Welcome to the adult world, in which you can vote, sign a lease and take out a credit card.
But there’s a lot to know about credit cards before you sign up for one of those flashy offers that come in the mail or pop up on your smart phone. Remember, they are designed to reel customers in, but the details about interest rates and other tidbits that will affect you longer term are in the small print!
In most states, you need to be at least 18 to even qualify to apply for a credit card. And if you’re under 21, you will need a co-signer on your credit card application. Pesky federal laws require that people under age 21 must have quantifiable income before they can be approved for a credit card without a co-signer.
What does this mean in hard, cold facts? It means you must have a paper trail of reliable income from a paying job, at the very minimum a part-time gig. A one-time loan from Uncle Joe or a nice sum of high school graduation checks do not qualify as sustainable income. Sorry.
But if you have enough independent income or savings to show that you can, all on your own, pay off debt, you may be able to be approved for a credit card in your own name.
If you’ve reached the old age of over 21, credit card restrictions aren’t as strict. You will still need to demonstrate a regular income, independent of parents or other adults, but you can include any income you have, including part-time jobs, commissions and side hustles.
Think all credit cards work alike? Think again.
Purchasing Via Credit Card
The Big Pitch
One of the most obvious heavy pitches for companies vying for your business are the on-the-spot offers every time you cash out at a retail store.
Ever wonder why the sales people take the time – and risk looking pushy – by offering to take your one-minute application right then and there? Well, for one, they’re required to. But for two, most make a small commission or points towards a prize for each application they take – whether the customer qualifies or not. There are even in-store competitions for the cashier who takes the most applications. Take these factors into consideration, and it’s a wonder they don’t follow you out to the parking lot to take your credit card application!
Easy To Get, But Use With Care
If you can prevent yourself from going hog wild with a store card, this might be a feasible option for a non-traditional credit card.
Your first temptation will come immediately, since retail cards offer deep discounts on the first day of use.
Consider this scenario: You scored big on Levis and hoodies at an outlet store, even got a shopping cart because it was too much to carry.
The cashier sees you coming. There’s a light behind her eyes. A certain sparkle that spells anticipation of a commission.
Sure enough, as soon as you unload your clothes, the pitch begins. You’re offered a one-minute application for an outlet credit card – actually, a card good at its sister stores as well – which if approved will save you 15 percent on the spot.
If it’s not approved, well, then you aren’t a customer of interest and you may as well move along.
So there you are, given an option that needs a decision pronto.
First of all, NEVER make a financial decision at a check-out line! There are angry people behind you who will glare, mutter under their breath and even jostle your shopping cart to get you to move along. No one wants to be behind the guy who can’t decide whether or not to take out a credit card. Would you?
The best way to pay for those jeans and hoodies, of course, is with cold hard cash. Optimally, these greenbacks have come from a carefully planned clothing budget that allows for an expenditure for your most needed wardrobe items. In other words, you’ve saved up and planned for this shopping spree.
Studies have shown when people pay in cash, they are less likely to spend impulsively. This can be attributed to the fact that swiping a debit card is so far removed from handing over bills, it almost seems like not using money at all. But when you dole out 20s, all you can think of was how many hours it took you to earn that bill….and many times, that egg sandwich isn’t worth it.
So we urge you to pay cash whenever and wherever possible. And to have planned this purchase as part of your ongoing monthly budget.
Building A Decent Credit Score
But maybe you’re specifically looking to build up your credit score.
One thing cash doesn’t offer is a chance to launch a solid credit history. Credit cards are a great way for you to begin doing this so that you can eventually qualify for a lease, a truck, or even a mortgage when you get to that point way down the road.
Simply put: you will need to show a credit score for anyone to take the risk of handing you a loan.
If you’ve never had a credit card or any type of loan in your name, you’re considered high-risk because you have a credit score of 0.
Here’s how it works: credit scores typically fall within a range of 300-850. For most adults, their score falls in between 600 and 750. A score of 700 or above puts you in the category of having “good” credit. Score 800 and up, and you’ve hit the big time with the status of excellent.
Clearly, you want to shoot for the start and reach the highest credit score you can.
The longer your documented credit history is, the better. If you can show a handful of years of wisely managing credit, that works to your advantage.
Around two to four years of smart credit management will build confidence in lenders and earn you the stamp of approval to your loan application.
Who looks at credit scores? Everyone! Well, not your parents. Probably not. Credit scores are tracked by banks that approve or turn down mortgage loans, car dealerships financing your next vehicle, insurance companies and even potential landlords.
You can and should keep an eye on your credit score using one of the many sites allowing you to look for free.
Back To The Store Credit Card
Traditional credit cards require a good credit history just to qualify, which basically leaves you between a rock and a hard place.
Retail store cards frequently have more relaxed underwriting than general use credit cards. This means they are more likely to grant you approval with a shorter credit history or a lower score.
Remember, the corporations that own the retail chain – and the cashiers itching for commission – want to get you approved. They’re betting on the chance that you might go on a spree, charge up to your limit, then take time paying back, which earns them a ridiculous amount of interest fees.
You’ve studied up on the facts, you’ve read this blog, you know how to make smart decisions.
This also means you understand the terms of the card, that you’ve read the small print and the scary interest rates associated when you carry a balance over from month to month. If you aren’t up to speed on these really important details, pass on the application.
IF you have the cash in your account carefully budgeted for clothing, AND you don’t have twice that amount of merchandise in your cart, AND the terms are agreeable, go ahead and apply. It only takes a minute and you have a 50-50 chance of being approved.
Now you will want to take advantage of that discount on the items ALREADY IN YOUR CART! That does not mean go back and add to your inventory! Impulse spending is always a mistake. Take it from us.
Know Your (Credit) Limit!
Your approval will come with a pre-set credit limit. This sets a ceiling on how much debt you can carry on your card monthly.
Expect to see a limit of $500 to $1,000 on your first store card.
Here’s another valuable bit of advice: ALWAYS keep your balance well below your limit. Industry experts set the figure at 30 to 50 percent of your limit. This will assure creditors can see you aren’t in the habit of spending wildly.
So if your cart load of clothes will push your limit, get out of line and put some items back on the shelves. Try not to make eye contact with angry shoppers who’ve been waiting in line behind you during this process.
When The Payment Deadline Arrives…
Usually on the first or last weekday of the month, your statement will become due.
The only smart move is to pay it off IN FULL on that due date (or before if you can swing it).
This prevents you from carrying over a balance that will be hit with high interest rates. The longer you carry a balance, the more debt you accrue. People pay multiple times over the value of their actual purchases in interest payments.
Final Thoughts On Store Credit Cards
It’s still a good idea to use cash for most of your purchases, which you can do for small expenses like that egg sandwich.
When you go into Gap, who awarded you the store credit card, resist the urge to become a compulsive shopper.
Yes, you want to spend some amount, then pay it in full when due, to build your good credit history.
This DOES NOT mean buy out the store. People are especially tempted to over-spend during holidays, only to find themselves credit heavy and cash poor in the new year.
Guest post by Nathan Clarke. Nathan is a systems engineer and eBay reseller with a goal of reaching a million dollar net worth. He blogs about his journey at millionairedojo.com
eBay has been around for over 20 years now. It was founded on the idea that you could take junk out of your closet, list the items and ship them across the country once someone purchased them. It’s amazing to think this business model actually worked, because there’s a high level of trust involved.
When the company first started, nothing was stopping someone from creating a listing and then taking the money and running without shipping the item when someone made a purchase. That rarely happened though, and the company continues to thrive today.
Most people don’t realize the opportunity we have with eBay. Anyone can start selling their items on the platform, begin making money and even create their own business. Here are some ways that eBay is similar to investing in stocks.
Ebay Screen Saver, Pixabay
1. You’re purchasing something with the hopes that you’ll make money.
No one buys stocks with the intention of losing money (unless you’ve got so much money that you need to lose some for tax purposes). Just like a stock investor, eBay resellers look for items that they can buy at a low price and sell for a profit. It’s really the same idea as stock investing in a way.
When you buy a stock, you’re purchasing a part of a company. The company uses the money you invest to hopefully grow their business and make even more money. If they achieve this, the value of your stock goes up because the company is worth more money.
When you buy something to sell on eBay, you are hoping to sell it later on for a profit. I have purchased a hat at a thrift store for $0.25 before and it sold for $35.00. I profited over thirty dollars and was able to buy more items to continue reselling. Once you start making money on eBay, you’ll see a snowball effect with your cash pile by reinvesting your earnings.
2. You expect to get a good return on investment.
When you invest in the stock market, you hope that your investment is going to grow and you’ll earn money rather than lose it. When you’re reselling items on eBay, you are trying to do the same thing. If you go out and buy things that aren’t worth anything, you’re going to lose money.
It takes some time to figure out what sells well on eBay, but when you know a few items that are valuable, you can focus your energy on looking for those things. Investing in the stock market is a bit of a gamble since you never know if it’s going to go up or down. Buying things to sell on eBay can be a gamble as well. The most valuable item I’ve sold so far was something I knew nothing about. I got an old CB radio at a yard sale for free because the person was just throwing it away. I did some research on it, listed it, and it sold for over $500.00!
3. It’s best to diversify your assets.
Having a well diversified stock portfolio is key to being a successful investor. If you aren’t diversified, you have a higher risk of losing money. The more companies you are invested in, the better chance you have of earning more money. I personally invest in index funds that cover the entire stock market. Since my money is spread out across the entire market, I have well diversified exposure.
Having a diverse set of items to sell on eBay is a great way to ensure long term success. I’ve seen several people specialize in selling only one type of item. The problem with this is that trends come and go, and if people stop being interested in the items you’re selling, you aren’t going to make any sales. I will literally sell anything that I think I can make a profit on. I tend to stick with smaller items since they’re easy to ship, but if you look at what I sell each month, you’ll find all kinds of things.
4. A large eBay store will pay you dividends over time.
The main purpose of investing in the stock market for most people is to have a passive form of income in the future. You are investing money now with the hopes that it will grow and you’ll be able to pull dividends from that investment later on in life.
When you grow an eBay store to have lots of items, it will start paying out profits over time when you make sales. I sell items regularly that have been listed for several months. Sometimes it can take years for certain items to sell, but if you’re in it for the long run, this shouldn’t discourage you. The fact that items can take a while to sell just means you have more time to grow your store and continue building your inventory.
My eBay store currently has about 300 items in it and I’ve sold hundreds of items over the past year. When your items sell really fast, it can be hard to keep building your inventory. The great thing is that I could stop listing items for a whole year and continue to make money each month until my inventory runs out. I just have to collect payment and ship the items!
Final Thoughts…
Selling on eBay isn’t nearly as passive as stock market investing. When you invest in stocks, all you have to do is put money in a fund and let it sit. With eBay, you have to find items, list them and ship them when they sell.
Reselling on eBay is a lot of work, but if you love doing it, you can possibly turn it into your full time stream of income. It isn’t the same as retiring and living on stock market investments, but you might be able to quit a job you don’t enjoy and sell things on your own time. eBay can be a great way to make some extra money and if your earning enough from it, you could even invest some of your profits into the stock market!
Buying a car can be one of life’s largest expenses and greatest sources of stress.
But it doesn’t have to break your bank or make you tear your hair out or refill your ulcer medicine.
Do your homework, arm yourself with information, and don’t be deterred by a sales pitch designed to throw you off course with promises and bargains that seem too good to be true. That’s because they probably are.
Buying A Car, Flickr
Before you EVEN THINK about buying a car or even picking up an auto digest or the latest car magazine, you need to determine how much you can afford, right down to the dollar. That means don’t estimate or guess. Base your decision on your current financial situation.
If your budget is bursting at the seams (you DO have a budget, right?) you should consider a new vehicle something to put on the back burner and put your energy into stashing cash away into an auto fund.
There is no one-size-fits-all calculation you can use to gauge how much cash you should spend on a pre-owned or new vehicle. Whether you use cash or get a loan and make monthly payments, it should not cause an upheaval of your finances or leave you broke without enough money to pay for necessities like rent, food and Internet services.
Unless you are hitching rides (NOT safe!) to work or walking miles in the snow barefoot, a new vehicle is a “want” not a “need.”
The best answer for how much you should spend on a car is the amount you’ve saved for that purchase. Saving up and paying cash for a vehicle is wise and won’t derail your budget.
Do NOT Buy Brand New!
Come on, did you really think we would recommend this as an option?
Prices on new cars are through the roof. According to Kelley Blue Book, the average new car price at the end of 2017 logged in at $36,110. And the average for pre-owned vehicles is nudging $20,000.
Most people don’t have that kind of cash. Because of this, loans are the most common option, and they’re high. In the first quarter of 2018, the average new car loan was a whopping $31,450.
Consider for a moment the long-term impact a loan of this magnitude would have on your future. Then stop looking at new vehicle brochures and get back to reality.
Here is a great video on the car buying process…
Affordable And Pre Owned
This is an option for people who need a vehicle ASAP and have some cash set aside to pay for it.
It also is a good choice for you if you’ve worked a car loan payment into your budget and it won’t sabotage the rest of your monthly expenses.
Here are some initial steps to take when deciding to buy a vehicle…
Look for a car or truck that’s within your price range. The importance of this cannot be overstated.
Identify the year, make, and model of several used cars you’d like to purchase.
Develop a short list of cars/trucks that will work for your needs. Be flexible. Ideally, you will put together a list of several vehicles not just one.
Narrow your list by checking Consumer Reports or a similar website to read trustworthy reviews of the cars you’re interested in.
Browse auto digests, Craigslist and other similar sites for vehicles, and also go to car lots and dealers to check them out in person. Don’t be talked into a quick sale. Impulse buying is always a no-no.
If you decide to buy directly from another person, ask the right questions. You want to know as much as you can about the car’s performance and history.
Here are some suggested questions…
“Does this car have any issues you know about?” “Why are you selling it?” “How many previous owners did it have?” “Do you have paperwork about recent maintenance or repairs?” “Has this vehicle been in any accidents?” “What is the age of the tires?” “When was the last oil change?” “Who is your mechanic?”
Check out the facts. Then, put your sleuthing hat on and check history reports to learn
more about the car. Sites like CARFAX and Auto Check are great for searching vehicle history reports. Just enter the VIN (vehicle identification number) to find information regarding a specific car.
The info that may be available includes previous owners and whether the vehicle has any liens against it, as well as if it has been involved in major accidents.
Don’t forget to look up the vehicle with the national traffic safety agency to determine if the car you’re considering or any of its parts have been recalled.
If you are looking at a car being sold by a private owner, always have the vehicle inspected by your own independent mechanic. Walking around the car/truck and kicking the tires isn’t a good enough indicator of whether it’s a smart purchase or not.
If you find the seller stalls or won’t allow the car to be inspected, you can safely assume they’re hiding something, and our advice to you at this point is to run.
If your mechanic finds problems with the vehicle, ask how much it would cost to have them fixed. If it requires a lot of work and money, this is likely a deal-breaker. But for more minor repairs, you could use this as a negotiating point for a better deal on the car/truck.
Get Behind The Wheel
Always test drive the car. Giving a used car a test drive is imperative to see if it fits your style, budget and needs. It will help tell you if the car really is the one for you. During your test drive, evaluate the car’s performance and whether or not it accommodates you comfortably.
Here are some things to consider…
Ensure that the seats are comfortable and easily adjustable.
You must be able to sit in the car without your head grazing the interior ceiling.
Test the blinkers.
Keep your ears open for any sounds of clinking, clanking or grating which could mean engine trouble.
Test the brakes
See how easy it is to drive. The steering wheel should be responsive.
Blast the air conditioner then the heat to make sure both work effectively.
Look for any warning lights or symbols flashing on the dashboard panel.
Check for blind spots by adjusting the rear-view mirror and side mirrors appropriately.
Drive by your mother’s house and see what she thinks (this step is optional).
Dealer vs Private Party
Although you may score a good deal buying directly from an owner, shopping through a dealer has strong selling points. Dealers offer certified pre-owned vehicles, which means they’ve passed industry standards of excellence. They also often come with a warranty that gives you reassurance if you find something wrong after you drive away.
Keep in mind, too, that the best price is not necessarily the lowest dollar price. If you get a car from a private seller, the cost will probably be less than it would at a dealership, but a dealership can offer certification and warranties that a private seller can’t.
We always recommend you get a service contract. A service contract (or extended warranty) is available through dealerships and holds them responsible if your car blows a gasket, if the engine warning light comes on, if the brakes fail, or the car exhibits any number of other faults within the time period specified by your service contract.
Read the details of your service contract carefully so you know what is covered and what is not.
Signing The Deal
If you’re in the position of paying cash (lucky you!), keep that to yourself when shopping at a dealer. In other words, don’t tell the sales people you’re using cash. They often earn hefty commissions on car loans, and if they know they won’t be personally benefitting, they may be less helpful negotiating the deal. Only tell them at the very end of sale that you’ll be paying with cash.
Do your best to negotiate a good deal. Straighten your shoulders and speak with authority. Don’t cave and accept the advertised price immediately. Instead, offer a figure that is lower than your target price, then edge up little by little. For example, if the asking price is $10,000 but your ideal purchase price is $9,000, you might offer $8,500. The seller might make a counteroffer with a price of $9,500.
Keep working to lower the price. Eventually, you may settle for a price of $9,200 – a compromise between the seller’s starting price and your ideal purchase price.
Don’t be afraid to take up too much time, or to even walk away if you get flustered or feel pressured by the sales people. You can always go back the next day.
Did I Get A Good Deal?
There is no measure or definition of a good deal. If you’ve done all your homework and know beyond the shadow of a doubt you are getting a serviceable vehicle, and the vehicle you want, consider it a good deal. As long as you feel that the price is fair, you’ve done your best to negotiate a fair deal. Good job!
Paperwork
Always sign and retain a bill of sale for the car you are purchasing. The bill of sale should include the date of sale, the make, model, year, and VIN of the vehicle, the current odometer reading, and the sale price. It should also include your name, the seller’s name, and each of your addresses.
Get the title from the seller of the vehicle. Laws regarding the vehicle title vary from place to place, but generally, both you and the seller will be required to sign the vehicle’s title. With the title, in hand, you officially own the vehicle.
By following these steps outlined, the car buying process can be utterly painless! At the end of the day, the best rule of thumb we can give you is not to make an impulse purchase. Do your research and put some serious thought into how much you can realistically afford to spend on a car.
Investing Simple is affiliated with Fundrise and Betterment. This relationship does not influence our opinion of these platforms.
As investors, we have countless options when it comes to the platforms we use to invest our hard earned money. Over the past decade, thousands of different investing and trading platforms have emerged. It can be very overwhelming to the average investor looking to make an informed decision. This is one of the main reasons why we started our blog Investing Simple. We help investors decide which platforms may fit their investment style and personal preferences. In this post, we are going to review and compare two prominent platforms; Fundrise and Betterment.
Fundrise vs Betterment
What Is Fundrise?
Fundrise is a new investing platform that allows everyday investors to invest in private real estate projects traditionally limited to high net worth individuals or accredited investors. Using the Fundrise real estate investing platform, you have the ability to have investment exposure to both commercial and residential real estate. Here is our full review of the Fundrise investment platform.
How Does Fundrise Work?
Fundrise is a crowdfunded real estate investing platform. Similar to real estate investment trusts or partnerships, all the investors pool their money together to purchase real estate assets. These assets then produce income and/or growth and historically have provided investors with a positive return on their portion of the investment over time.
Real estate is traditionally a high barrier to entry investment, but crowdfunded real estate platforms like Fundrise have allowed average retail investors to get exposure to this asset class. You can get started with Fundrise with as little as $500!
Fundrise takes a new approach to the traditional Real Estate Investment Trust (REIT) structure. Through the use of technology, Fundrise makes it easy to fund your account, check in on projects and choose your portfolio. By leveraging a new regulation, Fundrise gives the average investor access to commercial and residential real estate with as little as $500.
The Fundrise platform offers a variety of benefits such as low account minimums and quarterly redemption periods. However, investors should understand the liquidity and time horizon of an investment in the Fundrise platform. We will discuss this in further detail throughout the article.
Fundrise Real Estate Projects
Fundrise offers plans to invest in different types of real estate such as income producing rental properties or growth oriented real estate developments. Fundrise offers different investment plans based on your investment objectives. You can keep track of Fundrise real estate projects within your account. Fundrise will also notify you about major developments with their projects.
Fundrise Project Addition
The main investment objectives of Fundrise are to generate revenue from income producing properties as well as buying and selling real estate in thriving markets. As a Fundrise investor, you can choose whether you want to be in a growth-oriented portfolio or income-oriented portfolio. Income from rental payments and proceeds from flips are passed along to Fundrise investors in the form of dividend payments or distributions. In exchange, Fundrise collects a 1% fee as the investment manager.
It is important to understand that Fundrise is a private real estate investment. The Fundrise eREITs and eFunds can only be bought and sold through this platform. They are not publicly traded on a stock exchange like a publicly traded REIT.
Fundrise Investment Options & Portfolios
Fundrise allows you to choose from four professionally built real estate portfolios based on your risk and investment preferences. Some portfolios are geared towards cash flow and others focused on the growth of the underlying assets. If you invest the minimum of $500, you will be placed in the starter portfolio. The other three advanced plans require a minimum investment of $1,000.
Fundrise Portfolio Options
Starter Portfolio: This portfolio is designed for new investors who would like to give Fundrise a shot. The minimum account requirement is only $500 to begin investing. This portfolio consists of 50% growth and 50% income-oriented holdings. If you want to upgrade to an advanced plan down the road, it is completely free!
Supplemental Income: This portfolio is geared toward income-producing real estate. Investors will earn returns primarily through dividends from cash flow producing real estate. Dividends are generated through rental and interest payments in proportion to your share of the fund.
Balanced Investing: This portfolio offers a blend of 50% growth and 50% income-oriented investments. The balanced investing portfolio invests in a blend of eREITs and eFunds offered by Fundrise. The goal for this portfolio is for a balance of income-generating real estate, as well as real estate that is appreciating in value.
Long Term Growth: The goal of this portfolio is to generate returns primarily from asset appreciation. This portfolio aims to purchase high growth potential real estate and generate returns mostly from the sale of the underlying properties. This includes buying property and performing renovations in order to sell the asset for a gain later.
Fundrise Technology: eREIT & eFUND
Each portfolio consists of eREITs and eFunds designed by Fundrise. These investments are set up as real estate investment trusts or partnerships and they are managed by Fundrise.
An eREIT will produce income for your portfolio in the form of dividends. Dividends are earned from the rent payments from the underlying apartment and commercial leases owned within the eREIT as well as interest payments from underlying real estate debt investments owned by Fundrise. An eFund is a partnership created by Fundrise to be treated differently for tax reasons and to provide greater investment flexibility. Partnerships have the advantage of avoiding the double taxation of normal C-Corps. eFunds are designed in a similar way to eREITs where there is a pool of real estate investments split into shares and sold to investors. Where eREITs are designed to generate income, eFunds are geared towards growth.
Fundrise Investment Liquidity
Fundrise uses the funds you invest to purchase real estate. For this reason, there is a 60 day waiting period for withdrawing funds. There are also quarterly redemption periods. This is why it is important to understand what you are investing in when you invest with Fundrise. Investors should aim for a long-term investment of at least 5 years in duration when investing with Fundrise. Real estate is not an investment with high liquidity and it is not for everyone! It is important that investors understand that liquidity and distributions are never guaranteed.
Fundrise Historical Returns
Past performance does not guarantee future returns. All investing involves risk, including the potential loss of principle.
Fundrise Historical Performance
Fundrise Fees
Fundrise charges a fee of 1% per year. They do not charge any other hidden fees and there is no front load fee with Fundrise. The returns shown above are the returns after Fundrise collects the 1% fee.
Pros of Investing With Fundrise
The minimum to get started with the Starter Portfolio is $500.
Small retail investors are able to access private real estate investments.
Since this is a non traded REIT, it may be less correlated with the overall market.
Fundrise has a transparent fee of 1% per year.
This investment allows you to earn compound interest, with the option of automatically reinvesting quarterly dividends using a drip (Dividend Reinvestment Plan).
Fundrise does not have a minimum net worth or income requirement like most private investment funds do.
This is a 100% passive real estate investment.
Fundrise gives you diversified exposure to real estate.
Fundrise supports retirement accounts.
Monthly redemption periods eliminate the temptation for panic selling.
Cons of Investing With Fundrise
Liquidity is never guaranteed. During a downturn, liquidity may not be available as many investors will rush to sell and buyers may be few and far between.
Distributions (dividends) are never guaranteed.
Distributions (dividends) are taxed as ordinary income rather than capital gain rates.
Fundrise has a limited track record of four years and not a long investment history.
Fundrise: The Bottom Line
In most cases, Fundrise is a great platform for passive investors who are looking to gain access to private real estate markets. Fundrise is also a good option for investors who are looking to diversify asset classes and have less correlation to the overall stock market. Since you can only liquidate your positions quarterly, investors may be less tempted to actively trade in and out of positions. You can also automate your dividend reinvestment plan, allowing compound interest to build up in your account. In most cases, Fundrise is best for investors with a minimum 5 year time horizon. Real estate is not a highly liquid investment and inexperienced investors need to take this into consideration. While Fundrise does offer a 90-day satisfaction guarantee, you should not invest if you have a short-term investing mentality. Click here to get started with Fundrise!
What Is Betterment?
Betterment is an online roboadvisor geared towards everyday investors who want automation of their investments paired with personalized financial advice. Through the use of technology, Betterment is able to offer management fees that are extremely competitive compared to the industry average. Refined investing strategies such as tax loss harvesting and smart rebalancing are some of the many features offered by Betterment.
Betterment Home Page
Betterment also offers ongoing financial guidance. Depending on the plan, investors can have unlimited access to professional financial advice from CFP® professionals. Since Betterment and its professionals are fiduciary advisors, they must act in the clients best interest at all times. Betterment advisors have no incentive to sell products or funds hoping to make a commission off your purchase. A fiduciary duty is the legal obligation to act in the clients best interest at all times and is the highest level of customer care in the investment advisor community.
A robo advisor is a new technology based financial advisor that advises clients and manages accounts with minimal human interaction. This is capable through the use of algorithms and technology. Financial advice is provided based on mathematical rules and programs. This results in a lower management fee and significant cost savings for the investor.
How Does Betterment Work?
Each Betterment account is tailored to the needs of the individual investor. When you open an account with Betterment, you will be guided through a questionnaire where Betterment will learn more about your goals and objectives. Here is the process for every new investor using Betterment:
1. Learn about the investor. Using a series of questions, Betterment determines your current financial landscape. By understanding your goals, time horizon, and personality Betterment gets an overall picture of where you currently stand and what you are trying to accomplish financially. 2. Make recommendations. Once Betterment has an understanding of your overall financial picture, they will guide you through a path customized to your specific situation. Betterment will suggest portfolios geared towards your risk tolerance, time horizon, and investment objectives. 3. Invest using cutting edge technology. Using personalized portfolios of stock and bond ETFs, investing is streamlined so you don’t need to worry about the management of your investments. Betterment’s portfolios are focused around minimization of both investment fees and taxes.
Betterment uses exchange-traded funds (ETFs) to build the portfolios. ETFs are investment vehicles similar to mutual funds, but they trade on a major exchange like a stock.
ETFs have grown tremendously in popularity over the last 20 years in the investment community due to the low fees and high liquidity. ETFs provide diverse positions where one fund could be trading at $50 per share yet it can have hundreds of underlying holdings. ETFs allow you to invest in many different asset classes such as stocks, bonds, real estate, and commodities. By using ETFs, Betterment can construct cost-effective and diversified portfolios with ease.
Most of the ETFs in Betterment’s professionally built portfolios are from the Vanguard fund company. Vanguard is one of the most well known mutual fund and ETF companies. Known for very low fees and the invention of the index fund, Vanguard has dominated the fund industry with over $5 trillion in assets throughout its funds. Betterment uses Vanguard funds mostly because of their low expense ratios and excellent reputation.
Vanguard Logo
Here are some of the Vanguard funds included throughout Betterment’s portfolios: VTI – US Total Stock Market VTV – US Large Cap Value VOE – US Mid Cap Value VBR – US Small Cap Value VEA – Developed International VWO – Emerging Market Stocks
Betterment also includes a number of bond funds offered by Vanguard. Each Betterment portfolio will consist of a collection of stocks and bonds.
Betterment also offers custom portfolios constructed by Goldman Sachs. The Goldman Sachs Smart Beta portfolio aims to provide a diversified portfolio strategy using a balance of actively and passively managed investments. Active portfolio management typically has the goal of beating the market, often associated with hedge funds and mutual funds. Passive management has the goal of generating market returns over the long term. Index investing and buy and hold strategies are associated with passive management. Goldman’s Smart Beta uses a variety of factors to determine investment allocations across its portfolio. Some of these factors include equities consisting of good value, high quality, strong momentum and low volatility characteristics. Contrary to traditional portfolio allocations that are based on market cap weighted indices, Smart Beta uses a variety of rules based factors that determine allocations across the portfolio. The Smart Beta portfolio using a rules based methodology has a goal of beating the market over the long term.
Smart Beta Factors
Betterment also offers a professionally built portfolio created by BlackRock. The BlackRock Target Income portfolio is a 100% bond portfolio with the goal of capital preservation. This may be an ideal portfolio for someone who is looking for an income producing investment strategy versus a growth oriented strategy. This portfolio has no exposure to the stock market but can fluctuate in value as interest rates change. BlackRock strategically looks to provide higher yields by investing in long term bonds as well as higher risk bonds in this portfolio.
BlackRock Target Income Portfolio
What Are The Betterment Fees?
Betterment has a strong focus on minimizing fees and expenses to investors. Betterment specifically chooses ETFs that have some of the lowest expense ratios. Betterment has no trading fees and no markups on prices. The only fees Betterment charges is a management fee of 0.25% to 0.40% depending on the investment plan. This fee structure is extremely low compared to traditional advisors and stock brokers.
Betterment Premium
Betterment Digital
Management Fee
0.40%
0.25%
Minimim Balance
$100,000
$0
Automated Rebalancing
Yes
Yes
Tax Loss Harvesting
Yes
Yes
Unlimited Access CFP Professionals
Yes
No
Account Types
Taxable, Traditional IRA, Roth IRA, Trust
Taxable, Traditional IRA, Roth IRA, Trust
Betterment has recently made changes to its pricing structure. All account balances greater than $2M will be given a 0.10% marginal discount for the portion of their balance above $2M. Previously accounts with balances over $2 million had their fee cap out at $2 million so any assets above that amount would not be charged a fee. Betterment will continue to honor the $2 million fee cap for all existing Betterment customers, even if their current balance is less than $2 million.
For Betterment Digital, customers will pay 0.15% for the portion of the balance above $2,000,000.
For Betterment Premium, customers will pay 0.30% for the portion of the balance above $2,000,000.
Pricing as of 9/18/2018
Balances up to $2,000,000
Balances over $2,000,000
Digital
0.25%
0.15%
Premium
0.40%
0.30%
What Are The Features Of Betterment?
Financial Planning: Betterment Premium offers unlimited access to financial professionals. These professionals will assist you by making recommendations on how much to invest and provide guidance on asset allocation within your portfolio.
The Premium Plan also includes detailed advice on investments held outside of Betterment. Betterment Digital offers algorithm based financial planning with no human involvement. All Betterment plans offer some level of portfolio guidance.
Betterment Premium Financial Experts
Smart Rebalancing: Betterment offers smart rebalancing of your portfolio. This is offered to both premium and digital investors. Rebalancing of a portfolio should happen when your target weights of assets gets skewed.
For example, if you have a portfolio of 60% stocks and 40% bonds and the stocks increase in value. Now, you may be weighted at 70% stocks and 30% bonds. To tone down risk and return to your target allocation, you should rebalance and sell stocks and buy bonds to return to your 60/40 stock bond allocation.
Betterment’s version of smart rebalancing makes sure your positions are in their right allocation at all times. Tax Loss Harvesting: Betterment offers a feature called tax loss harvesting which aims to minimize your taxes on capital gains. Betterment does this by selling securities that have underperformed in your portfolio and realizing a capital loss. This loss can be used to offset capital gains or ordinary income up to $3,000 per year.
Once the loss is realized, Betterment then purchases a similar security to replace the one you just sold in your portfolio. This way you avoid any wash sales which occur when you realize a loss on a security and purchase it back within 30 days. The government identifies wash sales in order to prevent tax loss harvesting. This tax loss harvesting is something that separates these automated platforms like Betterment from the traditional investment options. Betterment also has the functionality of implementing tax loss harvesting across your accounts as well as your spouse’s accounts. Spousal tax loss harvesting will allow you to optimize your tax minimization strategies on one tax return.
Betterment Spousal Tax Loss Harvesting
Tax Coordinated Portfolio: Betterment uses a method of asset location to construct tax coordinated portfolios. This is accomplished by putting your highest taxed assets in your IRA first (where you have a tax shelter) then putting your lower taxed assets in your taxable brokerage account. Betterment claims this strategy could boost your return by 0.48% each year. You can set up a tax coordinated portfolio at any time on Betterment for no additional fee outside of the asset management fee. Smart Saver: As interest rates remain extremely low in the current economic environment, interest rates on savings accounts are virtually non-existent. Betterment offers a solution to this issue by offering an alternative to a savings account.
The Betterment smart saver account yields 2.20% annually. This is significantly higher than most savings accounts. Betterment offers this feature while still providing liquidity. According to Betterment, you will have access to your funds in 4 to 5 business days.
Betterment Smart Saver
Smart Deposit: Betterment offers a feature called smart deposit that will allow you to set a minimum amount of cash you would like in your bank account. Once your minimum is set, any amount above your minimum will be sent to Betterment and invested.
Say you set your bank account minimum at $5,000. Once your bank account balance is over $5,000 smart deposit will transfer any funds over this threshold to Betterment. Smart deposit in Betterment will allow you to maximize your invested capital while retaining a safety net in your bank account. Retire Guide: This is a retirement planning tool offered by Betterment. You will input your current savings, projected budget, and retirement date to get a picture of where you stand in reaching your retirement goal.
Retire Guide will show you how to save, what accounts to utilize, and recommend any changes you need to make to reach your goal. This allows you to have an understanding of your projected financial position and budget when you retire. Fractional Investing: Betterment also offers a unique feature called fractional investing. Fractional investing allows an investor to buy fractional shares of an ETF. For example, if you want to buy VTI which is trading at $150 per share and you only have $100 you could buy .67% of a share using Betterment’s fractional share investing. The advantage of using fractional shares allows an investor to be fully invested at all times. Fractional shares also provide for greater diversification as you will have more precise allocations across your portfolio at all times.
What Are The Pros Of Betterment?
Passive investing. Betterment is a set it and forget it investing platform. You do not need to worry about account maintenance. Betterment takes care of everything.
Automation. The entire investment process can be automated. You can automate contributions to your account that will automatically rebalance your portfolio upon contribution. Your investments are on autopilot!
See the big picture. Betterment allows you to link up all of your investment accounts and get an idea of what all of your investments are doing in one place.
Fiduciary responsibility. Betterment advisors are held under the fiduciary duty standard. This is the highest standard in the investment advisor community. This means the advisor is legally required to act in the client’s best interest at all times. Remember, this in person advisement is only offered through Betterment Premium.
Low fees. Betterment focuses on minimizing fees for investors. They do this by selecting low-cost ETFs that have low expense ratios and leveraging technology.
No minimum. You can open a Betterment Digital account with any amount of money. Betterment Premium requires a balance of $100,000 or more.
What Are The Cons Of Betterment?
No direct indexing. Some other investment accounts offer direct indexing or stock level tax loss harvesting. This is typically reserved for accounts with $500,000 invested or more. This allows direct ownership of individual stocks, not funds, which allows for more tax loss harvesting opportunities. Betterment does not offer this feature.
Too passive for some. If you are interested in being active in your selection of stocks or ETFs, Betterment is not for you. Betterment is for passive investors.
Limited to stocks and bonds. Your asset allocation is limited to stocks and bonds. You cannot invest in other assets like real estate or commodities through Betterment. It is important to note however that Betterment has stated that these assets added no value to portfolios that they tested.
Betterment: The Bottom Line
Betterment has revolutionized the brokerage industry through the use of technology. This has significantly lowered the barriers to entry to receiving high quality financial advice. Traditionally, you would need thousands if not tens of thousands of dollars to invest with an in-person financial advisor.
Now, you can get started with a robo advisor like Betterment with any amount that you have. Betterment is a long term investing platform for passive investors. If you are interested in short term trading, individual stock ownership or DIY investing Betterment is not for you. Click here to get started with Betterment!
Fundrise vs Betterment
Fundrise and Betterment are both very different investing platforms. The Fundrise platform gives you the ability to invest in commercial and residential real estate. With a minimum balance of $500 to open an account, Fundrise gives the average investor an opportunity to invest in assets typically limited to high net worth individuals. By using technology and offering a user-friendly experience, Fundrise remains very transparent about any project developments or updates to their portfolios.
Betterment, on the other hand, offers a robo advised investing experience with the goal of creating a broad portfolio of stocks and bonds. The Betterment platform offers some of the most valuable investment features available today. Smart rebalancing, smart deposit, smart saver and advice from securities professionals are just some of the features that create tremendous value for investors.
When comparing the two platforms it is important to understand what your goal is as an investor. If you would like to own growth or income-producing real estate on a dynamic user-friendly platform, then Fundrise may be a good option for you. Fundrise gives you the ability to invest in real estate projects without having to outlay a huge amount of capital. If you are an investor with the goal of building a broad portfolio of stocks or bonds, then Betterment may be a great option for you. Betterment is one of the most dynamic robo advisors available today.
Let’s face it. Saving money sucks. It’s not fun, it’s not cool, and it’s not easy. No one likes a cheap-skate right?
Regardless, saving money is important. It enables us to live the life we dream of and achieve the freedom we so desire.
But first, a story.
Delaying Gratification
Nearly 60 years ago, Walter Mischel and his team of Stanford psychologists, performed one of the most popular studies ever.
Here’s how it went.
Mischel tested hundreds of young children. The kids were told that they could either eat a marshmallow now or wait 15 minutes to receive two marshmallows. Then, the researcher would leave the fluffy dessert on the table and leave the room.
As you can imagine, the video footage of the kids is quite entertaining. Fidgeting, squirming, staring at the marshmallow.
The study seems innocent, but over a decade later, the results of the famed Marshmallow Experiment were eye-opening. The kids who delayed gratification and received two marshmallows went on to get better SAT scores, had lower levels of drug and alcohol abuse and were even healthier.
Further, the researchers followed up with the test subjects over 40 years later and the results were the same. The ones who delayed gratification as children were more likely to succeed in life.
Why do I tell this story?
Well, it’s the same way with money. By delaying gratification, we set ourselves up for success. At times, it is difficult to see this. But if we know “why” we need to save, it can helps us to actually do it.
As the philosopher Friedrich Nietzsche once said, “He who has a why to live can bear almost any how.”
I’d like to alter that a little, “He who has a why to save can bear almost any how.”
Here’s why you need to start saving now.
The Why Of Saving Money
The #1 investing secret is time. Not elaborate trading strategies or insane amounts of research. It’s time.
Let’s run through a scenario.
Picture this: Phil and Todd are new college graduates and best friends. They both end up getting great jobs at the same investment bank right out of school.
However, Phil knows about the power of compound interest so he saves as much as he can during the first year of work. Todd, on the other hand, doesn’t really care because it isn’t interest-ing (pun intended).
After expenses, Phil saves almost $11,000 during the first year, $10,733.80 to be exact. Todd doesn’t save anything because it is too difficult (he would’ve eaten the marshmallow immediately).
Phil puts $10,733.80 into the stock market. Todd, well, he just bought a new car.
Fast forward 30 years, both guys are 53 years old. Phil hasn’t put a penny more into the market since that first year after college. On the other hand, Todd wakes up one night in a sweat. He realizes he hasn’t thought about retirement at all. He was too busy trying to impress everyone with lavish vacations, European sports cars, and a ritzy zip code.
So he buckles down and decides he needs to start saving and investing as soon as possible. He makes quite a bit of money so he starts socking away $20,000 a year. And he does this for the next 20 years. In total, he saves $400,000.
Fast forward another 20 years, and both guys are 73.
Who do you think came out ahead?
Phil who put less than $11,000 dollars in the stock market? Or Todd, who saved and invested $20,000 a year for 20 years?
If both men received the same 10% returns over time, the results actually come out as a tie. Well, Phil will be 5 cents poorer.
Phil’s total at 73: $1,260,049.94 Todd’s total at 73: $1,260,049.99
Phil’s amount put into the market: $10,733.80 Todd’s amount put into the market: $400,000
Phil’s Results:
Todd’s Results:
There is so much financial advice circulating in the news and on blogs and on TV, but this lesson is really the only one you need to grasp. Be Phil, not Todd. In finance, rather than counseling, time heals. Let time do its thing.
But this can only happen if you start saving. NOW.
The more you save, the younger you are, the better off you will be. It’s that simple. The power of compound interest will take care of the rest. So now that we can see the “why” of saving money, let’s dive into the “how.”
The How Of Saving Money
Here is the part of the article where we zoom in and break the problem down into actionable steps so we can make daily progress.
Not to be Captain Obvious, but the key to saving money is not spending it. We’ll give some tips and tricks, but fundamentally, it’s that easy. Spending fewer dollars than you make is the only way money will accumulate.
Let me preface this with something important. There is more to life than money, so if you find yourself extremely miserable with no friends because you are doing so well at saving money, maybe you need to tone it down.
Ok, got that off my chest…
Let’s skip the chit-chat and dive right in. Here are eight underrated ways to save money.
1. Don’t eat out.
Eating out is fun and it is enticing. But it adds up. Eating 3 times a week at Chipotle could put you back about $30. Over a year, that’s $360. Nothing to sneeze at. As an added bonus, if you learn to cook, you can save money and have exactly the food you want.
2. Make your own fun.
A lot of times, we spend money on experiences; going out to the movies, bowling and
whatever else sounds fun. But there are so many ways to have a good time without spending money. We can play sports, games, or explore. Creativity wins you extra points!
3. Care less about what people think.
If you need to have the latest gadgets and the coolest shoes, you might not be cut out to save a lot of money. The good news is you can change. At the root of buying stuff for ourselves is caring too much what people think of us. We try to impress them by buying nice things. You know what is more impressive? Being kind and caring about people, not what they think.
4. Look for deals.
If you must spend money, make sure to do a little research to get the best deal you can. Some people take this really far and become professional coupon clippers (I kid you not). One about buying cheap stuff is that it can actually be a worse deal in the long term if it doesn’t last. Keep that in mind.
5. Walk or ride a bike more places.
Gas is a big expense, especially if you live in a city. While it may be impractical to ride your bike everywhere, try to do it whenever possible. You’ll get in great shape and save money in the process.
6. Be single.
I’m joking… partly. If your significant other guilts you into spending inordinate amounts of money on them, it might not be the healthiest relationship. While it’s unlikely you’re looking for relationship advice here, this can be a tell-tale sign. Your significant other should like you for you, not your money.
7. Don’t carry around cash.
Cash is dangerous because it is so easy to spend. Since you don’t see your bank account
number go down, it feels like Monopoly money. Instead, deposit all cash into your bank as soon as possible. By doing this, you will increase the friction it takes to spend money lowering the odds you will actually do it.
Some will find that it is actually BETTER to spend cash! By seeing the money leaving you hand, it gives you a better idea of how much money you are spending. Try them both and see which strategy works for you.
8. Increase your income.
Often, most financial blogs get into the nitty-gritty of saving money like we’ve done here. An underrates way to save more money is to keep your spending habits the same but make more money. You can do this by hustling (washing cars, cleaning, helping out), learning and implementing new skills, or investing smarter. By starting your own little business, you can make a nice chunk of change. You can walk dogs, do website design, cater, sell products online and so much more. It doesn’t have to be elaborate, just start something and learn as you go.
Conclusion: Final Thoughts
Though saving money isn’t fun, it will change your life. If you can wait for two marshmallows, you will increase your odds of living the life of your dreams exponentially.
One other tip that has worked well for myself and others is coming up with a monthly budget. Simply writing your expenses out on paper can help you to realize exactly where it is going!
Delay gratification. Remember “the why.” Be Phil, not Todd. And try out these eight tips for saving money.
You’ll be on your way to becoming a millionaire before you know it. If you’ve read all the way up until this part, it shows you really care about this. So I’d put my money on you!
Happy Saving,
Ryan Reeves
Ryan Reeves is CEO and founder of Investing City, a blog to help people invest better.
This article is a guest post from the blog Stoj Finance.
This list will provide you with some of the most popular and highly regarded investment books of all time. They will provide you with knowledge that will help you to invest with confidence. You will learn how Warren Buffett achieved average annual returns of 20.9% versus 9.9% for the market over a 50 year period. You will also learn how Benjamin Graham was able to achieve returns of 14.7% annually versus 12.2% for the market as a whole from 1936-1956 and much more.
Many of these books are dated. However, their principles and strategies remain relevant today. I have personally read all the books listed. I would not allow myself to provide you with a book recommendation without personally evaluating and assessing each book and the value contained within. We will begin with my favorite book, by Benjamin Graham.
Book #1: The Intelligent Investor: The Definitive Book On Value Investing
Author: Benjamin Graham
The Intelligent Investor is widely regarded as one of the best investing books of all time. Despite its original 1949 publish date, the information contained within is still relevant today. To quote Warren Buffett, it is “By far the best book on investing ever written.” This book covers areas of investing including: The past century of stock market history, general portfolio policies to follow, how you should interpret market fluctuations and much more. It provided me with the knowledge needed to independently select stocks with confidence.
As the name of the book would suggest, Graham employed a value investing approach. He pursued stocks which he believed were worth more than their current market quotation would suggest. Essentially, he would buy stocks trading at $0.50 that he believed had an intrinsic value of $1.00. This strategy awarded him with above average returns over his career (as discussed below), while providing safety of principle for himself and his clients.
Benjamin Graham, the author, was an extraordinary person. He attended Colombia Business School on a scholarship. (Colombia Business School currently holds the #7 position worldwide for its MBA program). Graham graduated from Colombia as the salutatorian of the class at the young age of 20.
As mentioned previously, he gained at least 14.7% annually for his clients versus 12.2% for the overall stock market. This became known as one of the best long-term track records in history. Warren Buffett, one of Graham’s most successful students, originally developed his investment philosophy around the principles Graham advised. Here is a resource for more information about how to invest like Graham.
The Warren Buffett Way provides an insight into Buffett’s investment techniques and practices. It is a great read and if you would like to learn more about Warren Buffett and his investment methodology, there is no better place to look. Originally published in 1994, it contains updated accounts to ensure the contents remain relevant today.
Containing forewords from some of the greatest investors of all time, this is an essential book for new investors. That list includes Howard Marks, co-founder of Oaktree Capital Management (a global asset management firm with over US$122 billion in assets under management) and Peter Lynch, former mutual fund manager and philanthropist who averaged returns of 29.2% annually between 1977 and 1990.
The Warren Buffet Way is a comprehensive investment resource and Hagstrom has provided us with an in-depth insight into Buffett’s investment career. It details how he was able to turn $100 in 1957 into a personal net worth of over $80 billion today. Buffett is known for his impressive record of returns throughout his investment career. From 1964-2017, his holding company, Berkshire Hathaway, achieved average annual returns of 20.9%. Versus 9.9% (including dividends) for the S&P 500.
Hagstrom has provided us with an in-depth insight into some of Buffett’s largest and most significant investments and their outcomes. Companies such Coca-Cola and The Washington Post are included. Hagstrom has also explored less common areas of investing, including behavioral finance and the mathematics of focus investing.
The Warren Buffett Way will give you an insight into the techniques and strategies employed by one of the most successful stock market investors of all time.
The author, Robert G. Hagstrom, is the chief investment strategist and managing director for Legg Mason Investment Counsel. He has also authored other investment books including “Investing: The Last Liberal Art” and “The Essential Buffett: Timeless Principles for the New Economy.” This is a great buy for value investors and belongs on every serious investors shelf at home.
Common Stocks and Uncommon Profits, originally published in 1958 and much like The Intelligent Investor, is a comprehensive investment resource. This book is a more compact guide on stock market investments. It contains topics including Fisher’s illustrious “scuttlebutt” strategy, what stocks to buy, when to buy and when to sell. The book also outlines how to apply Fisher’s ideas to suit your own needs.
Common Stocks and Uncommon Profits is by no means a simple guide to stock market investment. More advanced stock selection strategies are explored within this text. This book alone has provided me with the knowledge needed to begin investing in the stock market employing a growth stock approach, which will be explored further below.
Fisher’s investment philosophy was quite different to Graham’s. Fisher took what I call a growth stock approach. He purchased companies with a strong likelihood of increasing their earnings in the future. Consequentially, increasing their market quotation. Typically, “growth stocks” pay minimal if any dividend.
Fisher’s “scuttlebutt” strategy was based on the belief that every piece of information about a company should be exploited. This is to provide you with the highest level of knowledge about a stock before making a purchase.
Fisher would go to great lengths to learn more about a company before making an investment. He is known to have contacted current and former employees, suppliers and even top-level management of the company under consideration. To quote Fisher: “When it comes to selecting growth stocks, the rewards for proper action are so huge and the penalty for poor judgement is so great that is it hard to see why anyone would want to select a growth stock on the basis of superficial knowledge.” Now, a little bit about Fisher.
As featured on the back cover of the book, Phillip A. Fisher started his career as a securities analyst in 1928. He later founded Fisher & Company, an investment counseling business in 1931. He is known as one of the pioneers of modern investment theory. Fisher is reported to have made his clients extraordinary investment gains over his career and managed the company’s affairs until his retirement in 1999 at the age of 91.
Book #4: Unshakeable: Your Financial Freedom Playbook
Author: Tony Robbins
Unshakeable, published on February 28, 2017, is one of my favorite personal finance books. Not only is it a New York Times best seller, 100% of the profits from the book are donated by Tony Robbins to Feeding America.
The stock market is not the primary focus of this book, however there are certainly chapters directed towards stock market investment. Tony will teach you how to properly allocate your assets, explain why index funds are preferable over managed funds and teach you how to navigate through crashes and corrections in the market.
This is more than just a finance book. You will also learn how human behavior and psychology can negatively affect your investment returns, as well as how to combat those innate vulnerabilities that have been hardwired in all of us as humans. Seen on the back cover of Unshakeable: “No matter your salary, your stage of life or when you started, this book will provide the tools to help you achieve your financial goals more rapidly than you ever thought possible.”
Tony is an American author, entrepreneur, philanthropist and life coach. He is known for his infomercials, seminars and self-help books including Unlimited Power and MONEY: Master the Game. He is the founder of several companies that earn approximately $6 billion in annual sales. If you are looking for a book that encompasses more than just the field of investing, but the financial industry, this is a must buy.
I have been a full time online entrepreneur since June of 2017. Since I was old enough to have my own computer, I have been trying different methods for making money online. The idea of pulling money out of thin air by using the internet has always fascinated me.
My early ventures for making money online were not successful. I would guess that I have tried and failed at close to a dozen different online businesses. Thankfully, I have now found a few money making ideas that have actually worked for me. The good news is, none of them involve a rich prince sending you money through email!
I will be sharing those with you now as well as money making ideas that have worked for close friends of mine!
So, let’s get into it!
If you prefer watching videos, here you go…
1. Start A YouTube Channel
You know that phone sitting in your pocket? Or the one you are reading this article on? Well, that phone has a camera and a mic. Did you know you can make some serious money as a YouTube personality?
I have been doing YouTube videos since October of 2016 and it is hands down my favorite way to make money online. It does require you to put yourself out there, but if you have an outgoing personalty and thick skin, this could be a great way for you to make money online.
What you need to understand is that there is a massive amount of effort involved with building an audience on any platform! In fact, it took me over 7 weeks to get my first 100 subscribers on YouTube.
Once you build a large following, the money to be made is honestly unbelievable. One of my friends, Graham Stephan, put together a video showing his YouTube earnings.
Here is how much money you can make on YouTube…
2. Affiliate Blog
And now, we move on to my second favorite method for making money online! A lot of people think that blogging is dead, but that could not be farther from the truth. Blogs have been around for a very long time, and I do not see them going away anytime soon.
When I am talking about starting up a blog, I am not talking about a blog where you write about your day and include what food you ate. What I am referring to is an authoritative, niche specific blog.
Take our blog here for example. Investing Simple is a niche specific blog that covers personal finance and investing. I don’t write articles about avocado toast or my vacation to Vancouver. I create engaging blog posts about money, personal finance, investing, credit score and a variety of other topics!
You can make money from a blog in a number of different ways, but my favorite method is affiliate marketing. To explain this simply, you get paid for making referrals to purchase a product or a service.
If you want to learn more about affiliate marketing, check out our 5,000 word guide on affiliate marketing for beginners!
Again, building up a successful blog requires a lot of hard work. Take Jeff Rose for example. He has a personal finance blog Good Financial Cents that he has been building for the last 10+ years! While he does make a lot of money with this blog, he has invested thousands of hours into content creation.
Here is a great video by Jeff Rose on how to make money with a blog…
3. Make Money On Instagram
In June of 2018, I purchased an Instagram account called Investing Simple. Included with this package was a blog called Investing Simple as well. That is how I came to acquire this brand and start this blog!
Now, a lot of people might be wondering why I would purchase an Instagram account. When I tell them I paid close to $10,000 for it, they think I am a complete nutcase! The truth is, there are a lot of different ways to make money with an Instagram account.
P.S. don’t forget to follow @InvestingSimple on Instagram!
I make money with this page in a few different ways. First, paid shout outs. Brands and influencers will pay me to post something on my feed or story. Second, affiliate marketing. I refer traffic to brokerage companies through swipe up stories and earn a commission in the process. Third, I refer traffic to my blog. Most of the traffic for this blog comes from the content I share over on the story of Investing Simple!
There are countless ways to make money on Instagram. Earlier this year, I did an interview with Josue Pena over on my channel. He runs an Instagram marketing agency that is bringing in over $100,000 a month!
Check out that interview here…
4. Review Products You Already Own
Are you a guitar aficionado? Do you know a lot about headphones or kitchen gadgets? One of the best ways to make money online is to review products that you already own and are using. Believe it or not, you are probably an expert at a certain category of products. What if you could review these products, talk about what you like and don’t like about them, and make money in the process?
Now, let me take this a step further. What if you could partner up with Amazon, refer sales to them and earn a commission in the process? Amazon pays thousands of people just like you and me for referring traffic to the online store. If someone makes a purchase within the 24 hours that you sent them, you earn a commission!
This is known as the Amazon Associates Program. When I first started making money online, this was one of the first avenues I explored. I got out my camera, filmed reviews of products that I already owned and was knowledgeable of, and uploaded them to YouTube!
Now, I didn’t make a killing with this but it was a great learning experience for me. I still make money through Amazon Associates, primarily by recommending books. If people purchase a book through my link, I earn a commission!
If you aren’t comfortable with getting in front of a camera to film a product review, you could create a review blog instead! One of my close friends Odi Productions created a headphone affiliate blog known as Recording Now. On this blog, he reviews headphones and recording equipment and refers sales to Amazon. Easy money!
Here is a pretty comprehensive video I did talking about Amazon affiliate links…
5. Do Gigs On Fiverr
I am sure we have all heard of this money making idea before. You post gigs on Fiverr and earn $5 (hence the name “Fiverr”) in the process. Here’s where it gets interesting though… there are a lot of people charging more than $5 for their professional services on Fiverr!
I’ll admit, Fiverr does not have the best reputation. I have purchased gigs before where the quality was very poor, but at the end of the day you get what you pay for. I have also spent $200+ on gigs before that have been exceptionally good! As someone who spends $500 or more a year on freelancing gigs on Fiverr, I can tell you that there is a lot of money to be made on this platform.
You might have to start out charging just $5 for your gigs in order to get some reviews, but once you have a dozen or so reviews you can increase your price! As you build trust with the community on Fiverr, a higher price for your gig is justified.
Fiverr Pro Banner
In fact, for top freelancers there is Fiverr Pro. Some of these gigs go for $1,500 or more! If that doesn’t get you motivated to post some freelance gigs on Fiverr, I don’t know what will. Go ahead and make some money!
Are you a good writer? The truth is, most of us aren’t! Personally, I feel that I am much better on my YouTube videos. I do enjoy writing though, so I write one or two articles a week for the blog.
So who writes the rest of these articles? Currently, I have two creative writers working for me! That’s right, even if you are the worst writer in the world you could still have your own blog by leveraging the talent of other people. Or, if you are the greatest writer in the world, you could have others pay you to create content for their blogs!
Here is a tip; the more specialized you are, the more you will earn!
If you are a expert in a certain field, and a great writer, that is a winning combination. Sites like Upwork and Fiverr allow you to post gigs or services for hire. People looking for creative writers often start their searches at these two sites!
Looking to brush up on your writing skills? Here are some great tips…
7. Virtual Assistant
In every business, there are some tasks that you enjoy doing and some that you absolutely hate doing. For me, one of the tasks that I hate doing is SEO optimization of my blog. Thanks to the internet, I was able to hire someone from across the country to handle the SEO for my blog!
This individual is known as a “VA” or a virtual assistant. These virtual assistants have become a vital part of the way online businesses are run today. Ask anyone running an ecommerce business. Most of them would not be able to do it without a team of these virtual assistants working for them behind the scenes!
Your strength is someone else’s weakness. Become a virtual assistant and help business owners with the day to day tasks behind the scenes!
8. Public Notary
Now, this isn’t technically an online business but you can advertise this business online. One of the easiest ways that you could make some extra money on the side is to become a public notary.
There are a number of different sites like 123 Notary that allow people to find a public notary in their area. Some of these are paid listings while others are completely free!
Most notaries are charging between $40 and $60 for their services. In order to be a notary public, you have to pay a fee for testing and pass an exam. Here is more information!
9. Sell An Online Course
Investing Simple is affiliated with Teachable.
Ready to demonstrate how to write the perfect resume? Knit a sweater? Read tarot cards? Buy a car? Balance a checkbook?
If you are an expert at virtually any topic, you could package that knowledge up into an online course and sell it to others! This was one of my largest sources of income in 2018. The way that people are learning things is changing. More and more people are looking to learn new skills online!
Setting up the curriculum will take some time, as will marketing your course, but once it is up and running you will be able to earn passive income based on the number of students that enroll.
Course Creation Companion By Ryan Scribner
Ryan Scribner, one of the blog authors, offers a free course all about building a successful online course or membership site. You can enroll here!
This is one of the best ways to make passive income. Once the course is completed, you just collect the payments! Hosting sites like Teachable will handle the rest. There are countless examples of people who are making $100,000 or more with an online course.
Take Tai Lopez for example. In this video, Tanner J. Fox estimates that he does close to $90,000,000 a year in revenue from his online courses and coaching!
10. Create A Membership Site
On the topic of creating an online course, another great option is to create a membership site! Some things are better taught through a course while others are better taught through a membership site. With a membership site, you charge members a set fee on a recurring monthly or yearly basis.
Let me give you an example. Let’s say you were creating an educational program that shared healthy cooking recipes. You would be better off creating a membership site, as you would be regularly adding more content and sharing new recipes.
Sites like Teachable allow you to create a membership site with ease. One of the best parts about membership sites is that you have a general idea of how much you will be making each month!
11. Being A Flipper Or Reseller
In my opinion, this is one of the EASIEST ways to make some extra money online. The concept is really simple. Purchase items that have high resale value and resell them on sites like eBay!
Think about college textbooks for example. Most college students are not going to take the time to create an eBay account, take photos of their textbooks, list them on eBay, package and eventually ship them out. What if you were able to purchase textbooks from college students in cash and resell them online? By putting in the extra work, you could easily make a 20% profit margin or more as a reseller!
Another example of this is picking items at thrift stores like Salvation Army and Goodwill. Simply go to these stores with your smartphone and scan items to see what they are selling for on eBay. Most people working at thrift stores have no idea what these items are worth. Since they are donated, any amount they can get is profit. It is easy to find money making flips at thrift stores.
A third way you could do this is by going to garage sales. Again, people just put arbitrary prices on their unused items. Find items with high resale value and flip them!
Here is a video of Gary Vaynerchuk (shocking, right?) talking about how to make money online as a flipper…
12. Coaching, Tutoring Or Consulting
This money making method has been around for a very long time. If you are an expert in a certain field, you can make money teaching others. You might be saying to yourself that you have no skills that you could teach, but you don’t have to know as much as you think!
Consider college or high school students for example. If you excelled at a certain subject in school, you could simply tutor students in this subject! Don’t feel like leaving the house? Simply do this over Skype or Zoom.
13. Ecommerce
The way people are buying things is changing. Actually, let’s be honest, it has already changed. Young people in particular are doing more shopping online than ever before. Amazon Prime subscriptions are now more common than a landline telephone in a household in the United States.
Thousands of people are taking advantage of this trend by getting involved with ecommerce. This could be selling items on Amazon, creating your own store on Etsy or dropshipping on Shopify! There are countless ways to make money online.
One of the most popular ways to make money online these days is by dropshipping. Essentially, you are selling products that you are never putting your hands on. You build out a website, run ads to get traffic to the site and then fulfill the order.
For example, many people are creating a Shopify store where they can sell products from AliExpress. Keep in mind that it will take weeks if not months for products to ship from China, so you want to be transparent about this on your site!
A better way to dropship is to ship the products to the United States first and pay for fulfillment services. This will significantly reduce the shipping time.
Dropshipping Explained, Oberlo
14. Run Facebook Ads For Businesses
One of the BEST opportunities today in my opinion for making money online is to learn how to run Facebook ads. Digital advertising is going nowhere but up as more and more businesses ditch traditional advertisement methods each year. The truth is, digital advertising like Facebook ads is just more effective.
Take a billboard for example. If you put up a billboard and spend $5,000 on it for a month, you will get thousands of eyeballs on that ad a day. But how many people are actually interested in your product or service? With this type of traditional advertisement, there is no way to determine who is looking at your ad or who followed through with it.
With Facebook ads on the other hand, you can build audiences of EXACTLY who you want viewing your ad. On top of that, you can also determine how many people clicked the ad and followed through with a meaningful action on your site. The opportunities with Facebook ads are endless!
So, why should you care? Even if you are not a business owner yourself, you can help business owners by setting up Facebook ads for them! Business owners should be focused on one thing; running the business! They don’t have time to worry about testing, running and optimizing Facebook ads.
Check out this interview I did with Kevin David to learn more…
15. Create And Sell An Ebook
This is one of the old school methods for making money online, but it still works today! Personally, I prefer making online courses (money making idea #9) as the profit margins are higher. You can still make some decent money selling ebooks though!
Selling paperback books is annoying. Who wants to deal with physical products these days? Selling a digital product like a course or an ebook is a great way to earn passive income. Once you take the time to create the ebook or course, you just keep on selling it!
Personally, I have never tried this. The Writing Cooperative put together a great guide on how to sell your first ebook. Check it out here!
16. Build ClickFunnels Funnels
Back in November of 2018, I hosted my first live event in Dallas, Texas. Now, I am not telling you this to brag. The reason why I am sharing this is because I had to use ClickFunnels to create a sales funnel for that event!
After an agonizing hour of trying to figure out this platform myself, I went on to a Facebook page for ClickFunnels and put up a post in search of someone who could build a funnel for my event. I found someone relatively quickly, and he agreed to build us a sales funnel for $200.
It took him about a day, but that was easy money.
If you are well versed with programs like ClickFunnels, you can get paid good money to simply build funnels for other people! All you have to do is simply advertise your services for free in Facebook groups or online forums.
Here is a video Kevin David did that talks about how to make money with ClickFunnels…
17. Build Manychat Autoresponders
This idea is very similar to #16, but there is another new program out there that is extremely useful to small businesses and influencers. Manychat is an automated messenger bot for Facebook Messenger. As open rates for email marketing efforts continue to decline, services like Manychat are becoming more popular.
If you become an expert at building these messenger bots, you could advertise your services in Facebook groups, forums or reach out to businesses and influencers directly and offer to help them set up this powerful tool!
Here is a Manychat tutorial for those of you that are interested…
18. Get Free Traffic From Quora
For those of you who already know what Quora is, skip this paragraph. For those of you who don’t keep reading! Quora is an open forum where people can both submit questions and answer questions for others. Let’s say, for example, I was looking for some ideas to make money online! I could go on Quora and submit a question that says “What are some ways to make $100 a day online?” and other people could answer. (Hint: this is actually a question I answered on Quora!)
But… why should you care?
Believe it or not, Quora can serve as a great source for free traffic to your site or business! Let me run you though a example. Let’s say you have a consulting business (money making idea #12) where you help small business owners with staffing. You could go on Quora and find questions that are already out there that you could answer!
On Quora, you are allowed to include links to your own site, your LinkedIn and even your email. You want to make sure your posts are extremely valuable, otherwise you will get flagged as spam.
So, in case you aren’t connecting the dots, here is the run down. First, you find questions in your niche being asked by people on Quora. Then, you answer those questions adding a tremendous amount of value. Finally, you add your contact information at the bottom where people can learn more about you.
And BOOM! Now, potentially thousands of people could read your answer. If done correctly, this could generate free leads for your business or free traffic for your site.
19. Invest In The Stock Market
Okay, I know this one is a stretch, but there are thousands of people out there making $100 a day or more on average through the stock market. One of the most common ways is through dividend income. Dividends are payments to shareholders that are typically paid out on a quarterly basis.
Consider a stock like AT&T. This is a company that currently pays a dividend of around 7%. That means for every dollar you invest in this company, you will get back seven cents a year in the form of dividend payments. Now, it is important to remember that dividends are never guaranteed. However, companies like AT&T have been paying dividends for decades, so it is a pretty sure bet.
AT&T Stock (T) 6.89% Dividend
In order to average $100 a day from dividend income, you would need to be earning $36,500 per year. Assuming AT&T continues to pay a dividend of 7%, an investment of just over $500,000 would earn you that income. While that probably sounds like a lot of money for most readers, that is a great goal to aim for long term! Dividend income is one of my favorite methods for making money because it is completely passive. You simply invest in a real company and collect a portion of their earnings!
And finally, we have this old school method for making money online. While open rates on email marketing activities are getting lower and lower, there is still potential to make money here. In order to build an email list, you need to offer something of high value for free. Typically, this is some kind of free guide or course.
Once you build up an email list, there are countless ways to make money with it. You could leverage affiliate marketing, sell your own course, sell a membership site or sell your own online coaching services just to name a few examples!
Email marketing is a great addition to an existing online business. There are very few businesses that I can think of (actually, none!) that would not benefit from ongoing contact with their customer base.
Closing Thoughts…
Every year, there are more and more ways to begin making money online. The best piece of advice I can give you is to find one thing that you enjoy doing and stick to it! Those who dabble with different money making ideas often have “shiny object syndrome” where they constantly jump from one idea to another. There is no secret out there when it comes to making money online. The closest thing to a secret that I can come up with is that money is made by sticking to one thing for a long time. Have patience and see the long term vision for what you are building!
Ask your parents, and they will probably recall how, back in the day, credit card companies used to set up tables on college campuses, handing out free logo T-shirts or water bottles to undergrads who signed up with them on the spot for student credit cards. This kind of easy access to credit was great news for some, but it got tons of college kids in the fast lane speeding toward substantial debt that would take decades to overcome.
Legislators stepped in and changed finance laws, stamping out those free-for-alls, and these days, the opposite is the case. Students, or anyone under age 21 now have a difficult time getting approved for a credit card.
But don’t give up! There are ways to get your hands on your first ever credit card that won’t require jumping through (too many) hoops.
P.S. If you are totally new to credit, check out our free guide here!
Is The Timing Right?
Getting your first credit card is pretty much a rite of passage from your younger years into your 20s. There’s no exact time set in stone to apply for a credit card, but keep this in mind: you want to be at the stage of life where you won’t go wild and charge up a storm! And also…. you need to have the financial means to pay off the balance of the card monthly. That’s the only way to avoid interest charges (and God forbid, late penalties).
Happy 21st Birthday! Now, go apply for a credit card!
In most cases, you need to be at least 18 to even qualify to apply for a credit card. And if you’re under 21, you will likely need a cosigner on your credit card application. Federal laws require that people under age 21 must have verifiable income before they can be approved for a credit card without a cosigner. Sadly, a monthly stipend from your parents, aka an allowance, doesn’t count. You must have income from a paying job, at least part-time employment.
But if you have enough independent income or savings to show that you can, all on your own, pay off debt, you may be able to swing a credit card in your name.
After you blow out those 21 candles, credit card restrictions aren’t as tight. You will still need to demonstrate a regular income, independent of parents or other adults, but you can include any income you have, including part-time jobs, commissions and side hustles.
Here is a great video by The Credit Card Maestro that talks about getting your hands on your very first credit card…
Why Do You Need A Credit Card?
Paying with cash is a great way to curtail your spending. Studies have shown that paying for purchases with cold hard cash makes people think twice about buying pricey items, because it’s harder to part with $20 bills than simply swiping a plastic card.
One thing cash doesn’t offer is a chance to build up your credit history. Credit cards are a great way for you to begin building a solid credit history so that you can eventually qualify for a mortgage, a car loan, or even funds to launch business you’ve been itching to start up.
If you’ve never had a credit card or any type of loan in your name, you’re considered high-risk because you have a credit score of 0. In most cases, you need at least six months of payment history to be eligible for a credit score.
Here’s a quick rundown: credit scores generally fall within a range between 300-850. For most adults, their score weighs in between 600 and 750. A score of 700 or above is considered good. Score 800 and up, and you’ve earned a gold star and the status of excellent.
Credit Score Rating
Just like most things in life, the higher your score, the better. A high score gives lenders confidence that you make good credit decisions and they’re not taking a gigantic risk approving a loan.
Credit scores are tracked by banks that approve or turn down mortgage loans, car dealerships financing your next vehicle, insurance companies and even potential landlords.
A healthy credit score means you’re more likely to be approved for loan, and has an added benefit of boosting your chances of securing an interest rate that doesn’t send chills down your spine.
If you’re looking for more perks, like rewards points or cash back on purchases, it’s also imperative to have a flourishing, well-established credit history.
The length of time (in years) that you’ve been building credit also works to your advantage. A good rule of thumb is to shoot for two to four years of sound credit management to build confidence in lenders and have them give the green light to your loan application. In most cases, you need three things to get a credit card: a Social Security number (or taxpayer identification number), the ability to pay the credit card bill and, at the very least, a fair credit score.
As tempting as it may be to fill out as many credit card applications as you can get your hands on, it’s wiser to pick and choose. Read the small print and compare benefits. Research which financial institutions are known for approving first-timers. Doing the homework will benefit you in the long run by giving you a faster stamp of approval on your application.
Where To Get Your First Credit Card
Maybe your mailbox is already full of interesting offers from credit card companies prominently featuring flashy perks such as a great introductory rate, money or travel rewards, whatever they can dream up to entice you to choose their card. In the small print, you’ll find the important details such as fees, interest rates and finance charges.
Here’s what you’ll likely find out there…
1. Major Credit Card Issuers
If you’re enrolled in college, there’s a good possibility of getting approved for a student credit card from a major credit card issuer. But don’t assume every card with ‘student’ in the name is a good deal. Some student credit cards are notorious for having high-interest rates and weighty annual fees, both of which put the cards low on the list for a manageable first credit card. Again, read the small print and do the research before jumping in. Once you have settled on a few credit card companies to try, you’ll want to study the terms carefully.
Some answers you’ll want to look for include: Does the card come with an annual fee? What is the annual percentage rate (APR)? Is there an introductory rate? How long does it last? What happens if you pay late? What kind of late fee will you pay? Will your interest rate sky rocket if you miss a payment?
Another tip: look for cards that are accessible to people with moderate to limited credit history. Some credit card websites list the type of credit history needed to get approved. For first timers, seek out credit cards that accept applicants with little or no credit. This doesn’t necessarily mean you’ll be automatically approved, but you stand a better chance. Don’t bother with applications for credit cards requiring excellent credit; you won’t make it in the front door.
2. Your Bank
If you’ve had a long-term checking or savings account and kept the balance steady, consider applying for your first credit card at your bank. You’re a known risk to your bank, and this works well to your advantage by upping your chances of getting a credit card application approved. Of course, it should go without saying that your bank account’s history should be free of overdrafts, otherwise known as bounced checks.
You can apply online, or take the high road and go visit your local bank branch to meet in person with a customer service rep who may have more authority to get your application approved in a more timely manner.
3. A Retail Or Department Store
Retail and department stores are notorious for having fast and easy credit card approval. But on the flip side, they have high-interest rates that make it expensive to carry a balance from one month to the next. Another downside of these cards is they aren’t versatile—you can only use them in that store. That limits what you can buy, of course, but opens the door on a spending spree ignited by deep discounts for first-time users.
Be cautious about retail credit cards, but that doesn’t mean they can’t be used to your advantage. Show a regular history of paying off your balance monthly, and that store card could help you build up a good enough credit history to apply for a major credit card.
If it turns out your credit card applications are all denied, don’t despair. Even people with well-established credit histories are sometimes rejected. It can help you to find out why you were denied via the letter you receive that notes the specific reason. This can guide you to form an action plan for your next step.
4. Secured Credit Card
When your short or non-existent credit history prevents you from getting a standard credit card, go ahead and apply for a secured credit card. With a secured credit card, you make a deposit in your bank account that’s typically equal to the amount set as your credit limit.
This allows credit card companies to gamble less on your ability to make your payments because you pay a deposit to secure your line of credit. The deposit sets your credit limit, i.e. if you put down $1,000 that’s the ceiling for your line of credit.
To establish good credit using a secured credit card, you’ll want to make all your payments on time and use as little of your available credit as possible. The best practice is to use less than 30 percent of your total credit limit or, even better, less than 10 percent. So do the math and keep your balance at a very low ratio compared to your limit.
Make it your game plan to buy smaller purchases on the secured card and pay off the bill in full when it’s due. That’s right, pay the entire balance and make sure it’s on time. Seems simplistic, but if you’re tempted to charge a new wardrobe, splurge at the healthy food market or charge tickets to a summer concert, you’re going to struggle to pay off the balance when the first of the month rolls around.
This is an excellent habit to foster as you move on in life if you plan to use credit. Paying in full means zero interest charges and paying on time spares you hefty late fees.
5. Find A Cosigner
You’ll need to find someone with an established credit history over the age of 21 (mom and dad come to mind) to cosign credit card applications for you in case you miss payments.
Keep in mind if you do pay late, you’re not only risking your stellar relationship with the parental units, you’re also messing with their credit score. Any late or missing payments will be reflected on their score and it will take a good amount of time for them to get it back on track.
6. Become An Authorized User
This option also gives you a way to tap into the healthy credit history of another adult over 21. As an authorized user, you’ll carry a credit card with your name on it, but it will be connected to the other adult’s account.
When you and the other adult use the card wisely, it will reflect on both credit histories. After about a year of on-time payments, you will have achieved a decent credit score and be in a much better position to apply for your own card.
The Bottom Line On Credit Cards
As is the case with everything in life, moderation is key. Use your credit card responsibly. Squelch the urge to over-spend by making only small purchases that you can easily pay off at the end of each month. It’s good practice to sign up for email or text reminders or enroll in auto-pay. Keep all these tips in mind and soon you’ll be proud to have an excellent credit rating that will set you up for a sound financial future.
What’s the first thing that comes to mind when you hear the word wealth? Money, yachts or watches? In the normal sense of the word, you wouldn’t be wrong. But my challenge in this post is primarily to change your perception of wealth as well as set you on the path to create wealth in the other areas of life. (I’ll leave the financial part to my friends here on Investing Simple!)
In an effort to alleviate any dismay, you should take comfort in knowing that much of the process experienced through financial investing is the same for investing in yourself and developing non-monetary wealth.
“Wealth is the ability to fully experience life.” – Henry David Thoreau
If you’re reading this blog, you already recognize the importance of investing. It is truly an invaluable skill in this game we call life in order to get and stay ahead. It requires the understanding of delayed gratification, exercising patience and skill over a prolonged period of time. All of these are valuable traits which are sorely missing from our society. Simply by being aware, you are ahead because you then have the choice of taking action. After all, you don’t know what you don’t know.Just as you research and carefully select investments, you must educate yourself in the areas which you seek to pursue.
Our first distinction being rather obvious, monetary wealth, extends to all that can be bought. Materialistic possessions include luxury vehicles, watches, clothes and beyond.
Non-monetary wealth refers to all that cannot be bought, touched or felt. Instead, these are things that are experienced, felt and cherished. A few examples of this are memorable life experiences, wisdom, knowledge, health or significant relationships.
Wealthy In Health
The wealth in health is incomparable to that of monetary riches simply because without it nothing else is possible. What good is all the money in the world if you can’t enjoy it?
Let me begin by saying that for any of these categories, it all begins with a choice. You need to make a choice to be wealthy in health. A healthy body, mind and spirit is an intentional habit that must be developed throughout time. You yourself know exactly what you need to do.
It’s the things you’ve been telling yourself you need to work on, but that you’ve been putting off for a while. Make the choice to take action on it. If you know you need to improve your diet, then add those vegetables and reduce the fast food. You most likely know what foods are healthy and which aren’t, and if you don’t, Google it!
Has the exercise been inconsistent, or worse, non-existent? Take the first step and educate yourself on the fundamentals or develop an exercise routine if you’re ready and follow it! It is important to keep in mind that health doesn’t only extend to your physical body, but also to your emotional, social, psychological and perhaps spiritual body. It’s important to develop these areas as well!
Wealthy In Health
Wealthy In Love
How would you rate your friendships? Are you satisfied with your current relationships with your significant other or family? If you’re like me (cold and distant at times) then you most likely need to work on this aspect of your life. We live in the most connected time in history, and yet we are also at our loneliest. You may have more than a thousand friends on Facebook, but how many of those would help you in a time of need? How many would support you through an emotionally difficult time?
I used to be focused on quantity versus quality, however upon self-education through books and experiences, I reversed my objective and gained so much more value from three or five closest friends that I knew I could depend on.
Do you call your parents enough? When was the last time you went on a proper date with your significant other? Put in the effort to strengthen your relationships, because we never know when our time here may be up. I know it may seem macabre to think about the end, but coming to terms with our ultimate fate makes life much more beautiful and worthwhile.
So many times we get caught up in the monotony and tedious day to day life, but just like happiness cannot exist without sadness, and light cannot exist without darkness, life cannot exist without death. But there is beauty in that. Train yourself to see it every day.
Perhaps most importantly, love yourself, because it all begins with you. It is rather unfortunate that we can be so harsh to ourselves at times. Most of the time, we are our own worst critic and while this can be healthy in some aspects such as a project or work, it can quickly become toxic if you continually put yourself down.Learn to love yourself and I am positive you will find tremendous value in doing so!
Wealthy In Love
Wealthy In Happiness
What was your first conscious thought this morning? Did you dread the alarm clock? Did you make getting up a chore? Did you notice it yet? So much of life and YOUR happiness is truly in what YOU make of it. Believe me when I say your thoughts are more powerful than you think. But what is stronger; you or your thoughts? It’s an interesting concept isn’t it? So often we believe we are our own thoughts, but are we? Thankfully, we are not. But you could be if you keep thinking like that!
Who controls you? Your thoughts, your emotions or do you control them? I used to believe that happiness meant you would forever be free of troubles and achieve everlasting bliss. Fortunately, nothing could be further from the truth. The reason why I say fortunately is because if it truly was like that, being the humans that we are, we would quickly grow weary and bored just like we do with anything familiar. You think laying on a beach every day watching the ocean wouldn’t get boring?
The truth is that happiness is a conscious choice you make every day and you can start right now. Gratitude is my key to happiness. It’s easy to be grateful when things are going well and all is right with the world (which is still a great time to be thankful) but the character building times are of course when things are not going well.
When something (you perceive to be) undesirable occurs, do you blame others, yourself or curse the world and the forces that be? Or do you instead say thank you either way and move forward? In the heat of the moment (and I struggle with this myself for now) it can be extremely difficult to be grateful. If you can break through that anger and sadness for just a split second, and think of being grateful and act on it, you can dissipate that anger quickly and turn your mind towards more fruitful thoughts.
Wealthy In Happiness
Perception Is Reality
In conclusion, I sincerely believe that one should not be an extremist in life but should rather implement all tools throughout life in a balanced manner. It isn’t about one being necessarily more important than the other, but about being in harmony and living a well-balanced life.
Spending too much time working and making money? There’s nothing wrong with pushing yourself to reach a goal, but at what cost? Neglecting your family and friends? Too much of anything is bad.
I truly believe the path to becoming wealthy in these areas is through self-examination and reflection. As Socrates once famously stated, “The unexamined life is not worth living.” Sit down and really evaluate these different areas in your life and improve upon the ones which are lacking.
This is truly only an introduction into various topics we could discuss for days. Do yourself a favor and invest in yourself, your education, your relationships, your health and your happiness!
Most of these habits are simple, but not easy. They’re just as easy to do as not to do them and therein lies the trouble. But because you’re already trained to look past the immediate future, you should have a head start!
I hope you make the powerful realization throughout your journey that all these habits create a powerful positive cycle which can turn into a negative cycle simply by lack of action. Taking care of your health gives you more energy, which can result in working on a side project or investment to build up your monetary wealth. This frees up time you could spend with family and building relationships thereby increasing your happiness and fulfillment in life. Now, think of the opposite and ask yourself which life are you living?
If you’re interested in learning more about the topics discussed here, I delve into these on my website Prestige Defined focusing on the four pillars I consider to be crucial in life:Health, Wealth, Love & Happiness.
Thank you for your time and I hope you make the decision to invest in yourself in order to improve your life in the long-term!
Investing Simple is affiliated with Fundrise and LendingClub. This relationship does not influence our opinion of these platforms.
As investors, we are always trying to diversify our portfolios. Diversification can be a key factor in long term success as an investor. Many of us tend to diversify across core asset classes such as stocks and bonds. For those of us looking for alternative investments to the stock market, there are a variety of different options. In this article, we are going to review and compare two very popular alternative investments; Fundrise and LendingClub.
Fundrise vs LendingClub
What Is Fundrise?
Fundrise is a new investing platform that allows everyday investors to invest in private real estate projects traditionally limited to high net worth individuals or accredited investors. Using the Fundrise real estate investing platform, you have the ability to have investment exposure to both commercial and residential real estate.
Here is our full review of the Fundrise investment platform.
How Does Fundrise Work?
Fundrise is a crowdfunded real estate investing platform. Similar to real estate investment trusts or partnerships, all the investors pool their money together to purchase real estate assets. These assets then produce income and/or growth and historically have provided investors with a positive return on their portion of the investment over time.
Real estate is traditionally a high barrier to entry investment, but crowdfunded real estate platforms like Fundrise have allowed average retail investors to get exposure to this asset class. You can get started with Fundrise with as little as $500!
Fundrise takes a new approach to the traditional Real Estate Investment Trust (REIT) structure. Through the use of technology, Fundrise makes it easy to fund your account, check in on projects and choose your portfolio. By leveraging a new regulation, Fundrise gives the average investor access to commercial and residential real estate with as little as $500.
The Fundrise platform offers a variety of benefits such as low account minimums and quarterly redemption periods. However, investors should understand the liquidity and time horizon of an investment in the Fundrise platform. We will discuss this in further detail throughout the article.
Fundrise Real Estate Projects
Fundrise offers plans to invest in different types of real estate such as income producing rental properties or growth oriented real estate developments. Fundrise offers different investment plans based on your investment objectives. You can keep track of Fundrise real estate projects within your account. Fundrise will also notify you about major developments with their projects.
Fundrise Update Email
The main investment objectives of Fundrise are to generate revenue from income producing properties as well as buying and selling real estate in thriving markets. As a Fundrise investor, you can choose whether you want to be in a growth-oriented portfolio or income-oriented portfolio. Income from rental payments and proceeds from flips are passed along to Fundrise investors in the form of dividend payments or distributions. In exchange, Fundrise collects a 1% fee as the investment manager. It is important to understand that Fundrise is a private real estate investment. The Fundrise eREITs and eFunds can only be bought and sold through this platform. They are not publicly traded on a stock exchange like a publicly traded REIT.
Fundrise Investment Options And Portfolios
Fundrise allows you to choose from four professionally built real estate portfolios based on your risk and investment preferences. Some portfolios are geared towards cash flow and others focused on the growth of the underlying assets. If you invest the minimum of $500, you will be placed in the starter portfolio. The other three advanced plans require a minimum investment of $1,000.
Fundrise Investment Portfolios
Starter Portfolio: This portfolio is designed for new investors who would like to give Fundrise a shot. The minimum account requirement is only $500 to begin investing. This portfolio consists of 50% growth and 50% income-oriented holdings. If you want to upgrade to an advanced plan down the road, it is completely free! Supplemental Income: This portfolio is geared toward income-producing real estate. Investors will earn returns primarily through dividends from cash flow producing real estate. Dividends are generated through rental and interest payments in proportion to your share of the fund. Balanced Investing: This portfolio offers a blend of 50% growth and 50% income-oriented investments. The balanced investing portfolio invests in a blend of eREITs and eFunds offered by Fundrise. The goal for this portfolio is for a balance of income-generating real estate, as well as real estate that is appreciating in value. Long Term Growth: The goal of this portfolio is to generate returns primarily from asset appreciation. This portfolio aims to purchase high growth potential real estate and generate returns mostly from the sale of the underlying properties. This includes buying property and performing renovations in order to sell the asset for a gain later.
Fundrise Terminology: eREIT And eFund
Each portfolio consists of eREITs and eFunds designed by Fundrise. These investments are set up as real estate investment trusts or partnerships and they are managed by Fundrise. An eREIT will produce income for your portfolio in the form of dividends. Dividends are earned from the rent payments from the underlying apartment and commercial leases owned within the eREIT as well as interest payments from underlying real estate debt investments owned by Fundrise. An eFund is a partnership created by Fundrise to be treated differently for tax reasons and to provide greater investment flexibility. Partnerships have the advantage of avoiding the double taxation of normal C-Corps. eFunds are designed in a similar way to eREITs where there is a pool of real estate investments split into shares and sold to investors. Where eREITs are designed to generate income, eFunds are geared towards growth.
Fundrise Investment Liquidity
Fundrise uses the funds you invest to purchase real estate. For this reason, there is a 60 day waiting period for withdrawing funds. There are also quarterly redemption periods.
This is why it is important to understand what you are investing in when you invest with Fundrise. Investors should aim for a long-term investment of at least 5 years in duration when investing with Fundrise. Real estate is not an investment with high liquidity and it is not for everyone!
It is important that investors understand that liquidity and distributions are never guaranteed.
Fundrise Historical Returns
Past performance does not guarantee future returns. All investing involves risk, including potential loss of principle.
Fundrise Historical Performance
Fundrise Fees
Fundrise charges a fee of 1% per year. They do not charge any other hidden fees and there is no front load fee with Fundrise. The returns shown above are the returns after Fundrise collects the 1% fee.
This investment allows you to earn compound interest, with the option of automatically reinvesting quarterly dividends using a drip (Dividend Reinvestment Plan).
Fundrise does not have a minimum net worth or income requirement like most private investment funds do.
This is a 100% passive real estate investment.
Fundrise gives you diversified exposure to real estate.
Fundrise supports retirement accounts.
Monthly redemption periods eliminate the temptation for panic selling.
Cons Of Investing With Fundrise
Liquidity is never guaranteed. During a downturn, liquidity may not be available as many investors will rush to sell and buyers may be few and far between.
Distributions (dividends) are never guaranteed.
Distributions (dividends) are taxed as ordinary income rather than capital gain rates.
Fundrise has a limited track record of four years and not a long investment history.
Fundrise: The Bottom Line
Fundrise may be a great platform for passive investors who are looking to gain access to private real estate markets. Fundrise is also a good option for investors who are looking to diversify asset classes and have less correlation to the overall stock market.
Since you can only liquidate your positions quarterly, investors may be less tempted to actively trade in and out of positions. You can also automate your dividend reinvestment plan, allowing compound interest to build up in your account. In most cases, Fundrise is best for investors with a minimum 5 year time horizon. Real estate is not a highly liquid investment and inexperienced investors need to take this into consideration. While Fundrise does offer a 90 day satisfaction guarantee, you should not invest if you have a short-term investing mentality. Click here to get started with Fundrise!
What Is LendingClub?
LendingClub is a peer to peer lending platform that allows investors to earn interest in return for lending money to borrowers on the platform. You can choose which type of lenders to lend to and earn interest on a monthly basis.
Here is our full review of the LendingClub investment platform.
What Is Peer To Peer Lending?
Peer to peer lending takes a modern approach to the traditional bank loan. Traditional lending has been reserved for the banks for hundreds of years. Now, investors can get rid of the middleman and lend directly to borrowers. This allows investors to fund loans and earn principle and interest in return. It also allows borrowers to take out loans and make monthly payments on those loans. LendingClub acts as the exchange; its’ purpose is to connect lenders and borrowers. By enabling this mutually beneficial relationship, and creating the note structure, LendingClub collects a 1% investment management fee on any interest payment received by an investor.
Peer To Peer Lending Explained Simply
LendingClub Note Structure
LendingClub offers a wide variety of notes on their platform. Each LendingClub note is identified by its relative risk to the investor and rated from A to E. Notes rated A are of the highest quality and E being the lowest quality. A note’s risk is identified by a set of criteria such as credit score, debt to income ratios, credit history and activity of the borrower. The higher the risk, the higher the interest rate on the note. Therefore investors who take higher risk and invest in E grade notes will have the highest interest rates. Notes graded E also have the highest risk of losing part, if not all, of their investment.
LendingClub Note Risk Structure
It is recommended by LendingClub to invest in a number of different notes in order to diversify your exposure to a variety of different borrowers and lower your risk. We all have heard the saying, “don’t put all your eggs in one basket.” Investors may choose to invest in a variety of different notes with different risk aiming to lower the volatility and overall risk of their portfolio. If you are curious about the average returns on LendingClub, check out this article.
LendingClub Note Diversification
LendingClub Investing Strategies
When choosing the specific notes you would like to invest in, you have different options for investment strategies. LendingClub offers both manual and automated investments on their platform. You have the ability to manually select specific notes and perform any due diligence before investing in a single note. This is a good option for investors that are more hands on and would like to implement their own unique investment style. This manual investment strategy will allow you to hand pick each note.
LendingClub Manual Strategy
LendingClub also offers automated investing on their platform. You will select your investment criteria and risk tolerance and LendingClub will automatically purchase notes on your behalf. This saves the investor time and applies a consistent investment approach across your portfolio. This approach is geared towards the passive investor. Click here to get started with LendingClub as an Investor!
LendingClub Investment Time Horizon
LendingClub recommends investors plan on holding their investments until maturity. Currently, LendingClub offers two time horizons for their notes; 36 months and 60 months. Because there is greater risk in notes that have longer maturities, the interest rates are slightly higher for 60-month notes compared to 36-month notes.
You have the option to sell your notes before maturity on a secondary market, but liquidity is never guaranteed. That being said, you can buy and sell LendingClub notes to other investors on the Folio investing platform. This provides liquidity to investors and allows more flexible investing.
LendingClub Borrower Account Fees
There is no application fee for LendingClub, however there are often origination fees for borrowers. Borrows must pay up to 5% of the loan balance on the origination of the loan. These fees vary by the loan type and grade. Check with LendingClub to understand what origination fees may be involved. Investors do not pay these origination fees.
LendingClub Investor Account Fees
LendingClub has certain transaction fees when investing on their platform. There are no fees when purchasing notes, however there is a 1% transaction fee whenever you receive payment from a borrower. LendingClub also has fees when performing transactions on the Folio platform, the secondary market where you can sell notes you own. There is a 1% fee for selling any notes on Folio.
LendingClub IRA accounts have a $100 annual fee. LendingClub will pay your IRA maintenance fee on your behalf if in the first year you maintain a balance of at least $5,000 in LendingClub notes. In subsequent years you must maintain at least $10,000 in LendingClub notes to have the fee waived.
Pros Of Investing With LendingClub
LendingClub offers an alternative investment that may be less correlated to the stock market.
Lenders can achieve diversification by investing in a variety of different notes.
You can set up automated investing on LendingClub.
Exposure to an asset traditionally reserved for the banks.
Cons Of Investing With LendingClub
LendingClub charges a 1% fee for every payment received by an investor.
All LendingClub loans are unsecured, meaning there is a greater risk for lenders in the case of a default by a borrower.
All investment as at risk. Investors have no FDIC protection or guarantees of investment returns.
Any interest earned on LendingClub is taxed as ordinary income and not capital gains tax rates.
LendingClub: The Bottom Line
LendingClub allows investors to diversify by investing in an asset class traditionally reserved for banks. Because LendingClub is a private investment, shares or notes are not traded on a major exchange. As a result, this asset class may be less correlated to the overall stock market but may be less liquid if you’d like to sell.
One negative of investing in interest bearing assets such as peer to peer lending is that all interest is taxed as ordinary income and not at capital gains tax rates. If you plan on investing in LendingClub, you may want to consider investing in a tax sheltered retirement account. Click here to get started with LendingClub as an Investor!
Fundrise vs LendingClub
Alternative investments to the traditional stock and bond portfolio may be a good option for an investor trying to diversify their holdings. Both LendingClub and Fundrise can be good alternatives and provide investment exposure to different types of assets. In the end, you should be conscious of the risks and opportunities with each investment option.
LendingClub gives you the option to lend money to a variety of borrowers and earn interest on a monthly basis.
Fundrise, on the other hand, is a good option to gain exposure to the commercial and residential real estate markets with a small initial investment.
One of the core differences between Fundrise and LendingClub is the historical returns. Based on historical performance, returns on Fundrise range from 8% to 12% per year. On the other hand, returns on LendingClub range from 6% to 8% per year. It is important to remember that both Fundrise and LendingClub have a limited operating history. We hope to see returns like this going forward, but it is never guaranteed.
Another key difference is collateral. Through LendingClub, you are investing in unsecured debt like personal or medical loans. Through Fundrise, you are investing in secured debt where the real estate serves as collateral. If you are not comfortable with investing in unsecured debt, peer to peer lending is not for you!
Both LendingClub and Fundrise collect a 1% fee for managing your investments. The minimum to get started with Fundrise is $500 while the minimum to get started with LendingClub is $1,000.
