Category Archives: Guest Posts

What Stage of Financial Change Are You In?

If you choose to pursue financial independence and an early retirement, you will need to reject many of the popular, preconceived mindsets and behaviors that you’ve been taught about your relationship with money.

Over the past two decades, the average age at retirement has been increasing. Studies predict the average age of retirement for Millennials may reach 75 due to the growing costs of rent and prevalence of student loan debt.

The good news?

You don’t need to follow the same financial path as your peers (no matter what generation you were born in).

The “bad” news?

To reach retirement earlier than your peers, you will need to handle your money in a different way as well.

Pursuing financial independence will require self-education, practice, and persistence. You may or may not have the support of your friends, co-workers, and even family members… but you will need to make financial changes in your own life regardless of their own money habits.

In this post, you’ll learn more about the five stages behind every major life change, how these stages apply to your personal finances, and how you can use this model to stay committed on your journey toward financial independence.

The 5 Stages of Financial Change

In the academic world, the stages of change are more formally recognized as the “transtheoretical model of behavior change.”

This model was first proposed by psychology professors in 1977. The model is often applied to health-related changes, such as quitting smoking, starting a new exercise or diet plan, and managing anxiety and depression.

Here are the five stages:

    1. Precontemplation (not ready to change)
    2. Contemplation (considering change)
    3. Preparation (getting ready for the change)
    4. Action (making the change)
    5. Maintenance (reinforcing the change)

While you typically progress sequentially through the first four stages, it’s possible to “backslide” and revert to an earlier stage if maintenance is unsuccessful (breaking your diet during the holidays, for example).

This model not only applies to physical behavior changes but can also be applied to belief changes or decision-making as well.

Let’s take at how you may journey throughout these stages as you make significant changes in your financial habits.

Precontemplation

During the precontemplation stage, an individual is not seriously considering making a change. In fact, they may not realize that a change is necessary at all.

In the context of a health-related issue, a person in the precontemplation stage may assume they are totally healthy – perhaps unaware that their high cholesterol or blood sugar may already have them on a trajectory for a heart attack or diabetes down the road.

If you have just started your professional career, you may find yourself in the precontemplation stage of your retirement planning.

Perhaps you are contributing a small percentage of your 401k toward retirement each month. What you may not realize is that contributing just 5% of your salary is going to place you squarely in the “retire at 75” club.

To move out of the precontemplation stage may require a “financial epiphany.” This could be saving up to buy a house, preparing to have a child, or earning a salary for the first time. At this point, you’ll realize it’s time to make peace with your financial past so you can reach your goals.

Contemplation

The same year that psychology professors created the “model of behavior change,” film director Woody Allen was attributed in the New York Times for his popular quote, “Showing up is 80 percent of life.”

Just by “showing up” to read this post, you may have already progressed out of precontemplation into the next stage of behavior change: contemplation (surprise!).

During the contemplation stage, an individual is aware of their problematic behavior but are still weighing the pros and cons of change: Can I make time to exercise without hurting my career? Will my friends support me in my decision to quit smoking or drinking?

In a stage of financial contemplation, an individual may be considering their financial goals and the associated trade-offs.

  • Should we be focused on saving up a down payment for a home or paying down student loans instead?
  • Is it worth the inconvenience of downsizing our home or moving in with roommates to save additional money?
  • Can we commit to meal prepping for a few hours each Sunday night to reduce spending on lunch during the work week?

Preparation

An individual in the preparation stage has determined the pros of change outweigh the cons. At this stage, they may start performing research, creating a plan, or making small steps toward their improved for behavior.

If you are someone who wants to lose weight, your preparation might be purchasing a healthy cookbook, grocery shopping for nutritious foods, or signing up for a gym membership.

Many times, it’s tempting to skip from the contemplation stage directly into action (which we’ll discuss below). It’s important to spend time in the preparation stage to lay a framework for success.

You may have to remove barriers from your financial goals as well. This could involve learning more about debt payoff strategies, calculating your net worth to understand your current situation, or building a solid budget that organizes your finances.

Action

In this stage, individuals begin to actively change their behavior. This decision is often one of the shortest stages of change – most of the effort is either exerted in (1) building motivation during the contemplation the stage, or (2) maintaining and reinforcing change.

If quitting smoking is your health-related behavioral change, then the action stage would be the first few weeks of cessation. The behavior change requires consistent, active effort to make. You may be using aggressive strategies like substituting a new behavior in its place, rewarding yourself for the proper behavior, and avoiding any scenarios that trigger the old behavior.

There are many ways to take action and improve your personal finances. You may start scheduling recurring payments on your debt, setting aside an additional portion of your income with direct deposit, or creating a budget to keep yourself living within your means.

Maintenance

In a successful behavioral change, the maintenance stage will have the longest duration. The goal of the maintenance stage is to reinforce the new behavior to minimize the chances of a relapse. With time, the new behavior will become second nature.

It is not uncommon for individuals to relapse back to a previous stage. A successful behavior change will depend on how an individual responds to this situation:

Do you prepare yourself to eat healthily by going grocery shopping and planning your upcoming meals – or do you tell yourself that you’ll try again next New Year’s?

Financial independence is a long-term objective that requires maintenance as well. You may have to dip into your emergency fund to cover an unexpected expense. You might splurge and make an impulse purchase that falls outside your budget.

It’s important to avoid letting one setback justify additional bad behavior. Even if you aren’t perfect with your money, you can find ways to improve your finances each and every day.

How can you maintain your positive personal finance habits to minimize the impact of a setback?

  • Continue learning new financial principles with personal finance blogs and books
  • Surround yourself with like-minded individuals who share your goals and values
  • Be publicly accountable for your goals by sharing them with family and friends
  • Automate your behaviors with recurring transfers, payments, and direct deposits

Conclusion

To do something spectacular with your personal finances, you will need to adopt different beliefs and behaviors about money that may be different than your peers.

You can make this financial change easier by understanding the how the “stages of change” model applies to you and your personal finances, assessing your current status in the model, and finding ways to reinforce the right behaviors until our reach your goal.

No matter how long you’ve been focused on your personal finances – whether you’re just contemplating your goals or maintaining your progress – there are strategies you can use to make good financial behavior easier.

How do you stay committed to maintaining the positive financial changes in your life? 

Author Bio:

Aaron is a lifelong entrepreneur and internet marketer who started Personal Finance for Beginners to share experiences and insights from his own financial journey as he pays down student loan debt, sticks to a deliberate budget, and saves and invests for the future. You can find him at Personal Finance for Beginners or on Twitter @PFforBeginners.

Basic Economic Concepts for Consumers

 

Gone are the days when you just use to go out and shop with very little knowledge of what you are having, we use to have our faith on the salesperson but now, now there is a significant shift in our course of actions.

Modern customers know that the person guiding them about a particular product is getting paid to do what he does, he has to sell their product no matter what and here where people start to question that whether the product is worth buying?

Customers now are more familiar with their power than before and like to know about the dynamics of the product even without leaving home. Several reviews are there on the websites to help the people to make better judgments.

Following are the three concepts that I believe every consumer must be aware of for better economic understanding.

SCARCITY

As a human our needs are endless, one day we may be crying over no food at all, but another day when we have bread we would ask for eggs. The next day we would have eggs and bread, but we would find the milk missing, and this will continue until our own end. The list is never-ending, you may think it would end but it would not, that is how we human work.

The gap between our limited resources and our endless wants is known to be scarcity. Scarcity requires people to list down their needs and wants separately and then to figure out how to satisfy their needs first and only then their wants. British economist Lionel Robbins defined scarcity as

Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.

There is nothing free in this world. Take breathing as an example, we take breathing as free of cost but give it a good thought. We breathe in this air of industrial revolution with so many poisonous gases all around. These gases expose us to so many diseases that make us end up in a hospital bed, and we all are familiar with the bills that are charged by hospitals. So we end up paying for breathing too. Now as we understand that air is not free also, the government has another thing to invest into with the limited money to invest in. Here is where the government has to decide which thing should be given preference regarding investment.

DEMAND AND SUPPLY

The market works with this phenomena; demand and supply is the key to be found, and you have a properly functioning system to yourself. But make no mistake, a constant check and evaluation is a must.

What happens is manufacturers determine what their products’ demand is and then only they could know how much supply is needed. And the slight shift in the change of the supply can make a drastic difference to your product.

For instance, if you are the monopoly in rice manufacturing or as a group all you rice manufacturers decide to supply lesser rice for a period this will make your price boom in days as people will sense scarcity. But if one of you sells there product with the same or cheaper price than the traffic of customers from rest of the companies will flow your way hence, more demand for you more supply for them.

As shown in the figure, the increase in demand increases the supply and price and the decrease in demand decrease the supply and price

MARGINAL UTILITY

Marginal utility is one of the core concepts in economics because it helps the economist to determine the demand people have and supply producers have to make. The negative marginal utility is when the consumption of a product decreases, and the positive marginal utility is when the consumption of a product is increased.

This concept helps the economists to determine what things and ways people get happy and satisfied and how that affects their decisions for buying any commodity.

Economists also came up with the law of diminishing marginal utility. This phenomenon claims that the first unit of a product holds more utility for the consumer than the second one, like, when we feel thirsty and have a glass of water, we feel satisfied, the next unit of consumption gives us satisfaction but not as the first unit did. And if we keep on drinking, the pleasure will only turn into displeasure.

Economists’ claims that every individual wants to reach the highest level of satisfaction to get the total utility to make their purchase worth it but total utility differ from product to product and person to person.

For instance, maybe a shampoo brand is perfect for me, it makes my hair look good, but when I bought it for my daughter, she ended up with frizzy hair all day. Here I may love that brand but she did not. This is how different our demands can be.

Author Bio: Sarah Smith has been a personal finance author for the last five years. She is also an independent and very passionate finance and investment advisor. She regularly posts at www.personalincome.org.

How to get Started with Airbnb

I am very excited about today’s post.  This is a guest post from my new friend Cubert from AbandonedCubicle.com.  In this post, Cubert shares how he is planning on retiring at age 46 and to abandon his cubicle for good.  As a more passive investor, this post has provided me with great insight into real estate investing as well as an introduction to what is required to operate an Airbnb business.  I hope you enjoy it and find it as educational as I did.

How to get Started with Airbnb

For those of you who don’t know my story, here’s a little primer. I go by the pseudonym Cubert to keep a little anonymity on my blog, AbandonedCubicle.com. I’ve been a student of early retirement since the fall of 2014.

Around that time I discovered that it is possible to retire early with very little actual sacrifice and much to gain. That’s a good thing. See, we’d had our first kids – twins – just a year earlier. If life wasn’t crazy enough with work, the home front changes pushed us over the line.

I’m now within a year and a half of ending my cubical days for good. I’ll be 46, which is nowhere near as exciting as others who’ve reached that milestone in their 30s. But then, I have no regrets. And honestly, who can complain about being done working for the man a good 15 or 20 years before Fidelity says you should?

My Plan

It’s interesting how life-changes sometimes come in bunches. Within a span of two years, we started a real estate rental business, changed jobs, had twins, and then locked in on early retirement. Whew. Makes my head spin just thinking about it!

The real estate rental business turned out to be crucial in our wealth building progress. We definitely went out on a limb, but with the help of a good friend already in the business, I had enough confidence to buy our first rental – a short sale single family house.

We weren’t flush with cash. I had to take out a home equity line of credit on our primary residence to afford the down payment. Once we closed, the list of improvements grew to a tally of almost $5,000. Man, what had we gotten ourselves in to?!?

Long story short – this first house got rented out within two months of closing. Rent checks started flowing in. We closed on our second rental just six months later, right around the time we welcomed our twins into the world. Rentals three and four followed in 2015 and 2016.

Ultimately, each of our four long-term rentals have paid off handsomely. Thanks to a strong market here in Minneapolis, we can command good rents. Plus, the tenants we attract have been great to work with. Never a late payment, and often they’ll put their own money into small improvements. We clear about $500 in net profit per house, per month.

1 Our First Rental – “Rental A”

How Airbnb Came into the Picture

In 2017, the pickins were slim. The housing market had really taken off in the Twin Cities. Houses that once sold for $100,000 were now going for $150,000. In my quest for our fifth rental, I kept running into windmills. Cash-on-cash returns just weren’t adding up on the overpriced dumps that were available.

About ready to give up, we visited my folks in Charlevoix, Michigan last August. I was perusing the local paper and decided to take a peek at the real estate listings on the back page. I noticed a condo for sale in the same development where my parent’s spend their summers. It was bare bones, with zero updates since having been built in 2005.

I figured, at $125,000 list price, what could it hurt to have a look? This area is a great summertime destination. A new vacation rental option started to dance around in my head.

What is Airbnb?

For those uninitiated (which included yours truly until a few years back), from Wikipedia:

Airbnb is an American company which hosts an online marketplace and hospitality service, for people to lease or rent short-term lodging including vacation rentals, apartment rentals, homestays, hostel beds, or hotel rooms. The company does not own any lodging; it is a broker which receives percentage service fees from both guests and hosts in conjunction with every booking. In January 2018 the company had over 3,000,000 lodging listings in 65,000 cities and 191 countries.

For a company that started nine years ago, that’s a pretty impressive number of lodgings. How long did it take Hilton to build that many rooms? All Airbnb’s founders had to do was harness the Internet, create the marketplace, and take their 3% cut from each booking. Genius.

As we worked through the offer process and closing on the condo this past fall, I was also digging into my research. We’d stayed at a couple of Airbnbs, but we sure as heck hadn’t hosted any. A few helpful sources: Pinterest (see Financial Panther) and a very helpful book called “Get Paid for Your Pad” by Jasper Ribbers and Huzefa Kapadia.

The Easy Parts

Setting up your digs, whether it’s a spare room in your house, or a wholly furnished separate dwelling is pretty straightforward on Airbnb’s interface. I give them credit for creating a highly intuitive experience for hosts.

I will warn, however, that there are a LOT of variables that come with hosting. You don’t just set your nightly price, upload a bunch of pics and wait (and hope!) Nope. You’ve got to figure out check-in, check-out times. You need to create a house manual.

There’s more. Do you want to set a strict or flexible cancellation policy? Do you want to include a security deposit? How much will you charge guests for cleaning? This is where that handy book “Get Paid…” was a real life-saver.

1 So many variables to set!

Once you do get everything all set up, there’s a certain amount of apprehension that sets in. You have ZERO ratings. Who in their right mind would rent from you? This is why it’s super important to channel your inner marketing skills.

Study this sh*t out of your area Airbnb market. Use the best photos. Make sure your prices are strategically set to account for seasonality and local events. Even after you think you’ve got a handle on everything, be prepared to wait patiently.

I’ve got four whole bookings set for the next 9 months. Once reviews (hopefully 5 stars) start coming in, I’m certain the bookings will ramp up.

The Hard Parts

Then, there’s getting a place ready for prime time. In our case, we had purchased a really solid condominium unit that was not much over 10 years old. As they say with houses, “the bones were good.”

That said, the place was used as a Coast Guard rental. The carpet was original, and the walls were beaten up all to hell. There certainly weren’t any improvements that I could see during that first walk through. All original fixtures, and a lot of wear and tear.

Before…

The bottom line is you’ll likely need to put in some good ol’ fashioned elbow grease to get your property ready for vacation rental use. A LOT of elbow grease. Remember, these types of rentals have to be fully furnished (unlike long-term rentals, where tenants furnish the space.)

After…

Conclusion

I’m really enjoying the journey to my early retirement. Over the past three-plus years of the countdown, I’ve come to appreciate all the trouble I can get into outside of a cubicle. Working on homes and managing properties gets me out of a seated-all-day position. I get to produce something tangible.

We’ll see how the Airbnb Experiment goes. I’m optimistic about its potential, but I’m still learning and researching as much as I can before the high season hits this summer. Just this week, I’ve opted to fire up a listing on VRBO.com. Marketing through more than a single channel is never a bad idea.

I’ll leave you with one last bit of advice: More than anything, I’ve learned that early retirement is simply a means to an end. It should never be just an escape from a bad situation. Instead, “early retirement” is best when you use it as a launch pad for big ideas, projects, and hustles that align with your passion. Endless vacations get a little stale after a while.

Why I Paid Down My Auto Loan on a Used Car as Fast as Possible

Cars are a necessary expense for most Americans.

Unless you are lucky enough to live near a good public transportation system or in a major urban area, you will likely need a vehicle to accomplish tasks of daily living, such as getting to work, buying groceries, or going out to dinner. Buying a car can be expensive, and having a car loan can be a pretty steep financial burden, particularly on top of student loans, a mortgage or rent and other obligations.

That is why it makes sense to buy a quality used car whenever possible — and to pay off your car loan as soon as you can.

My Story

For me, buying a used car just made good financial sense. As a father of three young kids who is still working on paying off my student loans while saving for their college, I don’t have a lot of extra cash to put towards the latest and greatest vehicle. And while having a new car can be great, it’s no secret that a car is a terrible investment, as a new car starts to lose value the minute you drive it off the lot.

So when it was time for me to purchase a vehicle, I looked for a solid used car that was safe, reliable and a good deal. Then I got to work paying off my car loan as quickly as possible.

Why I Chose to Pay Off My Auto Loan Faster Than Required

Many people accept car payments as a fact of life. For me, not having a car payment represents financial freedom. Car loans can often have high-interest rates, particularly if you arrange to finance through the dealership. Loan rates may be as high as eight or ten percent.

Car loans may also be sold by a lender to a different bank, and if it has a variable interest rate, it may become more expensive over time as rates change. For these reasons, it makes a lot of sense to pay off your car loan as quickly as fast as you can — and avoid car payments entirely.

Saving Money

Of course, there are other benefits to paying off the debt on your car. When you pay off your car loans ahead of schedule, you will save significant money on interest. Interest on your loan — even if it is at a relatively low rate — can add thousands of dollars to the total amount of your loan.

By adding even a small amount of money each month onto your car payment, such as $50 or $100, you can shorten your loan term considerably and pay hundreds or even thousands of dollars less on your car loan. A number of online calculators are available to help you determine how much you can save by paying off your loan early.

Freeing Up Money to Use Elsewhere

The money you save by paying off your car can then be used to start saving for your next car. Unfortunately, unlike a house or a college education, a car will not last a lifetime. By buying a less expensive car and paying off your loan early, you can set aside money for a down payment on your next vehicle. That will help you get ahead of the game for your next car purchase — and perhaps even avoid the need for a loan at all.

Reduce Insurance Costs

Paying off your loan may also reduce your car insurance costs. When you have a car loan, the lender will require a certain level of coverage. Once you have paid off your loan, you can reevaluate your coverage. You may not want to dip below a certain level of coverage, but you might be able to save some money by lowering the amount of collision or comprehensive coverage for your policy.

Boost Your Credit Score

Finally, paying off your car loan will boost your credit score. Without a car loan on your credit report, your debt to income ratio will improve (in other words, you will have less debt in relation to your income). This will make it easier for you to be approved for major purchases and to get lower interest rates on mortgages or refinancing your student loans — which can save you even more money and help you reduce your overall debt.

Closing Thoughts

While it may be more fun to drive a flashy new car or to always have the latest car, it makes good financial sense to pay off an auto loan on a used car instead. By making that choice for myself, I am helping my family reach our financial independence — and achieving more security for our future.

Josh runs a parenting, faith, and personal finance blog over at Family Faith Finance. As the father of 3 children, he is always looking for ways to save a few extra bucks for his family.

Next Steps to Take After Paying Down Student Debt

When you have finished paying off student loans, it is time to start building your wealth. It’s also time to achieve some of life’s most important milestones.

But first, I want to talk about the negative effects that student loans can have on your future.

There are many people that go to the bank to buy a home with tens of thousands of dollars of student debt on their shoulders. The loan officer looks at the debt and you can almost see the look of disappointment in their eyes because they are going to have to tell you that the student loans are driving up your debt-to-income ratio.

If you say, “but my loans are deferred” or “my loans are in forbearance,” the loan officer is going to look at you and tell you that it doesn’t matter because the debt has to be paid back eventually. At some point, while owning a home or car, the repayments may begin on your loans. That consumes part of your income. The bank doesn’t want to take the risk of you not having enough income to make your payments to them.

It is devastating, and it happens every day.

To keep this from happening to you, it is best to pay down your student loans as fast as you can so you can enjoy buying a home or new car without receiving bad news while sitting at the loan officer’s desk.

Think About Retirement

Another milestone that student loans can interfere with is investing. When you’re dealing with student loan payments, it’s difficult to put money into anything else. Of course, you can increase your income with a second job or find side gigs like I did. However, I still didn’t have a lot of room for investing until the student debt was gone.

Investing can take many forms. You can invest in stocks, bonds, or mutual funds. You can even invest in real estate crowdfunding, P2P lending, or business ventures. There are many things that you can do with your money when you have the funds to do it. Think about being able to retire early or just retirement in general.

The last thing you want to do is retire and find that you don’t have enough income. There are many senior citizens filing bankruptcy because of pensions that fall short, social security that isn’t enough, and medical benefits that are still too expensive.

Think About Your Family 

With student debt gone, it is also easier to expand your family on the financial end of things. When you don’t bring children into debt, you’re able to focus more on the financial needs of your child.

It is difficult to bring a child into a debt situation because so much of your income has to be put into debt while meeting the needs of your family. Of course, it can be done. But do you want to go through that struggle if you don’t have to?

Of course not!

Regardless of what phase of your life you are in, it is important to pay off your student loans quickly. Those high balances are holding you back in more ways than one. Many good people who went to college to do something meaningful and make a good income are plagued with debt for a while after graduation. They make their minimum payments but still pay the collateral consequences of having the debt.

It can be heart-wrenching to struggle or be told “no” by a bank when all you’re doing is what you’re supposed to do.

The fact is that you need to go above and beyond what you’re supposed to do to get ahead as soon as you possibly can.

Even if you already have a family, a strict budget and some discipline can help you pay down the student debt so you can start working on other milestones in life. It’s best to pay off debt as soon as you can, but don’t ever think you are too late. People thinking that they are too late causes them to not be aggressive with their debt when being aggressive can be one of the best things they ever do for themselves and their family.

Jacob runs Dollar Diligence where he blogs about debt repayment, saving money and side hustles.

 

Traveling with debt with a smile: 5 Rules you must follow

Can you travel when you have credit card debts?

Some individuals will say this is a bad financial move. You should think about saving money instead of planning a vacation. You need to think about the ways to pay off debt. But is it true? Let’s find out.

I don’t feel that it’s irresponsible to travel when you have credit card debts. You can travel and pay off debt simultaneously. You just need to be cautious and financially responsible. Plus it’s not practically possible to deprive yourself of fun throughout the loan repayment term. Suppose, you have student loan debt. Usually, the loan repayment terms of student loan debt stretch for a long time. So does this mean that you won’t travel for 10-20 years? It’s totally unrealistic and impossible. You can control yourself for a short-term period. But it’s impossible to stop yourself from having fun all the time.

Smart financial plans can help you have fun even with debt. You can dine out, shop and travel. Basically, you can do a lot of things. All you need to do is plan carefully and follow your plan.

Rules you need to follow to travel with debt 

Here are a few rules you need to follow to travel with debt. 

  1. Don’t incur fresh debts: Have a look at your savings account before planning your vacation. Do you have enough money in your savings account? If ‘no’, then you can postpone your trip. Save enough money to enjoy a trip comfortably.

It isn’t that you have to pay cash for every transaction. Just make sure you have sufficient cash in your savings account. If you’re planning to use a credit card for covering expenses, then pay off the outstanding balance as soon as possible.

  1. Create 2 separate accounts: Set up a separate savings account and save money there to pay for your trip. You can have 2 separate savings accounts – (i) saving travel money (ii) saving debt repayment money. This will help you track your savings. You can figure out how much you have saved for traveling and how much you saved for paying off your debts. This will help you plan your vacation comfortably.
  1. Make your monthly payments: Have you enrolled in a debt relief program to pay back your creditors? If so, then make sure you have money to make the required monthly payments. If you pay $250 every month, then keep doing that even when you’re traveling. If you can’t pay this money, then don’t have a vacation right now.

Don’t travel if you don’t have a debt repayment plan. Calculate how much you owe on your debts and then formulate a plan to pay off them. Ask yourself how long it will take to pay back your creditors and the amount you need to pay every month. This is your debt payoff plan. Use it wisely.

  • Do extensive research: Before traveling, do extensive research on your desired destination. Calculate the average cost of food and accommodation. Know about the fun activities you can do in that place. Ask your friends about the local foods you can eat and the free activities you can do. Just post a message on Facebook. You’ll get lots of suggestions.

 Postpone your debt repayments: If it is possible, then postpone your debt repayments without being charged an additional interest. You can transfer your balance to another credit card with 0% interest rate. Some credit cards charge 0% interest rate for 12-18 months. You can transfer the balance to one such card. Just remember you have to pay off the balance within the introductory period. If you can’t, then be ready to pay the higher interest rate.

Conclusion 

You can take a job abroad to pay off your debts and travel simultaneously. Obviously, this option is not a suitable one if you’re thinking about making a short trip. You’ll be out of station for several months. Plus, you have to get a job at your destination before leaving home. There are other factors you need to consider too. For instance, you have to think about the relocation expenses and the cost of living. If the cost of living is too high and your expected monthly income is less, you’ll be in trouble. It’ll be difficult for you to live there. So make sure you get a job that will help to cover your monthly expenses and debt repayments. Otherwise, it’ll be a wrong financial move to relocate.

The best option is to think about a few ways to make money when traveling. First, you can ask your employer to arrange a free accommodation for you. This will help you save a lot of money. You can.

This post is contributed by Patricia Sanders from wiki.debtcc.com.

Investing in Your 20s – It’s the Chance of Your Lifetime

No matter how old you are, it is never too early to start investing. Whether you are in high school, college or just finished school now is the time to start putting money toward securing your financial future. The good news is that it is easy to start investing no matter how much you have to invest, what your risk tolerance is or what your goals may be.

How Do You Start Investing?

The first step to becoming an investor is to find a broker to trade with. Most brokers allow you to make your own trades online in a matter of seconds. They will also have access to charts, analysis and news to help you make informed trading decisions.

Some brokers also offer training courses that help new investors learn the basics of investing as well as how to use the charts and tools that they offer. The broker that you choose depends partially on how much help that you want or need making investment decisions as well as how much that you have to invest at the moment.

How Much Do You Need to Start Investing?

Some brokers such as Charles Schwab will allow you to start investing with no minimum balance. Therefore, you can start contributing to an index fund with as little as $1 if that is all you had to invest or all that you wanted to put in for now.

Newer brokers such as Betterment or Motif require anywhere from $100 to $300 to get started whereas some mobile investing apps have no limits. If you invest in Fidelity, Vanguard, or similar brokers, expect to need at least $1,000 to gain access to their stock or mutual fund offerings.

Why Should I Start Investing Today?

Compound interest is one of the most exciting concepts that you will ever learn. It is also the reason why you need to start putting money into the market today no matter how much or how little you have to get started with.

Let’s say that you bought stock worth $100 at age 30 and earned the historical average return of 11 percent per year. When you were 60, that $100 would be worth $2,289. However, if you put that $100 into the market when you were 20, you would have $6,500 by age 60 assuming an average 11 percent return.

What Should I Know About Broker Fees and Capital Gains Taxes?

It is important that you account for taxes and fees whenever you make an investment decision. When you first start investing, you will likely look to buy and hold a stock or index fund for many years. This is because most brokers charge a fee of $5 to $8 for each trade that you make. If you only have $100 in an account, that $8 may represent your return for an entire year.

When it comes to taxes, it is important to note that you only pay tax on the profit that is made on a given investment. Your profit is any gains above your cost basis, which is the price of the security plus any fees paid to buy or sell it. Therefore, if you bought a stock for $10 and paid $5 to buy it, your cost basis is $15. If you sold the stock for $20, you would pay capital gains taxes on $5.

If you are in the 10 percent tax bracket, you pay nothing in federal capital gains taxes. However, you may be required to pay state taxes on all capital gains. If the money is held in a traditional IRA, you don’t pay capital gains taxes while securities are in your account. Instead, you pay ordinary income taxes on any money that you withdraw when the withdrawal takes place.

Should I Open a Roth IRA or 401k Instead of a Traditional?

When you invest in a traditional IRA or 401k, you get a tax deduction in the year that the contribution is made. However, if you choose to open a Roth account, you use after-tax dollars to contribute to your account.

The benefit is that the money in your account grows free from capital gains taxes. Furthermore, it is not subject to income taxes when it is withdrawn because the money was already taxed.

Ideally, a person will invest in both a traditional and Roth IRA or 401k to reduce their tax burden both today and in the future. As a Roth IRA is subject to income limits, it may be best to contribute to a Roth 401k as there are no income limits and contribution limits are higher. A 401k is a retirement account provided by an employer, and those who are self-employed may open one on their own.

If you are serious about reaching financial independence, you should start investing as soon as you have a few extra dollars to do so. Those who aren’t sure what their financial goals or timelines are may benefit from speaking with a financial adviser. This person may be able to help you create short and long-term goals as well as different investment strategies to make it easier to meet them.

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