the banking system, the easier it will be to choose financial institutions that fit your needs and give you the best possible deal.

Do you have any questions about banking? Let us know in the comments below!

The post Banking Basics: 9 Essential Things to Understand About Banking appeared first on FinMasters.

Getting part-time, work from home jobs is easier than ever before. As companies transition to remote workplaces, the job landscape is shifting so even regular employees are forced to work from home. This opens the door for part-time workers to earn a substantial income while working from home.

Part-time Jobs You Can Do From Home

Whether you are a stay-at-home parent or dream of traveling the world, here are some of the best jobs you can get to work from home – or from wherever you are – part-time.

1. Data Entry

Data entry jobs involve everything from taking surveys to entering information. Requirements include basic computer skills, attention to detail, and some knowledge of grammar and punctuation. You can choose to take surveys and complete other tasks for a per-project fee or be hired on a regular, part-time basis. 

Annual income for online data entry jobs has a range from $24,000 to $49,000*. 

2. Customer Service

Customer service jobs are plentiful. This is a great job if you love problem-solving and talking to other people.  Customer service jobs are available from large companies like Google and Amazon, small local companies, and everything in between. You can usually set customer service hours to answer calls while working from home. There is growth potential in this position from “customer service” to “customer support” and then even a customer support supervisor. 

Income from work-from-home customer service jobs ranges from $24 to $45 per hour.

3. Online Tutor

If you can explain basic concepts or have a particular skill, becoming a part-time tutor can be a fulfilling career path. Tutoring opportunities from home include local schools and universities as well as large online sites. Consider listing your services on sites like Fiverr and VIPKid. Beyond math, english or SAT prep, think of skills you might have to teach such as woodworking, carpentry, sewing, singing, cooking, art, music, gardening, jewelry making, etc. 

Income for tutoring jobs ranges from $10 to $100+ an hour, depending on the area and subject. 

4. Teacher

Related to tutoring, the pandemic has opened up an increasing number of part-time work from home teaching jobs. While some require a teaching certificate, many do not, especially at the elementary level. Consider teaching homeschool groups or through the local private or public schools. Online teaching jobs to students from around the world are plentiful, especially in english.

The annual salary range for online teaching jobs is $33,000 to $76,000. 

5. Translator

If you have skills in more than one language, becoming a translator is a viable part-time work from home job. For most translator jobs no official certificate is required, as long as you can demonstrate fluency in at least two languages. This is an ideal job for anyone who grew up in a dual-language household or community. 

The annual salary range for online translator jobs is $16,000 to $66,000, with an average salary of about $35,000. 

6. Virtual Assistant

Virtual assistant jobs comprise a variety of skill sets, from traditional secretarial skills like typing and schedule management to social media management or course creation. Reliability, time-management, good communication skills, resourcefulness, organization skills, creativity, and typing are the main requirements for a virtual assistant. 

The annual salary range for virtual assistants is $13,000 to $102,000, with an average salary of about $52,000. 

7. Focus Group Participant

Participating in focus groups is a way to try new products, give feedback, share your opinion or knowledge, and interact with others. Some focus groups will require a specific demographic, but many are open to anyone. There are many online focus groups to join include Respondent.io, Recruit and Field, UserInterviews, and SurveyJunkie. 

Typical payment for participation in a focus group is $50 to $200 for a 2-hour session. 

8. Sales Agent

If you love to interact with people and share incredible products, becoming an online part-time sales agent is a good option. Sales agent jobs can be for both products and services, including automobiles, insurance, business solutions, and technology. Many sales jobs are paid on a commission basis, but some also offer a base salary. 

The average annual salary for an online sales representative is $45,000, dependent on performance. 

9. Mock Juror

You can also be paid to be a mock juror to help lawyers work out weaknesses or loopholes in their cases. You will be required to participate in the full proceedings the case will follow in court, from opening to closing statements. At the end, you will be required to answer a series of questions. You can find online jobs as a mock juror on sites like OnlineVerdict.com, eJury.com, and Resolution Research. This is an interesting part-time job for anyone interested in a future law career. 

Typical payment for a mock juror is $20 to $60 per case but can be up to $400 for a case. 

10. SEO Specialist

If you have knowledge of SEO, becoming an SEO specialist is a job you can do part-time from anywhere and set your own hours. Knowledge of SEO techniques, keyword research, and site optimization is essential. This is a job that is in high demand, and if you are able to demonstrate your skill, the growth potential is unlimited. 

The average annual SEO specialist salary is $42,000. 

11. Personal Coach

Coaching is a rapidly growing field that is no longer isolated to specific skills like sports techniques. Personal coaching fields include corporate or personal wellness, strategies, mentorship, stress management, and more. The personal coaching niche is nearly limitless. 

15+ Part-Time, Work from Home Jobs that Pay Well

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For many fields, no certification is required for personal coaching.  The main skills you will need are expertise in one or more areas, and the ability to motivate clients with excellent communication skills. 

The salary range depends on the field, with an average annual salary of $44,000. 

12. Graphic Designer

If you have a basic level of understanding of Adobe InDesign, Illustrator, and Photoshop, or even Canva, you can get work as a graphic designer. Artistic skill and the ability to adapt to the client’s request are a major plus, but you can start out with even a basic skill level, and raise your prices as you establish a client base. 

Consider offering website design, logo design, business card design, Facebook ads, and more. List your services on sites like Fiverr and Upwork, while also reaching out to local businesses.

The average salary for a part-time graphic designer is $50,000 per year. 

13. Receptionist

With more and more workplaces switching to remote locations, it is now possible to become a receptionist part-time from home. Look for jobs with local companies, as well as large national businesses. 

The average annual salary for a part-time receptionist is about $31,000 a year, with hourly wages of $11 to $17. 

14. Medical Transcriptionist

To become a medical transcriptionist, you will need proficiency with Microsoft Office and the ability to learn to use speech recognition software. This is a job that requires excellent verbal and written communication, strong critical thinking, and attention to detail. Previous experience in a healthcare setting is a plus but is not required. 

There is growth potential as a medical transcriptionist with the ability to get a certification in medical transcription (CMT) after two years of experience.

The median pay for a part-time medical transcriptionist is about $17 per hour. 

15. Web Developer

Web developers need previous knowledge in coding, however, we’ve included it in this list because it is a skill that can be picked up from home without an advanced degree. The advantage of becoming a web developer is the nearly unlimited job opportunities, excellent salary, and varied, interesting work. Attention to detail and the ability to work well with others in a fast-paced environment will ensure the greatest success.

The average annual salary for a part-time web developer is about $75,000 per year in the US.

16. Travel Agent

As a part-time travel agent, you will rely on your communication and sales skills. The ability to negotiate effectively and effectively solve complex problems is the foundation for success as a travel agent. Attention to detail and excellent organization skills are essential. Travel agent positions are usually commission-based. This means that you probably won’t receive a regular salary, but the income potential is unlimited.

The average annual salary for travel agents is $57,833, with top earners reporting salaries of more than $100,000 per year.  

17. Freelance Writer or Editor

If you enjoy writing, reading, or editing, becoming a freelance writer or editor can be an effective way to work part-time from home. You’ll want to prepare a professional portfolio, create a cover letter, and search for job listings online. You can also list your services on sites like Fiverr and Upwork. 

The average annual salary for a freelance editor is $69,000, while freelance writers’ average annual salary is $63,000. 

18. Call Center Representative

If you love to speak with people in a friendly way, are an excellent listener, and have good attention to detail, becoming a call center representative can be a good part-time job from home. You’ll need basic data entry, word processing, and typing skills to succeed. Jobs are readily available in companies of all sizes and across industries. 

The average annual salary for a call center representative is $34,000.

All of these professions open flexible opportunities, whether you plan to work from home or work while traveling the world. Within a short time, you can secure a job to earn greater freedom and security in the time you have available.

*We’re listing full-time salaries because “part-time” means different things for different people and different jobs. Part-time can be anything from a few hours a week to just short of full-time. Your earnings from part-time work from home jobs will depend on how much work you do.

The post 15+ Part-Time, Work From Home Jobs That Pay Well appeared first on FinMasters.

With pensions now a rarity in the private sector and Social Security diminished, 401(k)s are the backbone of many American retirement plans. That means workers have to take responsibility for building their own retirement funds.

While many worry about not saving enough, the opposite happens surprisingly often. 27% of Americans with a college-educated parent received an inheritance in 2019, with a median value of $92,700^[1]. That’s a lot of people with significant savings left over when they pass away.

That raises an important question: what happens to your 401(k) when you die? Who gets the money, when, and how? This guide will give you the information you need to prepare for and manage 401(k) inheritance transactions properly, whether you’re the original owner or the beneficiary.

In this post:

• 401(k) Beneficiary Rules
• Problems With Probate
• General Tax Considerations
• 401(k) Account Transfer Options and Their Tax Implications
  • Spousal Beneficiaries
  • Non-Spousal Beneficiaries

401(k) Beneficiary Rules

When you die, your 401(k) goes to the designated beneficiary of the account. If you have a living spouse at the time of your death, they’ll be the default beneficiary by law.

For you to pass your retirement account to a non-spousal beneficiary, your partner will typically have to waive their rights to the benefits.

Otherwise, even if you named another person on your beneficiary forms (say, when you opened the account), your spouse will still be entitled to the money.

If you’re unmarried or have no living spouse at the time of your death, you can elect to leave the funds to whomever you wish. That can include multiple people, in which case you can split the proceeds at your discretion.

There are two priority levels for beneficiaries:

• Primary: These are the people who get first dibs on your 401(k). If one of several primary beneficiaries is deceased or unavailable, their share will go to the others.
• Contingent: These people will only get the funds from your 401(k) if all primary beneficiaries have passed away or are unavailable.

Problems With Probate

Probate is a legal process during which a court validates your will, and its executor ensures your estate goes to the designated parties. If you die without a will, the probate court will assign someone to handle your estate (usually a close relative).

You should avoid letting your assets go through probate upon your death when possible. The process can delay the transfer by months or more and deplete the value of your estate.

The executor has to register paperwork demonstrating your death, get the courts to approve the will, take control of your accounts, and then distribute the assets, which can drag on for a long time.

In addition, the executor usually uses the estate to pay for legal costs and will have to pay off your creditors if you had outstanding debts upon passing. 

Creditors can’t normally pursue your 401(k) (unless they’re the IRS), but all bets are off if it’s part of your estate during probate.

Fortunately, naming a beneficiary on a retirement account keeps it separate from the rest of your estate and allows for a simple transfer upon your death.

What Happens to Your 401(k) When You Die?

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You have to name a beneficiary when you open your 401(k), so it typically won’t have to go through probate unless:

• All your primary and contingent beneficiaries are deceased or unavailable when you die
• You name your estate as the beneficiary of your 401(k)

Because of this, you should update your named beneficiaries after any life events that may impact who you want to receive your funds, like getting married, having children, going through a divorce, or a beneficiary passing away.

General Tax Considerations

As if death weren’t inconvenient enough, it can present some pesky tax issues. While there are typically few problems for the deceased, beneficiaries often have to do a lot of planning to navigate account transfers successfully.

I’ll go into further detail later when I talk about the specific transfer options for 401(k)s, but here are some general guidelines.

Traditional vs. Roth 401(k)s

Beneficiaries of a 401(k) use the same tax treatment for distributions as the original owner. That means if the account was traditional (funded with pre-tax dollars), the beneficiary’s withdrawals or distributions are generally taxable.

If it was a Roth 401(k) and funded with post-tax money, any distributions will not be taxable.

Learn More: Do you understand the difference between Roth and traditional retirement accounts? Take a deep dive into the topic here: Roth vs. Traditional: What’s the Difference?

Estate Taxes

The IRS rarely misses an opportunity to tax you, and death is sadly no exception. There is such a thing as a death tax, though people usually refer to it as the estate tax.

If you have enough left in your 401(k) when you die to trigger estate taxes, you’ll pay between 18% and 40% to the federal government on the amount above your exemption.

Fortunately, the threshold to qualify for estate taxes is surprisingly high. In 2021, there’s a lifetime exemption of $11.7 million for all gift transfers. That includes your estate.

That’s why most people don’t have to worry about this too much. However, your exemption will be lower if you gave gifts above the annual $15,000 per person threshold during your lifetime.

401(k) Account Transfer Options and Their Tax Implications

When you die, the IRS generally requires plan administrators to transfer your 401(k) to the proper beneficiaries no later than the end of the following year.

If you passed away in January 2021, your beneficiaries would receive their payouts, or control of the 401(k), by December 31, 2022.

However, as you probably know, 401(k)s have rules that limit access to the funds inside them. They’re retirement accounts, after all, so they’re designed to prevent people from taking the funds out before retirement.

Unfortunately, these limitations don’t necessarily disappear when the original account holder passes away. There are still restrictions on how the beneficiaries can receive the funds. That can complicate matters.

Spousal Beneficiaries

The inheritance of a 401(k)  is usually smoothest when it’s between spouses. There are three ways for surviving spouses to receive the funds.

Taking Over the Account

Spouses can elect to leave the 401(k) in the original owner’s name. They can then access the funds without the 10% early-withdrawal penalty, even if neither spouse was age 59 ½.

If they choose this option, they have to take required minimum distributions (RMDs) on the original owner’s schedule, which starts when they would’ve turned 72.

Important Note: Calculating required minimum distributions and dynamically adjusting your tax planning accordingly is a complex and delicate matter. The IRS will impose a whopping 50% penalty on any balance remaining in a retirement account that shouldn’t be there, so you should strongly consider talking to a tax professional for help with RMDs.

Rollover into a new account

Spouses can elect to close the inherited 401(k) and roll the proceeds into their own 401(k) or IRA. There are two general account options:

• Inherited IRA: These specific IRAs allow spouses to take distributions after a rollover without triggering the 10% early withdrawal penalty, regardless of age. The spouses can then take RMDs based on their single life expectancy or over the next ten years. They can’t contribute further to an inherited IRA.
• Regular IRA or 401(k): If spouses roll over the 401(k) into a regular defined contribution account, they’ll treat it as if it was theirs all along. That means the 10% penalty applies to further withdrawals from the new account, and RMDs will begin when they normally would (at age 72).

Rolling the funds into one type or the other depends on both spouses’ ages, incomes, balances, and plans for the future. Again, consider consulting a tax professional before choosing one.

Distributions

Spouses can elect to take distributions from an inherited 401(k) without rolling it into another tax-advantaged account. These distributions will not be subject to the 10% early withdrawal penalty.

The distributions can occur in a single lump-sum or periodically, but a single lump sum can potentially create a massive tax bill since it can push the recipient into higher tax brackets.

If the spousal beneficiary chooses periodic distributions, they can elect to receive them over their single life expectancy or the next ten years.

Keep in mind that while these are the legal options put forth by the IRS, the terms of an individual 401(k) might require one or the other. Make sure you check the rules that apply to your account or the one you’re inheriting.

Non-Spousal Beneficiaries

Thanks to the recent passage of the SECURE Act, there are a lot fewer options available to non-spousal beneficiaries. In some ways, that makes it simpler for them to inherit a 401(k), though it usually costs more in taxes.

Non-spousal beneficiaries have a ten-year window to take distributions equal to the amount of the account balance. By taking distributions in fewer tax years, inheritors will likely reach higher tax brackets and miss out on years of deferred growth.

There are exceptions to the ten-year requirement if the non-spousal beneficiary qualifies as an “eligible designated beneficiary.” These include the following:

• Permanently handicapped or chronically ill;
• Less than ten years younger than the deceased;
• Minors (their ten-year clock starts at age 18).

These eligible designated beneficiaries can take distributions over their single life expectancy, much like a spousal beneficiary.

Consider Talking to an Estate Planner

As you can see, estate planning can get extremely technical. The information above is just an introduction to what happens to your 401(k) when you die.

Finding the best tax strategy for an inherited 401(k) is a deeply involved process, and the cost of mistakes is high. One slip-up could mean leaving your life savings to your ex-spouse or mishandling an inheritance, and losing thousands in unnecessary taxes.

If you have a sizeable 401(k), if you have recently inherited one, or if you expect to inherit one, it’s a good idea to talk to an estate planner or tax expert to help you make sure you handle your next steps correctly.

Further Reading: Are you trying to decide whether a 401(k) or an IRA works best for your retirement plans? Take a look at our comparison of the two: 401(k) vs. IRA: The Best Type For You

Do you have any additional questions about what happens to your 401(k) when you die? Let us know in the comments section below!

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Klarna is the talk of the IPO community in the summer of 2021. The Swedish payment solutions provider is expected to go public soon, but nobody’s quite sure when and on what exchange. It may still be possible to buy Klarna stock before the Company goes public.

Investors have good reasons to be interested. Fintech and e-commerce are hot sectors in today’s market, and Klarna is Europe’s largest privately held fintech company. Performance metrics are trending steadily up and private capital is pouring in, pushing Klarna’s current valuation to $45 billion. Numbers like that get attention.

Let’s take a closer look at Klarna, at what the excitement is all about, and at some potential ways to invest before the IPO.

What is Klarna?

Klarna is a payment solutions provider. More specifically, the Company operates in the booming “buy now pay later” (BNPL) space, offering customers different payment options for purchases.

Klarna has over 250,000 retail partners in 17 countries. They include Peloton, Samsung, Ikea, Macy’s, H&M, Expedia, Nike, AliExpress, Saks, Shopify, and many others.

Klarna can be integrated with an online retailer’s checkout system, appearing as a payment option on checkout, or shoppers can use Klarna’s shopping mall app.

Once a shopper selects Klarna they have multiple payment options.

• Pay in 4: four interest-free payments, one every 2 weeks.
• Pay in 30 days: buy now, pay within 30 days, interest-free.
• 6-36 months financing: flexible financing with transparent credit options.

These options have been extremely popular: Klarna’s total net operating income increased 40% in 2020, breaking US$ 1 billion for the first time. Gross merchandise volume rose 43% to $35 billion. US users rose 118% to 18 million.

Klarna was founded in 2005 and was profitable for 14 years. The Company incurred expected losses while funding a growth drive in 2019 and 2020.

Klarna is active in multiple markets:

The company is expanding rapidly and entered six new country markets in 2020.

Klarna operates in two related niches: payment solutions and financing. It competes both with traditional credit card providers and with payment solutions providers like PayPal.

Klarna’s Financing 

In June 2021 Klarna announced that it had raised $639 million in venture capital. That financing round was led by Softbank, with existing investors WestCap Group, Honeycomb Asset Management, and Adit Ventures adding to their holdings. Previous rounds drew capital from SilverLake, Sequoia Capital, Dragoneer, and China’s Ant Group, among others.

The latest round of financing placed Klarna’s valuation at $45 billion and raised speculation that an IPO is imminent. However, no documents have been filed and no schedule has been set. Klarna CEO Sebastian Siemiatkowski stated in 2019 that “an IPO would most likely be happening in the US”. Some reports also claim that the Company is under pressure to list its shares in its native Sweden.

There’s a great deal of speculation over the possibility that Klana will push ahead with an IPO as soon as possible to take advantage of the current market environment, which is very favorable to e-commerce companies. That is still speculative, though, and it is not clear where, when, or if Klarna will go public.

How Can I Buy Klarna Stock?

Klarna is currently a private company. Shares do not trade on any public exchange and you cannot purchase them through a conventional broker.

It may still be possible to buy Klarna shares using these options.

Pre-IPO Secondary Markets

It is sometimes possible to purchase pre-IPO shares through secondary marketplaces. These companies may acquire shares from employees who have received them as part of their compensation package or from early investors.

It may be possible to buy Klarna stock through these platforms:

• EquityZen handles pre-IPO shares that it sources from employees and early investors. These shares are sold to qualified buyers. There is a qualification process and a minimum investment, at least $10,000 and potentially higher.
• Sharespost is a private equity marketplace formed by the 2020 merger of SharesPost and Forge Global. The usual minimum transaction size is $100,000, but they sometimes make exceptions.
• SecFi works with employees who have received stock options, helping them liquidate their holdings by selling them to private investors.
• Tioex Technologies is a Swedish that provides privately held shares to members. Online reports suggest that Tioex has Klarna shares available for purchse; contact them for details.

All of these platforms have requirements. You may have to pass a qualification process and you will usually need to open an account. There will be a minimum purchase.

There is no assurance that any pre-IPO secondary market platform will have Klarna shares available.

There are real risks in buying pre-IPO shares. Market conditions and internal concerns may lead a company to postpone or even cancel an IPO. If that happens there may be no market for your shares.

Before considering any pre-IPO purchase, you should learn more about pre-IPO investing and review this article on how to buy pre-IPO stock!

Invest in the IPO

Investing in pre-IPO shares is difficult and sometimes impossible. It’s also risky: if the IPO is postponed or canceled you may not be able to sell your shares.

If you buy Klarna stock at the IPO you’ll reduce the risk. The shares won’t be as cheap as they might be in a pre-IPO transaction, but you know there will be a market for your shares.

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Several major brokers offer IPO participation to qualified account holders. Each has its own system and its own restrictions.

• TD Ameritrade may let you participate in an IPO if TD Ameritrade is a member of the selling group. Participating account holders need a minimum balance of $250,000 or 30 trades in the last calendar year. 
• Fidelity customers in the Premium or Private Client groups may participate in IPOs. Other investors may qualify if they meet a minimum household asset requirement.
• Charles Schwab will allow IPO participation for clients with a balance of $100,000 or above or at least 36 trades in their trading history.
• E*Trade has no trading history or account balance requirements. The underwriter of ther IPO may require a qualification questionnaire.
• Robinhood allows customers to submit a “conditional offer to buy” at the IPO price.
• Freedom 24 offers participation in US and European IPOs. You will need to fill out a questionnaire to qualify.

Even qualified buyers may not be able to buy the number of shares they want, and they may not be able to buy at all. IPOs often assign a very limited number of shares to retail investors.

You may not be able to sell IPO shares immediately. IPO shares often come with a lock-up period, often 90 or 180 days.

Invest Indirectly

Investing in pre-IPO or IPO shares is difficult and it’s not always possible to acquire shares. Another option is to buy shares in publicly held entities that have invested in Klarna. These shares may see significant appreciation if Klarna holds a successful IPO.

One option for indirect investment in Klarna is Softbank. It’s a Japanese company but its ADRs trade in the US OTC market under the symbol SFTBF. Softbank has many other holdings, though, and may not respond dramatically to a Klarna IPO.

Invest After the IPO

The easiest option for buying Klarna shares is to buy after the IPO. You can make this purchase through your brokerage account if Klarna lists in the US.

Buying after the IPO won’t get you the lowest price, but it does get you in near the ground floor and long-term appreciation can still be considerable.

Tesla priced its IPO shares at $17. They reached $23.89 on their first trading day. At the time this is written, they are worth just under $700. Even if you don’t buy at the IPO price you can still get in early and make real money!.

Are There Any Concerns About Klarna?

Klarna presents fewer risks than many IPOs. The company is well established, has operated for 16 years, and has an established reputation. Sales are over $ 1 billion a year and growing. This is not a speculative enterprise. Still, any early-stage investment has risks.

• Competition is intense. Klarna faces competition from privately held AfterPay and fom Affirm (NASDAQ: AFRM), both of which offer similar products and services. Apple has reportedly considered a similar service. Klarna may or may not come out ahead.
• Klarna faces credit risk. The Company provides financing for customers, effectively functioning as a bank. Klarna uses a proprietary risk assessment model, but they could still face defaults.
• Regulation may become an issue. The buy now pay later niche is relatively new, and has generated discussion around risks to consumers. Some governments may propose or introduce regulations that could affect Klarna’s business and stock price. 
• Klarna could suffer in an economic downturn. Klarna’s business relies on shopping, and if economic conditions reduce discretionary purchases the transaction volume could be affected.. 

These risks may or may not affect the Company or its stock price, but they should be considered. All investments involve risks, and you should always consult with a financial professional to help you assess whether a given investment is the best use of your money.

Get notified when Klarna goes public – sign up for our newsletter.

Conclusion

Klarna’s highly anticipated IPO is generating a great deal of attention and discussion. The Company is an established player in a high-growth industry and has an impressive and established track record. When (and if) the IPO takes place, it’s likely to be a major event.

You may be able to buy Klarna stock at or before the IPO using the resources above. You may also make an indirect investment by acquiring shares in a company that owns part of Klarna, such as Softbank. If you want the simplest route, you can simply buy as soon after the IPO as possible.

FAQs

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If you have no credit score, you’re not alone. 45 million American adults – 20% of the adult population – are in the same position^[1]. 26 million are “credit invisible”, with no credit record at all. Another 19 million have credit records so thin or out of date that it’s impossible to generate a credit score. These people face unique problems, including figuring out how to get an apartment without credit.

If you are looking for an apartment and you don’t have a credit score you are at a disadvantage. Many landlords will check your credit before renting to you. Some may simply be looking for records of evictions or foreclosures, but others may have a minimum score cutoff or be put off by your lack of a credit score.

That can be frustrating because having no credit score doesn’t mean that you’re financially irresponsible. It could mean the opposite: you’ve avoided using credit cards and loans in order to avoid risk. You might have a good job, savings, and an adequate income and still be encountering reluctant landlords.

So how do you get an apartment without credit?

11 Ways to Get an Apartment Without Credit

You can get an apartment without credit. These steps can get you started.

1. Look for Small Landlords

If you rent from a property management company they will almost always check your credit. Individuals who rent only a single unit or a few units often will not. If you aren’t sure, look at the apartment listing. Is it a company name, or an individual? Is the address an office building or a residence?

Smaller landlords are much less likely to run a credit check. Try Google Marketplace or Craigslist for independently-owned properties.

2. Be Honest

If you’re applying for an apartment from a landlord that checks credit, tell them upfront that you don’t have a credit score. They’ll find out anyway, and it’s better if they hear it directly from you. Explain why you don’t have a credit score and why you’re not going to pose an excessive risk.

Be prepared with some of the evidence we’ll discuss further down this list. Remember that no credit is better than bad credit, and be prepared to make that point. If you have no credit, you almost certainly have no debt. That means you aren’t spending every month to make debt payments, which means more of your paycheck is available for rent.

3. Show Your Capacity

Landlords want you to pay the rent on time. Showing that you can do that is a persuasive argument. Pay stubs, a W-2 form, and a bank statement will demonstrate your capacity to pay. Remember that most landlords prefer tenants whose monthly take-home pay is at least 3 times their monthly rent. That’s also safest for you: taking on an apartment that will consume more than a third of your income is a risky move.

If you provide personal documents as evidence of your ability to pay, be sure to black out critical identifying information like account numbers or a Social Security number. You don’t want those circulating in anyone’s hands!

4. Offer a Higher Deposit

Nothing soothes a worried landlord as well as a larger-than-usual deposit. If the usual requirement is a month’s advance rent and a month’s security deposit, consider upping the security deposit to two or even three months. That does two things: it shows the landlord that you have some money and it provides protection against any potential future arrears.

Be sure that the additional deposit is recognized in your lease contract and that you can apply it to your last month’s rent.

5. Offer a Short-Term Lease

Landlords may be wary of a long-term commitment to a tenant they can’t fully evaluate. If you offer to start out with a short-term lease or even on a month-to-month basis, you might alleviate some of those concerns.

6. Offer to Close the Deal Right Away

A vacant unit is not something any landlord wants to have: empty units are lost income. If you offer to move in or at least put money down immediately, you may be able to close the deal. Some apartment listing sites may tell you how long a unit has been on the market. A longer vacant period may mean a landlord who’s willing to take a small risk to find a tenant.

7. Get References

If you have references from previous landlords or from credible individuals, a landlord may be more inclined to take a chance with you.

How to Get an Apartment Without Credit (11 Best Strategies)

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8. Find a Roommate

If your credit record is likely to be a problem, consider sharing an apartment. If you can find a roommate with a better credit score you can put the lease in the roommate’s name and solve your problem.

9. Get a Cosigner

If you can’t find a roommate or you’d rather not share your place, you may be able to get a friend or relative to cosign your lease. Both you and the cosigner should be fully aware of the responsibility each of you is taking on. If you fall behind on your payments the cosigner will be legally responsible for the arrears.

10. Get a Guarantor

Companies like Leap Guarantor and The Guarantors will take the place of a cosigner and guarantee your payments. You may even be able to move in without a deposit. You will need to get approved and you will pay the company for its service.

Be sure to read the fine print and fully understand your obligations.

11. Take Your Time

You can get an apartment without credit, but it may take more time and effort than it would if you had a good credit score. Be patient. Keep looking, and you’ll find what you need.

Build a Credit Record

Any of these methods can help you get an apartment without credit. Using more than one of them at the same time will improve your chances. Once you’ve found a place to live, though, you may wish to assure that you don’t have to face the same problem again.

Credit can be scary. Credit means debt, and many of us have been taught from childhood that debt is a dangerous thing that we need to avoid. That belief can lock us into a place that limits our options. You can get an apartment without credit, but buying a car without credit will be difficult, and buying a house without credit is nearly impossible. Sooner or later you’ll want to begin building the kind of credit that will open the doors you want to pass through.

The effort it takes to get an apartment without credit can provide an incentive to get started and build the credit record you want to have. If you’ve been managing your finances on a cash basis you have the discipline it takes, so don’t be afraid to move forward!

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Rich Dad, Poor Dad is one of the most famous books in all of personal finance. Though it came out in 1997, it’s still a #1 Best Seller on Amazon in 2021. Many of today’s most popular finance gurus cite it as the inspiration for their success.

I wanted to see what all the hype was about, so I grabbed a copy of the book, tore through it (it’s a pretty quick read), and compiled my thoughts for you here.

This Rich Dad, Poor Dad review will take a look at Robert Kiyosaki’s real lessons in this book (not just the ones he uses as names for his chapters) and help you decide whether it’s worth reading.

In this post:

• A Rich Dad, Poor Dad Summary
• Robert Kiyosaki’s Best Advice
• Robert Kiyosaki’s Worst Advice
• Is It Worth Reading Rich Dad, Poor Dad?

A Rich Dad, Poor Dad Summary

Right from the jump, Rich Dad, Poor Dad surprised me with its style and narrative framework. I expected more technical insight and investment math, but the book primarily consists of anecdotes that hold nuggets of (supposed) wisdom for the reader to absorb as if through osmosis.

Kiyosaki’s stories revolve around and contrast the lessons he received from his biological father (the educated but financially unsavvy poor dad) and his friend’s salesman father (the uneducated but clever, rich dad).

The book winds through Kiyosaki’s life and the reader witnesses him learning from his rich dad and rejecting the advice of his poor dad (which represents rising above the typical working-class mindset).

The book explains basic wealth generation in an understandable and inspirational way, and it’s a solid enough introduction to these concepts (at least for its time). However, it has issues that make its current relative value questionable.

Robert Kiyosaki’s Best Advice

I’ll start this Rich Dad, Poor Dad review with what I think Kiyosaki does well. Mainly, he makes some solid fundamental financial suggestions in an easily digestible manner.

The ideas might seem a bit shallow and apparent to anyone already engaged in entrepreneurship or investing, but they can be profound if it’s your first exposure to them. Let’s take a look. 

1. Learn Personal Finance (And Teach It to Your Kids)

While this is a pretty obvious suggestion, it’s still a significant one. The book does a great job of showing the reader how meaningful it is to learn how to manage your money. That means saving a high percentage of your earnings and putting the money to work in profitable investments.

Kiyosaki says: “It’s not how much money you make. It’s how much money you keep.” You have to keep your spending down as your income goes up and invest the difference in assets, not liabilities.

While his definitions of assets and liabilities might not follow Generally Accepted Accounting Principles, it’s practical: assets put money in your pocket, and liabilities take money out of it.

He supports learning to cut your taxes, studying accounting, and mastering saving, then teaching all these skills to your children. I love all of these ideas, and I’m glad his presentation of them resonates with so many.

2. Find Ways to Escape the Rat Race (Make Your Money Work For You)

Not only does Kiyosaki cover the fundamental best practices for personal finance, but he also does a great job of painting an inspiring picture of their end goal: financial independence, retirement, security, being rich, or whatever you want to call it.

I’ve always believed that people truly begin to understand the significance of their personal finance decisions when they realize that they constitute a journey that can culminate in holding enough wealth that work becomes optional.

Kiyosaki makes escaping the rat race using investments or a self-sustaining business sound glamorous and inspirational. I’m grateful for anything that gets people to plan for a better future.

3. Master Your Emotions Regarding Money

This one isn’t a personal finance message that you’d typically see today, but I like it a lot. Money is a hugely emotional issue for many people, and we could all probably benefit from understanding why it makes us feel however it does.

People often let their emotions sabotage their finances or let their finances upset their emotional state. They might have a fear of investing, insecurity over their job, or a need for the latest and greatest gadgets.

He urges readers to face their fears, cynicism, laziness, bad habits, and arrogance when it comes to money. That seems like an arbitrary list of emotional issues, but I like the sentiment.

4. Develop a Broad and Valuable Skillset

In a capitalistic society, having a practical and marketable skillset is the key to making money. If you can provide tangible value that people are willing to pay for, you’ll always be able to support yourself.

Kiyosaki recommends learning to manage money, lead teams, build systems, and close sales. More than that, he suggests that people cultivate a habit of continuing to learn throughout their careers so that they never stagnate.

He argues that people can improve their situations most effectively if they keep an open mind, learn from their mistakes, and keep improving. It’s a valuable lesson and one of the best in the book.

Robert Kiyosaki’s Worst Advice

Now that we’ve covered the good stuff, what follows is my Rich Dad, Poor Dad criticism. I hate to say it, but there’s more to talk about here than I’d like.

Honestly, Kiyosaki strikes me as a pretty typical guru. His attitude and tone throughout the book both rub me the wrong way. For example, he comes across as just a little too obsessed with the stereotypical image of a rich and powerful man.

He describes his rich dad as a charismatic manly man of few words, with power behind his statements and smiles. Rich dad is tall, blunt, and always closing deals. He doesn’t do things like the other guys, and he’s pretty smug in his superior knowledge.

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Rich dad and his lessons also come off as manipulative to me. He pulls the protagonists’ strings purportedly to teach them esoteric lessons too complex to be put into mere words.

The book just feels like it’s selling me something, and salesman gurus are by far my least favorite. Here are some of the specific ideas the book tries to sell to the reader that I don’t like.

1. You Should Start a Business and Get Rich Because Employees are Broke and Miserable

As someone who truly loves being self-employed, I hate to admit this, but it’s not the right path for everyone. If you’d rather not branch out on your own, that’s perfectly fine. There are plenty of people who enjoy their jobs, make good or great money, and save responsibly.

But Kiyosaki has a habit of putting down anyone who works for someone else and suggesting that employees are generally broke and unhappy. They just don’t get it.

His poor dad (already an insulting title), who worked a traditional job, couldn’t possibly understand what his rich dad understood thanks to all his business success.

Not only does Kiyosaki fail to address the risks and downsides to business ownership, but he also suggests some definitely-not-okay tax strategies using business entities. For example, he proposes using a corporation to write off vacations as board meetings or deduct health club expenses. Those moves can get you into much more trouble thsan they’re worth.

2. Academic Learning isn’t Valuable (Rich People Don’t Need It)

Kiyosaki also has a bad habit of downplaying the value of academic education and traditional learning. He seems to believe people who follow the general wisdom end up like his poor dad: highly educated but ineffective and stressed about their money. Rich people learn only by doing or from living life.

For example, rich dad says: “All too often business schools train employees to become sophisticated bean-counters. Heaven forbid a bean counter takes over a business. All they do is look at the numbers, fire people, and kill the business.”

Ironically, he promptly contradicts that claims, later saying: “Accounting is possibly the most confusing, boring subject in the world, but if you want to be rich long-term, it could be the most important subject.”

As an officially licensed and certified bean-counter, maybe he just hurt my feelings, but I don’t think so. Kiyosaki also glorifies rich dad’s cruel and unusual teaching methods, which included giving kids the silent treatment for weeks at a time while they work below minimum wage until they can’t take it anymore.

Because that’s how life teaches: “It just sorta pushes you around.”

3. Invest in Real Estate! It’s the Best Way to Get Rich!

At this point, you’ve probably noticed that many of his “worst lessons” have something to do with getting rich. That’s a significant part of what struck me as wrong about this book.

Getting rich isn’t really the point of personal finance. Maybe I need to “overcome my cynicism,” but I generally don’t trust gurus who toss that word around. Kiyosaki does it a bit too much for my comfort, and his suggested strategies for creating said riches aren’t always great either.

Mainly, it bothers me how strongly he doubles down on real estate. Investing in real estate can be a great way to build wealth, but (like self-employment) it’s not for everyone. It’s also not a requirement for a successful and diversified portfolio.

There are benefits to real estate investing, but Kiyosaki borders on implying that it’s a sure way to get rich quickly or inevitably. In reality, it’s a business like any other. There are unavoidable risks involved, and it takes knowledge, experience, and luck to succeed.

4. Jump Off Cliffs and Build Parachutes On Your Way Down

Last but not least, we have one of my biggest pet peeves in the whole book. Kiyosaki legitimately suggests that you pay yourself first (meaning your savings) even if that comes at the cost of paying your creditors, even if one of those creditors is the Internal Revenue Service!

Rich dad says: “So you see, after paying myself, the pressure to pay my taxes and the other creditors is so great that it forces me to seek other forms of income. The pressure to pay becomes my motivation. I’ve worked extra jobs, started other companies, traded in the stock market, anything just to make sure those guys don’t start yelling at me[…] If I had paid myself last, I would have felt no pressure, but I’d be broke.“

Don’t get me wrong, I’m all for prioritizing saving, but paying yourself first shouldn’t mean risking stiffing the people you owe money, wrecking your credit score, and racking up fees and interest. You pay your creditors and essential living expenses first, then you set aside your savings, and then you reverse engineer your remaining budget.

Is It Worth Reading Rich Dad, Poor Dad?

I don’t want this to upset anyone who considers the book to be the Holy Grail of personal finance, but I couldn’t recommend Rich Dad, Poor Dad to someone who asked me how to start managing their money better, let alone someone who already has some experience.

The book has a handful of positive lessons, but there’s nothing more profound in it than what you could find in the average personal finance blog these days. It’s mainly about inspiration, and there are places to get your inspiration these days without a side serving of Kiyosaki’s more troublesome ideas.

Do you agree with this review of Robert Kiyosaki’s Rich Dad, Poor Dad? What are your thoughts on this book? Let us know in the comments below!

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If you’re looking to make a little extra cash to pay off debt, build savings, or have income while going to school, a weekend job can help. If you want to make a downpayment on a home, pay off credit card or college debt, or buy that new car, a weekend job can get you one step closer to your goal. Here are the advantages and disadvantages of weekend jobs, and 15 ways to earn some extra money this weekend. 

Advantages of Weekend Jobs

The primary advantage of a weekend job is that you can make extra money and get ahead more quickly. It is an excellent way to pay off high-interest rate credit card debt, save for a downpayment on a house or build college savings. 

Weekend jobs can also be a way to explore alternate careers or make money from your other interests. For sports enthusiasts, being a referee, even in little league games, can feel more like a social event than a job. Likewise, if you’ve always wanted to learn to cook but are in an administrative job, becoming a weekend sous-chef can be a way to explore your passion and gain skills. 

Disadvantages of Weekend Jobs

The primary disadvantage of a weekend job is the loss of free time. If you’re working or going to school 40+ hours a week, and then working another 15+ hours on the weekend, lack of both social life and rest can be a serious problem. 

Burnout is common with weekend jobs. Loneliness, inability to participate in social gatherings and difficulty scheduling are some struggles of people trying to work on weekends.

There’s one common concern that shouldn’t get in your way. Some people worry that their weekend earnings will bump them into a higher tax bracket and raise the tax bill on all of their income. That’s not a worry because taxes don’t work that way. If you move into a higher tax bracket, the higher rate will only be applied to the portion of your income that is above the cutoff point for that bracket. The rest of your income will still be taxed at the old rate. It’s good to know more about taxes before basing any decisions on tax considerations!

15 Weekend Job Ideas

Weekend jobs are often a great short-term solution but are rarely sustainable over the long term. With that said, if you need extra cash and you’re willing to spend some time working 7 days a week, here are 15 weekend job possibilities to get you started.

1. Dog Walker

Dog walking can be a daily after-work side hustle or weekend gig. Many owners like their dogs to get extra exercise at least a few times a week. You can signup for apps like Rover or Wag! that let you pick and choose jobs to fit your schedule. Especially in urban areas, there are significant job opportunities for dog walking on a regular basis. 

If you prefer staying home instead of going out to walk the dogs, you can provide dog sitting services on Rover. Read more about how dog sitting with Rover works and how much you can earn.

2. Babysitter/Nanny

If you love children, becoming a babysitter or nanny is an increasingly lucrative weekend job. Hourly rates are typically above minimum wage, and you could expect to make $300 or more per weekend, depending on the area.

In addition to local listing sites, there are apps you can join to select jobs or reach out to potential families. SitterCity, Bambino, Helpr, and Care.com are just a few of the options to connect with local families and select jobs based on your availability. 

3. Fitness Instructor 

If you are passionate about exercise, it is relatively easy to become a fitness instructor. Yoga, pilates, barre, strength training, aerobics, swimming, kickboxing, and dance or Zumba are just a few of the options. 

15 Best Weekend Jobs & Side Gigs to Help Boost Your Income

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Consider also becoming a personal trainer to work one-on-one with clients. As a personal trainer, you can typically command a higher hourly price and also watch your client’s individual progress. Ask at the local gym about availability and requirements.

4. Construction

If you have some skill with a hammer or in other construction trades, you can pick up construction work. This is especially true in the summer months during prime building season. Many construction teams will offer on-the-job training, making this a weekend job you can start quickly. Due to the seasonality of this career, this is a better option during warm or dry months. 

You can list your services or find local jobs on sites like Indeed, Monster, TotalJobs, and more. 

5. Repair Service

You can also choose to go into business yourself as a handyman or woman. Startup costs are minimal, and you can set your own hours or respond to jobs as needed. Expand your services to offer lawn care or moving and yard work. 

As a bonus, as most full-time repair services don’t work on the weekends, you can charge extra for weekend or after-hours service. Average hourly rates are about $60 per hour. 

6. Tutor

There are nearly unlimited tutoring opportunities on a per-hour or per-course basis. Consider tutoring local students of all ages or signing up to tutor through online platforms like VIPKid or Preply. 

You don’t need an advanced degree to be a successful tutor. You just need to be able to explain the required concepts to students. Many tutoring opportunities are also available teaching English as a second language to students in China and around the world.

Interested in teaching English online? Learn everything you need to know to start teaching English with VIPKid!

7. Online Shop

If you want to have a virtual retail shop, there are a plethora of opportunities online. If you like crafting or have a unique skill, you can sell your products in an Etsy shop. Be sure to note that you only ship out items or respond on the weekend. 

You can also sell clothes and household goods that you no longer need on Poshmark, eBay, or other online platforms. Another way to create an online shop is to purchase goods at a discount and sell nationwide online. For example, if you purchase a shirt from Jcrew for $10, but the retail value is $80, you could sell it online for $30-$40 and make a good profit. 

Read all about how reselling used clothes on Poshmark can turn into a lucrative side hustle.

8. Delivery Driver

Since the beginning of the pandemic, demand for delivery drivers has skyrocketed. Consider working for a local company or using one of the many available delivery apps such as Instacart, AmazonFlex, or Ubereats. This is a good weekend job for someone with reliable transportation. 

9. Rideshare Driver

Demand for rideshare drivers is recovering after last year. Uber and Lyft are just a few of the companies you can consider working for. While you will need to sign up for the app, if you already own a car, this can be a reliable weekend job to choose your own hours.  

10. Clerk/Shopkeeper

Clerk and shopkeeper jobs range from weekend hours at the local supermarket to local coffee shops or covering the register for a small business. Many small business owners are faced with the option of working 6-7 days per week as the owner/operator. Weekends are also often their busiest times, making extra employees essential. Approach small businesses you love and ask about working one or two days of the weekend or look for local online listings. 

11. Fiverr

If you have a specific skill you want to advertise, Fiverr is a great way to get extra clients. Just state that you need a 7-day turnaround time to ensure you can work on the project over the weekend. 

Potential listings include all forms of writing, photography, editing, woodwork, construction, app development, customer service, website creation, interior design, fashion advice, and more. 

12. Housekeeper

Many families prefer to have housekeepers come when they are home over the weekends. If you’re good at cleaning, that could open an opportunity. Create your own housekeeping service, or join a local company. Consider offering decluttering services, garage clean-outs, and deep cleaning as well as regular cleaning services. 

Apps like ChoreRelief, Handy, MaidsApp, and Tidy are good starting points to find local jobs to fit your schedule. 

13. Restaurant Cook (or Food Prep)

If you love cooking or want to learn more, becoming a restaurant cook or working in food prep is a realistic weekend job option. Many restaurants are busiest on the weekends and require extra staff for those times. 

Check local listings, online listings, and approach local restaurants to find weekend cooking jobs. You can also set up a booth at farmer’s markets or food fairs to sell food or baked goods directly. 

14. Referee

If you love sports, weekend refereeing could be your dream job. While refereeing at higher levels will require a training course or to pass a basic test, becoming a high school or little league referee requires only a few hours of training. Weekends are prime time for tournaments, making refereeing opportunities nearly endless during the season. If you really love referring, consider becoming a referee in several sports throughout the year. 

15. Photographer/Videographer

If you have a talent for photography or videography, you can become a professional photographer or videographer. Weddings, corporate events, and graduate parties typically happen on the weekend. If you don’t have the skill to become a photographer, you can work as an assistant with a photographer and learn as you go. 

You can also list your skills on Fiverr and look for gigs on job listing sites such as Indeed, Upwork, and Ziprecruiter.

All of these jobs can be done for as little as one weekend or can become a regular gig. Try out different weekend jobs to find what best fits your skills and income goals. Once you start looking, you’ll be amazed at how many ways there are to earn extra income on weekends.

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The “American Dream” has evolved over the years. Once it was a 9-5 office job with a pension. Today it’s the ability to be your own boss and work from home. It is an ongoing evolution as many jobs become automated and as Americans discover new ways to earn an income.

Where am I in this evolution?

I am closing out my 11th year of teaching high school choir. I have two Masters degrees in education, and, truth be told, I love teaching. I love building relationships with my students and colleagues, making music, and taking my students all over the country to perform. And between all the rehearsals and performances, it keeps me extremely busy.

In this post, I’m going to share my journey on how I got started as a reseller as well as how I ended up where I am today. I’ll also share many tips with you on how you too can start reselling as a profitable side hustle. So let’s start at the very beginning, shall we?

In this post:

• My Reselling Origin Story
• How Much Can You Earn Reselling?
• How to Get Started Reselling on Poshmark
• What Do I Need to Get Started Reselling on Poshmark?
• How to Sell on Poshmark (A Step-by-Step Guide)
• How Do I Scale My Reselling Business
• Mistakes to Avoid
• General Tips for Reselling Success

My Reselling Origin Story

My husband and I are both teachers. We wear a lot of clothing by brands like the Banana Republic and J. Crew. You know; professional, career clothes. One day, I went through our closets and pulled out anything we weren’t wearing anymore. Most of the items were still in great shape. Some even still had the original price tags attached to them. I brought them proudly to my local Plato’s Closet, a buy/sell trade store. I expected to make at least $100 on everything. Instead, they purchased two items for a total of $5. They told me that they couldn’t accept most of the clothes I had brought them because they were “too mature.”

So I brought my tub of clothes home and started googling for other options. Some stores will accept more mature brands, but those stores didn’t exist in my small college town. As I was googling, however, I learned about an online option: Poshmark. It was an online reselling platform where buyers had full control over how their items were presented and priced. I decided to give it a try. After listing a handful of things, a pair of my husband’s shoes sold two weeks after I started listing on Poshmark. 

I was instantly hooked.

I was hungry to make even more sales. I turned again to Google to see if there was any information on how to make MORE sales on Poshmark. Blogs and forums helped, but what really piqued my interest were the various YouTube channels created around the topic of reselling, specifically on Poshmark.

I devoured videos and took notes, keeping track of which brands seemed to sell well for these YouTubers and noting ideas on how I should photograph my items. I convinced my husband to go to a local Salvation Army with me to try thrifting items to sell. My online closet grew and grew. So did my addiction.

Since I started reselling on Poshmark in December of 2017, I have branched out to reselling on other platforms like eBay, Mercari, Kidizen, Facebook Marketplace, and even Tradesy. I created my own Shopify store. I dabbled in Amazon FBA. An Instagram account dedicated to reselling helped me network with the reselling community at large. I fused my love of reselling and teaching into a YouTube channel dedicated to teaching others how to do what I was doing.

And now, here I am, sharing my tips and tricks on how to grow your own reselling empire!

How Much Can You Earn Reselling?

First, let me answer the question at the forefront of your mind right now – how much can you actually earn from reselling?

My reselling side hustle and everything it encompasses consistently brings in more money than my paycheck as a teacher.

I am definitely a small fish in a big pond. There are resellers who resell full-time. Many of them do extremely well for themselves. There are also part-time resellers out there. Like me, many make decent money on the side of whatever their full-time gig is. There are also hobby resellers who dabble with reselling but aren’t necessarily consistent with it. 

For the year 2021, I set a relatively low goal for myself of $30K in profits. I am currently on track to beat that goal by a handsome amount. Add to that the amount I earn from Google AdSense from my YouTube channel, affiliate marketing, profits from my YouTube for Resellers course, and I’m on track to earn over $100K from my “side hustle” in the year 2021.

How to Get Started Reselling on Poshmark

Easy. Marie Kondo your closet. Tell others what you’re doing and ask them to give you clothes they no longer wear. Don’t invest your own money into any inventory yet. In the beginning, you’re going to be learning the ins and outs of reselling on Poshmark and making a ton of mistakes. Mistakes are much more affordable to make when they’re on your own clothing. 

What Do I Need to Get Started Reselling on Poshmark?

Your phone, the internet, and stuff to sell. That’s it.

Sounds too good to be true, right? But that’s literally all I had for the first year or two of reselling, and I did just fine. 

Since I started reselling on Poshmark, the only additions to my “reselling toolkit” are things like apps to create white backgrounds (I personally use PhotoRoom), shelves, and bins to store all my inventory, and an iPhone with more memory. Natural light and efficient photo editing are enough to make my pictures look clean and professional.

How to Sell on Poshmark (A Step-by-Step Guide)

Here is what happens to an item from beginning to end:

1. Find an Item to Sell

Perhaps it’s something you no longer wear or use from your own home. Perhaps you purchased it at a thrift store, buy sell trade store, Target, etc. When you’re first starting your reselling journey, my advice would be to sell items from around your own home that you no longer use but that still have a lot of life left in them. List those items and start making a profit as they sell.

Once you gain confidence from your limited experience with photographing items, listing them, and shipping them out, then you can start venturing out into the world of “sourcing inventory,” which means purchasing inventory to sell online. I started at thrift stores like Goodwill, Salvation Army, and local thrift stores. I worked my way up to purchasing clothes at the clearance section of retail stores to sell for higher profits. I’ve also had tremendous success selling clothes friends and family members donated to me after they learned about my side hustle of reselling!

2. Make the Item Look Appealing 

Wash it, clean it up, slap a new coat of paint on it. An item that looks ragged or old is much less likely to sell.

3. Photograph the Item 

4. List the Item On Your Preferred Platform 

This is where you put the item up for sale on a reselling platform. Create a descriptive title for your item that is rich with keywords. Ask yourself what words or phrases potential buyers will be typing in order to find your item. “Cute dress” isn’t as successful as “Reformation Black Midi Square Neck Short Sleeve Dress Size 4” when it comes to potential buyers finding your listing. 

Continue being descriptive in the listing description. Fill out every part of the listing you can in order to create the kind of listing that is searchable. And when it comes to pricing, see how other items that are similar to yours are selling. If you just want to get rid of the item as quickly as possible, price it a little lower than what the average going rate seems to be. If you know you have something valuable on your hands, price it high and wait for the right buyer to come along.

5. Maintain Your Listing

If people “like” the item (Poshmark and Mercari) or “watch” the item (eBay) or “cart” the item (Kidizen), send them offers. If your listing hasn’t sold after a month or two of being listed, revisit it. Edit your listing by freshening it up with new keywords and perhaps even a new price. I would even recommend deleting the listing and creating a brand new one in its place. All reselling platforms require some maintenance, so make sure you’re giving each platform the attention it needs and deserves.

6. Ship the Item Once it Sells

Each platform handles shipping differently. Some reselling platforms make it extremely easy, like Poshmark. Others are a bit more intimidating, like eBay. That being said, anyone can ship anything if they have a shipping scale (inexpensive ones can be purchased on Amazon), something to send the sold item in like a poly mailer or box, and a way to print the shipping label.

When I first started reselling, I only sold clothing on Poshmark, and because Poshmark will supply their sellers with shipping labels for items up to 5 lbs, I didn’t have a need for a shipping scale. I used a combination of free USPS shipping boxes and unused boxes and poly mailers from online purchases to ship out my orders. Finally, I printed shipping labels to my regular printer until I purchased a thermal label printer a year into reselling.

Many resellers say that it is their fear of making mistakes when it comes to shipping eBay or Mercari items that keep them off those platforms. There are, however, many wonderful videos on YouTube that teach viewers the ins and outs of eBay and Mercari shipping (including some videos of my own!). The information is out there, and ultimately, experience is the best teacher.

7. Track Your Numbers

You want to get in the habit of tracking your numbers. Keep track of how much you spend on inventory, how much you’re spending in platform fees and shipping, and how much you’re actually profiting. 

Not only do you want to track your numbers for each individual transaction to ensure you’re making a profit on each item, but you’ll also want to find ways to track your numbers with the bigger picture in mind. 

Keep track of your overhead expenses like shipping supplies (shipping tape, thank you cards, etc), your inventory, your earnings from each platform, and start paying attention to trends regarding what is selling best for you and which platforms are performing best for you.

How Do I Scale My Reselling Business?

It’s best to master one reselling platform at a time. I was exclusively reselling on Poshmark for over a year before I added Mercari to the mix. I wanted to learn as much as I could about reselling and Poshmark before adding on other platforms. Growing slowly and surely helped me avoid making more mistakes than what was necessary, and as a result, I was able to retain repeat customers, create attractive listings, and grow at a pace that was comfortable for me.

As I started adding other reselling platforms, I sought out ways to make the process of cross-listing items from one platform to another faster. It was tedious to have to copy and paste information from one platform to the next and to download pictures from one platform so I could import them into another platform. 

Around the time I started branching out onto other platforms, a cross-listing software called List Perfectly was created. This was exactly what I had been looking for; a tool that would allow me to quickly and efficiently transfer the information from one listing on one platform to another platform. It also acts as my inventory management system so I know where all the inventory is being held in my home.

Space Matters

Another thing to keep in mind is the space available to you. You can maximize the space you do have, but at some point, you will run out. I would definitely recommend keeping your reselling business from physically bleeding into other parts of your life (this is the most hypocritical point I’ll make since there are currently piles of clothes I intend to resell in my dining room, office, closet, and guest room). It’s important to know how much inventory you can physically handle.

I have items I plan on reselling in what seems like every room of my house, but the majority of it resides in what is affectionately known as the “playroom.” It’s a large bonus room in my house my husband and I had earmarked as the children’s playroom. One entire half serves as my inventory storage space as well. This actually works out beautifully because my children can play while I ship, process inventory, and list.

Some of my delicate or large pieces are hung in the office closet, but the majority of my inventory is stored in the playroom. Along one wall, there are large storage shelves we purchased from Home Depot. Each shelf can house three large clear bins from Target, and each bin can hold roughly 25 articles of clothing. Each bin is labeled with numbers (ie: 1-25, 26-50, etc all the way up to 700). I put individual articles of clothing into a gallon size ziplock bag with a number on the outside.

Build an Inventory System

Perhaps I recently purchased a Theory dress to resell. I input the necessary information about the dress into my List Perfectly Inventory Management System online so I can record my cost of goods, date of purchase, and create my listing. 

In the List Perfectly inventory management system, there is a section where I can input my SKU. This is where I will put the number of the ziplock bag this dress will live in until it is sold. Let’s pretend the number on the ziplock bag is 541. I enter “541” as the SKU on List Perfectly, put the dress in the “541” ziplock bag, and put the “541” ziplock bag with the Theory dress in it inside of the bin labeled “526-550.”

When I cross-list the listing from my List Perfectly Inventory Management System to reselling platforms I sell on, it will automatically transfer the SKU information over to the reselling platforms as well. Therefore, if the Theory dress sells on eBay a few days later, I will see the SKU for the Theory dress on the eBay shipping page, enabling me to quickly find ziplock bag 541 in bin “526-550.” I will pull the dress out and save the ziplock bag to use for my next piece of inventory. I love this method because it’s simple, efficient, and environmentally friendly. I have used the same ziplock bags for over 3 years now.

Consider Outsourcing

Finally, when it’s time, start outsourcing some of your reselling tasks.

At times, it can get very overwhelming. It feels like there simply are not enough hours in the day to check off every box on your reselling to-do list. 

This is where outsourcing comes in handy. The mind-numbingly boring and carpal tunnel syndrome-inducing task of sharing my Poshmark closet has gone to a sharing company. I use List Perfectly to store all of my inventory information and cross-list to other reselling platforms. 

Since my husband and I are both teachers and we have the summers off, he has volunteered to photograph my inventory for me during the summer so I can focus on listing and cross-listing. By paying others to do the types of tasks that anyone can do, I’m free to spend more time on the parts of reselling I love most: sourcing and creating content about sourcing.

Mistakes to Avoid

As with any business or side hustle, there are pitfalls to avoid. Here are some that deserve particular attention.

Poor Sourcing

When I first started thrifting, I only cared about two things: was the item cute, and was it cheap? I loved going to Salvation Army on dollar days. I loved scouring Goodwill for the color of the week because I knew those items would be half off. What I failed to recognize, however, was that just because I threw something up online, it wasn’t guaranteed to sell. Learn what brands hold a high resale value and what styles are trending at the moment. There is nothing worse than being stuck with a ton of inventory that no one wants to buy from you.

Scaling Too Fast

I can’t tell you how many resellers have quit reselling because they simply scaled too fast. They got in over their heads. Reselling quickly became a thorn in their side rather than a fun side hustle. Grow slowly and assume that you will be incredibly slow at everything when you first start. You will get better and faster with time. Allow yourself to go through that growing season before buying pallets of clothes or renting out a storage unit. 

Growing slowly and surely helped me avoid making more mistakes than what was necessary. As a result, I was able to retain repeat customers, create attractive listings, and grow at a pace that was comfortable for me.

Sourcing More Than you can List

Most resellers would tell you that sourcing, or finding the inventory to sell, is the best part of reselling. It’s like a treasure hunt. You go to garage and estate sales, thrift stores, and other retail establishments and search for items that are underpriced. You then list them online at a premium, sell them, and make a ton of money.

Many resellers (including myself) have acquired something we call a “death pile.” Death piles are piles of inventory that are just taking up space and not making anyone any money because they’re not listed anywhere online. Set limits for yourself. Set listing goals for yourself. Just do whatever you have to do to get your inventory listed so it can sell.

Many of these concerns apply equally to any side hustle, particularly one involving retail sales.

General Tips for Reselling Success

Reselling is a relatively simple business: you buy items at a low price and sell them at a higher one. Doing that reliably and successfully does require some knowledge. Here’s where to start.

Do Your Research

There are SO many YouTube channels (including mine, Becky Park on Poshmark), blogs, email lists, courses, Reddit threads, etc on how to be a successful reseller. When I first started reselling on Poshmark, I watched every reselling YouTube channel and read every blog post at my disposal. I learned which aspects of each different business model would work for me and which aspects to leave behind. I learned how to store my inventory, what brands to sell, and how to ship efficiently.

Know What is Selling

Whether you’re into selling clothes, video games, sneakers, or anything in between, learn your market. Learn which brands are hot and which brands have been canceled or are over. Know which styles are selling best and which styles are last season. Learn what retired tags versus new label tags look like. Learn how to identify if something is vintage or rare. Again, there is so much free information out there on platforms like YouTube and Instagram. Consume as much of this information as possible.

The Bottom Line

If I, as a high school choir teacher, can find time to earn $30K in profits in 365 days from selling people’s used clothing, you can too. It may not happen the very first year you start. As you get better and faster at all the processes that come with reselling, you’ll get there.

Never in my wildest dreams did I imagine that this is what I would be doing with my free time as a side hustle. I am so thankful that I stumbled across Poshmark four years ago as I was googling “how to make money on my old clothes.” I have the luxury and stability of working as a high school choir teacher, a job that fills me with purpose and joy as well as a retirement plan and health care, and I have my side hustle. My side hustle has blossomed into the money-making machine it is today. And that, I think, is the 2021 American Dream.

The post Reselling on Poshmark: How I Earned Over $25K in One Year With My Side Hustle appeared first on FinMasters.

Financial tips are everywhere. You can’t turn on the TV, open a newspaper, or browse online without finding an expert telling you how to invest, save, or improve your credit score.

Much of this expert advice is the same. Sometimes it seems repetitive. Investment experts advise you to diversify your portfolio. Credit experts tell you to pay your bills on time and keep your credit utilization low. Saving experts remind you to think twice and take a time out before making an impulse purchase.

There are good reasons for much of this repetition. Advice often gets repeated because it’s good advice, based on facts and impartial analysis. Still, it can get tiring to hear the same tips and suggestions over and over again. What if there’s other good advice out there that we aren’t hearing?

If you’re looking for suggestions you may not have heard yet, we’ve got you covered. We asked 15 professionals for their #1 unconventional financial tips. Here’s what they had to offer.

Unconventional Financial Tips You Need to Know

Let’s take a look at the unconventional financial tips our expert panel produced.

Anna Barker
Founder
The Logical Dollar

Use Your Credit Cards

Many financial experts recommend that you should cut up all your credit cards, but my recommendation is to actually use these to your advantage. Specifically, I recommend putting all of the expenses you can on your credit cards, as this is a great way to secure a range of bonuses such as cashback or air miles.

The big caveat here is that you should only do this if you can pay off the balance in full at the end of the month. Otherwise, you will be charged interest on your purchases, which negates any of the other benefits that can come from doing this.

It’s true that not everyone can manage their credit cards effectively, and it’s those people who may wish to follow the traditional advice to cut up their cards. But for those who know they can control their spending and stick to an amount that they can afford, using credit cards can be a great addition to your overall money management.

Unconventional #FinancialTips: Put all of the expenses you can on your credit cards.

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Josh Heckathorn
Co-founder and COO
Tomorrow

Teach Children to Use Credit Cards

This one is for the benefit of your kids. I think an often overlooked and unconventional money tip is teaching young children how to use credit cards wisely. If you have a good handle on your credit, add your child as an authorized user to your credit card as soon as you can, help them build a good credit score by the time they leave the home, teach them the importance of living within a budget, and to always pay monthly credit card bills in full. Just by being on your credit card, they start building a credit history which increases their credit score.

Many parents avoid teaching the upcoming generation how to use credit cards altogether, which can then lead to misuse and poor decisions as soon as they are on their own and find themselves in need of a credit card and a good credit score to do many things in life.

Unconventional #FinancialTips: Add your child as an authorized user to your credit card as soon as you can.

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Jon Schlossberg
Founder and Executive Chairman
Even

Use Your Savings

People have this notion that they shouldn’t touch their savings, no matter what. And they feel extreme guilt when they do — so much so, that they’d rather charge something on their credit card or get a payday loan than use money from their savings account. Yes, it allows your savings to grow, but you know what else keeps growing? The amount of money you owe and the amount you waste on interest payments.

Use your savings instead. In fact, set aside a small percentage of your paycheck for short-term savings that you actually use. And ask your employer if they happen to have a program to incentivize emergency savings. Many do. Then, feel proud (not guilty!) when you dip into your savings to pay for unexpected expenses, bills that are due before payday, or even splurges. You’ve earned that money and by using your savings instead of credit, you are likely to have more money in your pocket … and more money to add to your savings, too.”

Unconventional #FinancialTips: By using your savings instead of credit, you are likely to have more money in your pocket.

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Bill Hardekopf
Senior Industry Analyst
CardRates.com

Use Micropayments to Manage Credit Card Debt

One of the unconventional ways to dig yourself out of credit card debt is to make micropayments throughout the month.

Most people believe that credit card payments can only be made when the bill comes due. But that is not true. Micropayments are smaller payments you make to the credit card company throughout the month.

An example: a couple was thinking about going out to dinner and a movie. But rather than spending $75, what if they ate at home and rented a movie? They might save $50. If they took that money and immediately made an online $50 payment to their credit card balance, their debt would forever be lowered by $50. If they made a habit of doing this each time they made a conscious effort to save money, they’d be surprised how much their debt would decrease.

In addition to paying off your debt faster, micropayments will also help lower your interest payments. Most issuers calculate interest based on your average daily balance during the month. You’ll lower your average balance by making smaller payments during the month. Smaller interest penalties also mean more money can be devoted to paying off the balance.

Micropayments may also help raise your credit score. By making more smaller payments throughout the month, you will be avoiding late payments and using slightly less of your available credit, both of which are important factors in increasing your credit score.

Finally, micropayments may have a beneficial effect on reducing your financial stress.

Unconventional #FinancialTips: Make micropayments throughout the month in order to pay off your debt faster.

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Mark J. Stevens
Founder
Stevens Wealth Strategies

Hire a Financial Coach Instead of a Financial Planner

Many people think that if they want expert help with their finances they should hire a financial planner, but as a 30-year financial planning veteran, I can tell you that this myth is a disservice to many. Hiring a financial coach might be the better choice.

According to the Consumer Financial Bureau: “A financial coach is a trained professional who collaborates with and guides their clients to reach their financial goals. The process is personalized and non-judgmental. Financial coaches provide support, encouragement, accountability, and tools to help people make informed decisions.”

Reasons to consider working with a financial coach:

• Financial coaches focus on the fundamental building blocks that eventually lead to needing to hire a financial planner or wealth manager.
• Many financial advisors that say they do financial planning also sell products that may be a conflict of interest – unlike most financial coaches, who do not sell any financial instruments (e.g., stocks, bonds, mutual funds).
• Most financial planners require clients to have fairly high incomes or investment levels to make it cost-effective and a good fit.
• Many can accomplish great financial successes working with financial coaches, for less money, and avoid unnecessary fees or commissions.

Mainstream marketing and media overcomplicate finding personal financial solutions. Most people just need to focus on cash flow and the debt management issues tied directly to their personal goals — that is at the heart of the financial coaching process.

Unconventional #FinancialTips: Hire a financial coach instead of a financial planner.

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Scott Nelson
CEO
MoneyNerd Ltd

Debt Isn’t Always Bad

I am very much a believer of the unconventional school of thought that not all debt is bad debt and being in debt or being short of money should stop you from investing.

By this, I mean that a large proportion of the population believes that any form of debt is bad and you should avoid it at all costs – I disagree. There are some debts such as student debt, mortgages, and any investment into a potentially higher returning project that you SHOULD do in order to improve your financial wellbeing.

I would advise that if you see an opportunity to increase your income or assets such as taking out a student loan to go to university/an equivalent; taking out a mortgage to own a house or investing your savings into the stock market or a side hustle that you should definitely do it.

Just ensure you also have a steady income, control of your money/debts (with a budget), and an emergency fund, and then all other finances you have you should look to better yourself or your situation. To do this, you should always avoid (or cut down) spending on depreciating assets such as clothes, cars, and food where you can find cheaper equivalents.

Unconventional #FinancialTips: Debt is not always bad and you should not avoid it at all costs.

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Francesca Nicasio
Content Marketer
Payment Depot

Saving Money Isn’t Hard

People who say that they don’t save money because it’s hard are wrong, saving money is the easy part.

As a content marketer for a B2B eCommerce payment processing company, the topic of money is part of my job. The way I see it, money is just a means to an end, it lets you get the stuff you want in the world. The hard part of saving isn’t the saving, it’s deciding what you want, prioritizing the things you want, and making a plan to get the things you want. After you know what you want and how to get it, it’s just a matter of carrying out your plan, it’s almost automatic at that point.

The next time you hear someone say that saving money is hard you can tell them that saving is the easy part once they’ve decided what they want and how they’re going to get it.

Unconventional #FinancialTips: The hard part of saving isn’t the saving, it’s deciding what you want.

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Chloe Choe
Personal Finance Blogger
Off Hour Hustle

Avoid Cards with Annual Fees

I personally refuse to get a credit card that has an annual fee. As someone who is a minimalist and doesn’t spend much, the annual fee is never worth it for me for the increased rate of return on rewards. People should always do the math before getting an annual fee credit card as you actually have to spend a considerable amount to break even with a no annual fee card that gives fewer rewards.

Annual fee credit cards also make you unnecessarily spend more just to reach a certain number of points. They also make you take advantage of benefits such as food delivery services that you may not have necessarily used. Ask yourself, would you be ordering this food if you didn’t have free delivery? Would it have been cheaper to eat in?

Make sure the annual fee credit card you’re considering is actually giving you more points or rewards even after the fee. Many people get suckered into high rewards points and neglect to do the comparison.

Unconventional #FinancialTips: Avoid credit cards with annual fees.

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Nic Perry
Owner
Mauve Morpho

Use Your Cards

If you have self-control, use credit cards for EVERYTHING.

This tip definitely isn’t for everyone, but if you have the control to avoid carrying a balance, credit cards are amazing. Most years I get at least $1,000 cashback, on top of points I save with other cards, and I’ve gotten 3x that on years where I used good promotions. Lots of cards also come with extended warranties, free rental car insurance, and other perks that just amplify their value. You also don’t usually need or want a card with a high annual fee, but a $100 fee or two might come with far more value, especially if it’s an airline card for an airline you use. Make sure you pay the full amount each month, if you have enough cushion in your checking account, set them all to auto-pay just to make sure you never miss a payment.

Yes, credit cards can get you in trouble if you rack up debt. Yes, they aren’t for everyone. And YES, if you can use them well, they are invaluable.

2 Stories about credit card perks.

A dozen years ago, I rented a car for a road trip across the country, and used my American Express as the insurance, waiving other car insurance. When I hit an animal in the middle of the night, in the middle of nowhere, it was as smooth as such an event could ever be – I filed a report with the rental company, gave American Express the info, and they handled literally everything, it didn’t take me any more time, and I didn’t pay a penny.

When my wife and I first got married, we bought her a laptop – shortly before the end of the AMEX extended warranty, her mouse button click stopped feeling right but still worked and the bezel around the screen had separated a little. I filed a claim and was told I’d probably need to take it to a shop for repair. Within a week, AMEX had refunded my account for the full purchase price and let me keep the laptop.

Unconventional #FinancialTips: If you have self-control, use credit cards for EVERYTHING

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Michael Benson
Lead Bankruptcy Attorney
A Bankruptcy Law Firm, LLC

Financial Gurus Aren’t Always Right

One of the most influential financial gurus would undoubtedly be Dave Ramsey. A lot of his advice is great, and all of his advice can work really well for some people, but for those that are willing to put some time and thought into money management and are able to control spending impulses, there are things that Ramsey preaches that I wouldn’t recommend.

First, Ramsey is very anti-credit card. This makes sense for individuals with a spending problem who are prone to impulse buys. If you can control your spending, a credit card is actually a great tool, because you can leverage the points or cash back they offer. As long as you’re paying your credit card bills on time, you’ll be earning free money or rewards for purchases you were already planning to make.

Second, Ramsey is a big proponent of paying off your mortgage early. There are, certainly, psychological advantages to paying off your mortgage quickly. You no longer stress about the debt you have. It also cuts down your living expenses, which makes it easier to afford unexpected expenses should they arise. However, that $150,000+ you use to pay off your mortgage could make you far more money if it were invested instead. Your mortgage interest rate is likely well below the annual rate of return from the stock market. You’d gain far more than you’d be paying in interest, which makes keeping your money a better investment. Again, this isn’t for everyone, but for those who don’t have anxiety over debt and have the ability to be disciplined investors, not paying off your mortgage early is the smarter money move.

Unconventional #FinancialTips: That $150,000+ you use to pay off your mortgage could make you far more money if it were invested.

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Shaun Morgan
Blogger
Simply Know Money

Invest in Real Estate

Individuals who make low incomes should invest heavily in real estate and not the stock market to become wealthy. Most financial advisors recommend building retirement accounts over 30 or 35 years, but that just isn’t possible for a low-income earner if they want to retire comfortably.

If you want to have $1,000,000 in retirement you would need to invest $1,000 a month for 30 years (assuming a 6% return) which for someone making $3,000 a month is nearly impossible. But since most low-income earners have a steady job, they can use bank leverage to get into rental real estate with very little money out of pocket which can snowball to a comfortable retirement.

In other words, you can invest your own money in stocks and bonds to build $1,000,000 in assets, or you can invest the bank’s money in houses (or other forms of real estate) but still own a $1,000,000 portfolio at the end of the day.

Unconventional #FinancialTips: Use bank leverage to get into rental real estate with very little money out of pocket.

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Alina Clark
Co-Founder & Marketing Director
CocoDoc

You Don’t Need Credit Cards to Build Credit

The idea that having credit cards helps you grow your credit score has never sat well with me. You don’t need to sink yourself into debt in order to build a credit score. On the contrary, one needs to know when to take debt, and which manageable debts at that. Expensive credit card debts won’t help you build a good credit score, they’ll help you dig a deeper debt hole instead.


Even though I have credit cards, I only use them when I absolutely have to. In hindsight, I built my credit history from other types of credit, which are cheaper and more manageable than credit card debts. Credit cards are convenient for everyday living and expenses, but the idea that they are must-have is absolutely wrong in my opinion.

Unconventional #FinancialTips: You don’t need to sink yourself into debt in order to build a credit score.

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Mike Raines
Owner
Raines Insurance Group

Use Whole Life Insurance

Conventional wisdom along with many in the media, etc. say that purchasing whole life insurance is a bad idea. But whole life insurance allows you to build up tax-deferred cash value each and every year at a guaranteed interest rate.

In addition, a dividend-paying whole life policy can pay dividends each year. What is more exciting is a whole life policy can allow you to grow your money tax-deferred and take out your money tax-free via a loan provision. This safe, conservative vehicle can do much more than just provide a death benefit for your family, it can provide you with additional tax-free income for life.

Unconventional #FinancialTips: Use whole life insurance because it can do much more than just provide a death benefit for your family.

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Josefin Björklund
Co-Founder
Topp Casino Bonus

Sell Your Car

My unconventional tip to save money is to sell your car. I sold my car off this pandemic and saved a lot of money that I could never have imagined. Unbelievable right? But it’s true.

This might not be a feasible option for many people. Especially if you live far from your place of employment and there is no public transport available. But there are many people who are living without a vehicle in order to save additional costs on gas, insurance, and car payments.

Alternative options to replace having a car include riding public transportation, carpooling as well as biking to the place you need to go. Another benefit of getting rid of your car is you can focus on your health. You can either walk or ride a bike to get to your destination. This might seem strange and convenient, but it worked really great for me and I am glad I sold off my car.

Unconventional #FinancialTips: Sell your car. if you can You'll be surprised with how much you can save.

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Melanie Musson
Finance Expert
USInsuranceAgents

Invest First, Pay Debt Later

Investing is more important than paying down debt.

This tip isn’t universally accurate, but so much emphasis is placed on paying off debt as the number one priority that people don’t stop to evaluate if that’s the best way to use their extra income.

Debt with a low interest rate is usually better to hang onto and pay off slowly so you can invest in something that yields a higher return rate. For example, if your car loan has a three percent interest rate and you have the opportunity to invest with a 10% return, keep making your monthly car payments, but put your extra money into the investment.

Paying off debt is reasonable, and investing is good. You really can’t go wrong with either, but sometimes investing is the wiser financial decision.

Unconventional #FinancialTips: Investing is more important than paying down debt.

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Let’s Sum That Up

Not all of these tips apply to all people. Some of them are contradictory: for example, some experts advise using your credit card at every opportunity, some suggest using it as little as possible or even not having one at all.

Those differences don’t mean one expert is wrong and the other is right. Each may be right for a different person. If you have the income and the discipline to pay off every bill in full and on time, using your card and claiming its perks makes good sense. If you don’t, leaving the card at home or not getting one would be a better move.

If you’re looking for unconventional financial tips, they’re out there. You’ll find some here and more if you look deeper into the world of financial advice. The key to using these tips effectively is understanding your unique financial situation and selecting the tips that best suit your needs!

What’s your #1 unconventional financial tip? Let us know in the comments below!

The post 15 Unconventional Financial Tips You Don’t Hear Every Day appeared first on FinMasters.