The last thing you want to worry about when making a big purchase is being scammed. Whether you’re buying or selling something, you don’t want your money or investments to go to waste. Making any financial decision can be unsettling for your budget when faced with a chance of fraud. That’s where certified checks can help add security. But first, what is a certified check?
A certified check is authorized by a bank to guarantee buyers have the funds before writing the check. This ensures that the person receiving payment isn’t left hanging, and the buyer double-checks they have enough funds to make the purchase.
Why Use a Certified Check?
A certified check is one of the most secure payment options available. When you’re selling or buying expensive items, you want to ensure you get what you were expecting. Certified checks generally require a bank or credit union to set aside money in the buyer’s account until the check has gone through. This way, the bank verifies the buyer has enough cash to make the purchase and the seller gets paid. If you’re selling a big ticket item, you can request payment with a certified check.
If you’re buying an expensive item, certified checks will offer your seller additional security. It will prove to the seller that you’re serious about your choice and that your finances are in place for this investment.
Certified Check vs. Cashier’s Check
A cashier’s check is also used for large purchases and authorized by a bank or credit union. The main difference between cashier’s checks and certified checks is where the money’s stored until it’s cashed out. Before signing a cashier’s check, banks will move the funds into a separate account for security purposes. Then, a bank representative will sign the check over to the receiver.
Even though both check types are generally safe, cashier’s checks tend to be more secure. As banks take the buyer’s funds when they authorize the check, your funds are waiting at the bank instead of in your buyer’s account until cashed out.
How to Get a Certified Check
For buyers looking to get certified checks, most banks or credit unions offer these services. While you’re able to get them at financial institutions that offer these services, fees may apply at banks you don’t have an account with. If you’re in need of a certified check, read our tips below:
Call your bank to ensure you meet all their requirements.
Visit the bank in person to avoid any mishaps or miscommunication.
Funds needed for the check amount
Name of the recipient
Your account number
Verify your identity and funds with a photo ID and bank account numbers for authorization. You may be asked to sign the check in front of a teller for them to certify it.
Bring extra cash in case your bank charges a service fee, typically anywhere from $5 to $25. A bank you already do service with may waive your fee.
The Pros and Cons of Certified Checks
Certified checks lower the risk of carrying around large sums of money or bounced checks. There are a few pros and cons to weigh before choosing your payment option as a buyer or seller.
Safer way to carry cash: Certified checks are great tools for large purchases. It can be impractical to carry around a large stack of cash or the risk of a regular check. This way, you’re able to cash in your earnings, or pay the seller without any worries.
Adds additional payment security: For large purchases where a buyers credit score or payment is questioned, this adds additional security. Since the bank issuing the check double-checks that the funds are there, it takes more risk out of the deal.
Scammers may be ready to scam: One downside of this payment option is the risk of scams. It’s common for businesses to purchase bulk products out of state in exchange for a certified check. If you realize your purchase is a scam after sending your check, you may not be able to stop the payment from going through.
Potential service fees: As always, bank services usually come at a price. In this case, most banks and credit unions will bill you for the time used to certify the check. Generally, these services cost anywhere from $5 to $25. If you decide to request a certified check from a bank you already do business with, they may waive your fee.
4 Tips to Prevent Check Fraud
Forty-seven percent of industry money losses were from fraudulent checks in 2018. Taking the extra steps to double-check your buyer’s payment could prevent your budget from taking a hit. Follow the steps below to ensure you and your earnings are on the right track:
1. Research Your Buyer
People may use fake names, addresses, phone numbers, and more to get away with a scam. Without knowing the identity of the person you’re selling to, it may be hard to get your money if things go wrong. Research your buyer or safely meet with them in person to get a better feel for their identity.
2. Call or Visit Your Buyer’s Bank of Choice
For more security, reach out to the financial institution where the check is issued. Contact your buyer to see where they’ll be authorizing their check. Look up the branch’s phone number and call to verify the check went through. Avoid calling any phone numbers the buyer gives you in case they provide you with the wrong number.
3. Immediately Double-Check With Your Bank
Right after you get paid, go straight to the bank or call to ensure there weren’t any complications processing the check. Ask your bank or credit union if the funds made it to your account safe and sound.
4. Save All Documentation
Receipts, emails, and other information can build a case in the event you don’t receive your payment. Keep all documentation or files until you’ve been paid in full. As long as you have all the details, you’ll have a better chance of building a case.
A certified check is a check that’s authorized by a bank to guarantee buyers have the funds before writing the check.
When you’re selling or buying a large item, certified checks are a less risky payment option.
If you’re unsure about your buyer, do more digging. Research them, call the buyer’s bank, and save all documents and files from the exchange.
Call your bank beforehand to ensure you meet all the requirements and ask about service fees.
Having an uneasy feeling about selling or buying a large ticket item is normal. You don’t want your hard-earned money or investments going to waste over a bounced check or scam. Certified checks can be a safer payment option and it’s worth the extra research for your budget’s sake.
A “rule of thumb” is a mental shortcut. It’s a heuristic. It’s not always true, but it’s usually true. It saves you time and brainpower. Rather than re-inventing the wheel for every money problem you face, personal finance rules of thumb let you apply wisdom from the past to reach quick solutions.
Table of Contents show
I’m going to do my best Buzzfeed impression today and give you a list of 75 personal finance rules of thumb. Some are efficient packets of advice while others are mathematical shortcuts to save brain space. Either way, I bet you’ll learn a thing or two—quickly—from this list.
These basic personal finance rules of thumb apply to everybody. They’re simple and universal.
1. The Order of Operations (since this is one of the bedrocks of personal finance, I wrote a PDF explaining all the details. Since you’re a reader here, it’s free.)
2. Insurance protects wealth. It doesn’t build wealth.
3. Cash is good for current expenses and emergencies, but nothing more. Holding too much cash means you’re losing long-term value.
4. Time is money. Wealth is a measure of how much time your money can buy.
5. Set specific financial goals. Specific numbers, specific dates. Don’t put off for tomorrow what you can do today.
6. Keep an eye on your credit score. Check-in at least once a year.
7. Converting wages to salary: $1/per hour = $2000 per year.
8. Don’t mess with City Hall. Don’t cheat on your taxes.
9. You can afford anything. You can’t afford everything.
10. Money saved is money earned. When you look at your bottom line, saving a dollar has the equivalent effect as earning a dollar. Saving and earning are equally important.
I love budgeting, but not everyone is as zealous as me. Still, if you’re looking to budget (or even if you’re not), I think these budgeting rules of thumb are worth following.
11. You need a budget. The key to getting your financial life under control is making a budget and sticking to it. That is the first step for every financial decision.
12. The 50-30-20 rule of budgeting. After taxes, 50% of your money should cover needs, 30% should cover wants, and 20% should repay debts or invest.
13. Use “sinking funds” to save for rainy days. You know it’ll rain eventually.
14. Don’t mix savings and checking. One saves, the other spends.
15. Children cost about $10,000 per kid, per year. Family planning = financial planning.
16. Spend less than you earn. You might say, “Duh!” But if you’re not measuring your spending (e.g. with a budget), are you sure you meet this rule?
Investing & Retirement
Basic investing, in my opinion, is a ‘must know’ for future financial success. The following rules of thumb will help you dip your toe in those waters.
17. Don’t handpick stocks. Choose index funds instead. Very simple, very effective.
18. People who invest full-time are smarter than you. You can’t beat them.
19. The Rule of 72 (it’s doctor-approved). An investment annual growth rate multiplied by its doubling time equals (roughly) 72. A 4% investment will double in 18 years (4*18 = 72). A 12% investment will double in 6 years (12*6 = 72).
20. “Don’t do something, just sit there.” -Jack Bogle, on how bad it is to worry about your investments and act on those emotions.
21. Get the employer match. If your employer has a retirement program (e.g. 401k, pension), make sure you get all the free money you can.
22. Balance pre-tax and post-tax investments. It’s hard to know what tax rates will be like when you retire, so balancing between pre-tax and post-tax investing now will also keep your tax bill balanced later.
23. Keep costs low. Investing fees and expense ratios can eat up your profits. So keep those fees as low as possible.
24. Don’t touch your retirement money. It can be tempting to dip into long-term savings for an important current need. But fight that urge. You’ll thank yourself later.
25. Rebalancing should be part of your investing plan. Portfolios that start diversified can become concentrated some one asset does well and others do poorly. Rebalancing helps you rest your diversification and low er your risk.
26. The 4% Rule for retirement. Save enough money for retirement so that your first year of expenses equals 4% (or less) of your total nest egg.
27. Save for your retirement first, your kids’ college second. Retirees don’t get scholarships.
28. $1 invested in stocks today = $10 in 30 years.
29. Inflation is about 3% per year. If you want to be conservative, use 3.5% in your money math.
30. Stocks earn 7% per year, after adjusting for inflation.
31. Own your age in bonds. Or, own 120 minus your age in bonds. The heuristic used to be that a 30-year old should have a portfolio that’s 30% bonds, 40-year old 40% bonds, etc. More recently, the “120 minus your age” rule has become more prevalent. 30-year old should own 10% bonds, 40-year old 20% bonds, etc.
32. Don’t invest in the unknown. Or as Warren Buffett suggests, “Invest in what you know.”
Home & Auto
For many of you, home and car ownershipcontribute to your everyday finances. The following personal finance rules of thumb will be especially helpful for you.
33. Your house’s sticker price should be less than 3x your family’s combined income. Being “house poor”—or having too expensive of a house compared to your income—is one of the most common financial pitfalls. Avoid it if you can.
34. Broken appliance? Replace it if 1) the appliance is 8+ years old or 2) the repair would cost more than half of a new appliance.
35. Used car or new car? The cost difference isn’t what it used to be. The choice is even.
36. A car’s total lifetime cost is about 3x its sticker price. Choose wisely!
37. 20-4-10 rule of buying a vehicle. Put 20% of the vehicle down in cash, with a loan of 4 years or less, with a monthly payment that is less than 10% of your monthly income.
38. Re-financing a mortgage makes sense once interest rates drop by 1% (or more) from your current rate.
39. Don’t pre-pay your mortgage (unless your other bases are fully covered). Mortgages interest is deductible, and current interest rates are low. While pre-paying your mortgage saves you that little bit of interest, there’s likely a better use for you extra cash.
40. Set aside 1% of your home’s value each year for future maintenance and repairs.
41. The average car costs about 50 cents per mile over the course of its life.
42. Paying interest on a depreciating asset (e.g. a car) is losing twice.
43. Your main home isn’t an investment. You shouldn’t plan on both living in your house forever and selling it for profit. The logic doesn’t work.
44. Pay cash for cars, if you can. Paying interest on a car is a losing move.
45. If you’re buying a fixer-upper, consider the 70% rule to sort out worthy properties.
46. If you’re buying a rental property, the 1% rule easily evaluates if you’ll get a positive cash flow.
Spending & Debt
Do you spend money? (“What kind of question is that?”)Then these personal finance rules of thumb will apply to you.
47. Pay off your credit card every month.
48. In debt? Use psychology to help yourself. Consider the debt snowball or debt avalanche.
49. When making a purchase, consider cost-per-use.
50. Make your spending tangible with a ‘cash diet.’
51. Never pay full price. Shop around and do your research to get the best deals. You can earn cash back when you shop online, score a discount with a coupon code, or a voucher for free shipping.
52. Buying experiences makes you happier than buying things.
53. Shop by yourself. Peer pressure increases spending.
54. Shop with a list, and stick to it. Stores are designed to pull you into purchases you weren’t expecting.
55. Spend on the person you are, not the person you want to be. I love cooking, but I can’t justify $1000 of professional-grade kitchenware.
56. The bigger the purchase, the more time it deserves. Organic vs. normal peanut butter? Don’t spend 10 minutes thinking about it. $100K on a timeshare? Don’t pull the trigger when you’re three margaritas deep.
57. Use less than 30% of your available credit. Credit usage plays a major role in your credit score. Consistently maxing out your credit hurts your credit score. Aim to keep your usage low (paying off every month, preferably).
58. Unexpected windfall? Use 5% or less to treat yourself, but use the rest wisely (e.g. invest for later).
59. Aim to keep your student loans less than one year’s salary in your field.
The Mental Side of Personal Finance
At the end of the day, you are what you do. Psychology and behavior play an essential role in personal finance. That’s why these behavioral rules of thumb are vital.
60. Consider peace of mind. Paying off your mortgage isn’t always the optimum use of extra money. But the peace of mind that comes with eliminating debt—it’s huge.
61. Small habits build up to big impacts. It feels like a baby step now, but give yourself time.
62. Give your brain some time. Humans might rule the animal kingdom, but it doesn’t mean we aren’t impulsive. Give your brain some time to think before making big financial decisions.
63. The 30 Day Rule. Wait 30 days before you make a purchase of a “want” above a certain dollar amount. If you still want it after waiting and you can afford it, then buy it.
64. Pay yourself first. Put money away (into savings or investment accounts) before you ever have a chance to spend it.
65. As a family, don’t fall into the two-income trap. If you can, try to support your lifestyle off of only one income. Should one spouse lose their job, the family finances will still be stable.
66. Every dollar counts. Money is fungible. There are plenty of ways to supplement your income stream.
67. Savor what you have before buying new stuff. Consider the fulfillment curve.
68. Negotiating your salary can be one of the most important financial moves you make. Increasing your income might be more important than anything else on this list.
69. Direct deposit is the nudge you need. If you don’t see your paycheck, you’re less likely to spend it.
70. Don’t let comparison steal your joy. Instead, use comparisons to set goals. (net worth).
71. Learning is earning. Education is 5x more impactful to work-life earnings than other demographics.
72. If you wouldn’t pay in cash, then don’t pay in credit. Swiping a credit card feels so easy compared to handing over a stack of cash. Don’t let your brain fool itself.
73. Envision a leaky bucket. Water leaking from the bottom is just as consequential as water entering the top. We often ignore financial leaks (e.g. fees), since they’re not as glamorous—but we shouldn’t.
74. Forget the Joneses. Use comparisons to motivate healthier habits, not useless spending.
75. Talk about money! I know it’s sometimes frowned upon (like politics or religion), but you can learn a ton from talking to your peers about money. Unsure where to start? You can talk to me!
The Last Personal Finance Rule of Thumb
Last but not least, an investment in knowledge pays the best interest.
Boom! Got ’em again! Ben Franklin streaks in for another meta appearance. Thanks Ben!
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Not sure what to do with a retirement account from an old employer? Laura covers five options for managing your retirement funds when your job ends. Handling your nest egg the right way is critical for preserving what you’ve worked so hard to save.
Laura Adams, MBA
September 16, 2020
Retirement Account Comparison Chart (PDF)—a handy one-page download to see the retirement account rules at a glance.
What is a retirement account rollover?
Don’t make the mistake of thinking that once you leave a job with a 401(k) or a 403(b) you can’t continue getting tax breaks. Doing a rollover allows you to withdraw funds from a retirement plan with an old employer and transfer them to another eligible retirement account.
When you roll over a workplace retirement account, you don’t lose your contributions or investment earnings. And if you’re vested, you don’t lose any money that your employer may have put into your account as matching funds.
The main rule you must follow when doing a retirement rollover is that you must complete it within 60 days once you begin the process.
The main rule you must follow when doing a retirement rollover is that you must complete it within 60 days once you begin the process. If you miss this deadline and are younger than age 59½, the transaction becomes an early withdrawal. That means it is subject to income tax, plus an additional 10% early withdrawal penalty.
If you’re a regular Money Girl podcast listener or reader, you know that I don’t recommend taking early withdrawals from retirement accounts. Paying income tax and a penalty is expensive and reduces your nest egg.
If you complete a traditional rollover within the allowable 60-day window, you maintain all the funds’ tax-deferred status until you make withdrawals in the future. And with a Roth rollover, you retain the tax-free status of your funds.
What are your retirement account options when leaving a job?
Once you’re no longer employed by a company that sponsors your retirement plan, there are four options for managing the account.
1. Cash out your account
Cashing out a retirement plan when you leave a job is the easiest option, but it’s also the worst option. As I mentioned, taking an early withdrawal means you must pay income tax and a 10% penalty.
Cashing out a retirement plan when you leave a job is the easiest option, but it’s also the worst option.
Let’s say you have a $100,000 account balance that you cash out. If your average rate for federal and state income taxes is 30%, and you have an additional 10% penalty, you lose 40%. Cracking open your $100,000 nest egg could mean only having $60,000 left, depending on how much you earn.
Note that if your retirement plan has a low balance, such as $1,000 or less, the custodian may automatically cash you out. If so, they’re required to withhold 20% for taxes (although you may owe more), file Form 1099-R to document the distribution, and pay you the balance.
2. Maintain your existing account
Most retirement plans allow you to keep money in the account after you’re no longer employed if you maintain a minimum balance, such as more than $5,000. If you don’t have the minimum, but you have more than the cash-out threshold, the custodian typically has the authority to deposit your money into an IRA in your name.
The downside to leaving money in an old retirement account is that you can’t make additional contributions because you’re not an employee. However, your funds can continue to grow there. You can manage them any way you like by selling or buying investments from a set menu of options.
The downside to leaving money in an old retirement account is that you can’t make additional contributions.
Leaving money in an old retirement plan is certainly better than cashing out and paying taxes and a penalty, but it doesn’t give you as much flexibility as you you would get with the next two options I’m going to talk about.
I only recommend leaving money in an old employer’s retirement plan if you’re happy with the investment choices and the fund and account fees are low. Just make sure that the plan doesn’t charge you higher fees once you’re no longer an active employee.
Another reason you might want to leave retirement money in an old employer’s plan is if you’re unemployed or have a job that doesn’t offer a retirement account. I’ll cover some special legal protections you’ll get in just a moment.
3. Rollover to an Individual Retirement Arrangement (IRA)
Another option for your old workplace retirement plan is to roll it into an existing or new traditional IRA. If you have a Roth 401(k) or 403(b), you can roll it over into a Roth IRA. The deadline to complete an IRA rollover is 60 days.
Your earnings in a traditional IRA would continue to grow tax-deferred, just like in your old workplace plan. And earnings grow tax-free in a Roth IRA, like a Roth account at work.
Here are a couple of advantages to moving a workplace plan to an IRA:
Getting more control. You choose the financial institution and the investments for your IRA.
Having more flexibility. With an IRA, there are more ways to tap your funds before age 59½ and avoid an early withdrawal penalty than with a workplace account. That rule applies to several exceptions, including using withdrawals for medical bills, college expenses, and buying or building your first home.
Here are some downsides to rolling over a workplace plan to an IRA:
Having fewer legal protections. Depending on your home state, assets in an IRA may not be protected from creditors.
Being ineligible for a Roth IRA. When you’re a high earner, you may not be allowed to contribute to a Roth IRA. However, you can still manage the account and have tax-free investment earnings.
If you want more control over your investment choices, think you’ll need to make withdrawals before retirement, are self-employed, or don’t have a job with a retirement plan to roll your account into, having an IRA is a great option.
4.Rollover to a new workplace plan
If you land a new job with a retirement plan, it may allow a rollover from your old plan once you’re eligible to participate. While the IRS allows rollovers into most retirement accounts, employer plans aren’t required to accept incoming rollovers. So be sure to check with your new plan administrator about what’s possible.
Once you initiate a transfer from one workplace plan to another, you must complete it within 60 days to avoid taxes and a penalty.
Here are some advantages of doing a workplace-to-workplace rollover:
More convenience. Having all your retirement savings in one place may make it easier to manage and track.
Taking early withdrawals. Retirees can begin taking penalty-free withdrawals from workplace plans as early as age 55.
Avoiding Roth income limits. Unlike a Roth IRA, there are no income restrictions for participating in a Roth workplace retirement account.
Getting more legal protections. Workplace retirement plans are covered by the Employee Retirement Income Security Act of 1974 (ERISA), a federal regulation. It doesn’t allow creditors (except the federal government) to touch your account balance.
Some downsides to transferring money from one workplace plan to another include:
Having less flexibility. You can’t take money out of a 401(k) or a 403(b) until you leave the company or qualify for an allowable hardship. It doesn’t come with as many withdrawal exceptions compared to an IRA.
Getting less control. You may have fewer investment choices or higher fees than an IRA, depending on the brokerage firm.
5. Rollover to an account for the self-employed
If you left a job to become self-employed, having an IRA is a great option. However, there are other types of retirement accounts that you might consider, such as a solo 401(k) or a SEP-IRA, based on whether you have employees and on your business income.
Read 4 Ways to Start a Retirement Account as a Self-Employed Freelancer or 5 Retirement Options When You’re Self-Employed for more information.
When is a Roth rollover allowed?
For a rollover to be tax-free, you must use a like account. For example, if you have a traditional 403(b), you must rollover to another traditional retirement account at work or to a traditional IRA.
If you move traditional, pre-tax funds into a post-tax, Roth account, you must pay income tax on any amount that wasn’t previously taxed. That could leave you with a massive tax liability. If you want a Roth, a better move would be to open a Roth account at your new job or to start a Roth IRA (if your income doesn’t make you ineligible to contribute).
Where should you move an old retirement account?
The best place for your old retirement account depends on the flexibility and legal protections you want. Other considerations include the quality of your old plan, your income, and whether you have a new job with a retirement plan that accepts rollovers.
The best place for your old retirement account depends on the flexibility and legal protections you want.
The goal is to position your retirement money where you can keep it safe and allow it to grow using low-cost, diversified investment options. If you have questions about doing a rollover, get advice from your retirement plan custodian. They can walk you through the process to make sure you choose the best investments and don’t break the rollover rules.
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The holiday season is the biggest travel season of the year, and traveling during the holiday season, especially with kids, can be super stressful. AAA forecasted that 112.5 million people traveled in the holiday season in 2018, and sometimes it feels every single one of them is in the airport with you at once! Here are 5 ways to keep your sanity if you have to navigate the airport while traveling this holiday season.
A little bit of planning goes a long wayEspecially if you are flying with young kids, make sure that you are planning your travel smartly. Yes, that red-eye flight or 6 hour layover looks like it won’t be a problem back several months ago when you booked the flight, but now that it’s impending, you might be starting to second-guess yourself. If you do find yourself in an unenviable situation, don’t just ignore it. Make a plan for it (and if you’re traveling with young kids, you might as well make 2 or 3 backup plans too!)
Keep track of your flights
One of the things that I highly recommend is to keep track of your flight reservations. Every couple of weeks, log on to the airline’s account and make sure that your flights still have the same time and you still have the same seats that you picked (if your ticket allows you to pick seats). Airlines are changing their flight schedules all the time, and the more time you have to make changes, the better. The worst thing that can happen is that you don’t find out about a flight change or an aircraft swap until the day before, when there isn’t much you can do.
Another thing I usually do, starting the day before my flight when I check-in, is to look at where my flights are, and where those planes are coming from. I use FlightAware.com to do that kind of research – you can put in your airline and flight number and it will show you not only the status of YOUR flight, but also where your plane is now.
By looking at where my plane is now, I usually know about flight delays BEFORE the airline itself acknowledges it. More information can help you plan your day and get a leg up on making alternate arrangements should you need it
Consider an airport lounge
If you do have an extended layover in an airport, you might want to consider checking if your airline has an airport lounge and how much it costs for entrance. Many credit cards come with access to the Priority Pass network of lounges, which allow you complimentary airport lounge access.
If you don’t have a credit card that gives lounge access, you can investigate how much it costs for a day pass. Most lounges cost $30-$50 for a day pass, though many admit children under 12 for free. Generally I wouldn’t recommend paying that much for a day pass, but it depends on your situation. Look at what you might pay for food and drinks at an airport restaurant and you may find that a day pass to an airport lounge isn’t that much more.
In addition to a quieter place than the terminal and complimentary food and drinks, many airport lounges have a separate children’s area which can be a lifesaver on a long layover.
Sign up for TSA Pre®
Another travel benefit that comes with some credit cards is a $100 credit towards Global Entry membership. If you have Global Entry membership, you also generally will receive TSA Pre on your domestic flights. Depending on where and when you’re traveling, this could be a huge lifesaver to keep you from spending a ton of time waiting in an endless airport security line.
Many of the credit cards that give Global Entry / TSA Pre are premium cards with annual fees north of $450. But here are a few cards with smaller annual fees, including some that waive the annual fee the first year.
Be smart about checked bags vs carry-ons
Our final tip to keep your sanity in airports while traveling this holiday season is to take a step back and consider whether checking bags is better for your situation than just taking carry-ons. There are pros and cons to both situations and you need to decide what works best for you. Our family of 8 has done it both ways. When our kids were younger, with all the baby gear we toted around, we tended to check bags. Southwest Airlines and their 2 free checked bags on every flight were huge – I remember a Southwest flight to Reno where between checked bags, carry-ons, strollers and car seats, we lugged 17 pieces of luggage through the airport! We’ve now gone more towards not checking bags and just taking carry-on luggage. Not only does that save on bag fees, we also don’t have to wait at baggage claim or worry about the airline losing our luggage. But my kids are now all old enough where they can take care of their own carry-on luggage. If you have younger kids who can’t manage their own rollerboards in the airport, then you might consider checking your bags, even if you have to pay extra for it. You don’t want to have to be lugging around multiple suitcases through the airport on top of making sure your kids stay happy and safe.
I hope these tips have given you some ideas to de-stress your holiday airport travel. Got another tip? Leave it in the comments!
With no monthly fees, unlimited refunds for ATM charges and a focus on digital banking, Novo business checking is a great option for small-business owners on the go. Novo offers its own integrated invoicing tool as well as direct integration with top business tools, making it ideal for streamlining financial processes and managing multiple accounts in one place.
While Novo Bank has a strong online focus, it cannot accommodate cash deposits, an essential feature of business banking. Many competitors, on the other hand, offer the ability to deposit cash with an online-based business checking account.
Novo business checking is best for small-business owners who:
Prefer to manage their finances online and do not need to deposit cash on a regular basis.
Want to be able to use any ATM in the U.S. or internationally without worrying about fees.
Want to connect their business checking account to financial tools they already use.
Pros & Cons
No monthly fees or minimum balance requirement.
Unlimited fee-free transactions, no ACH transfer fees and no incoming wire fees.
Refunds on all ATM fees worldwide.
Online banking with unlimited invoicing and bill pay, which includes the option to send paper checks for free.
Integration with top business tools like QuickBooks, Xero, Stripe and Shopify.
Access discounts on business software and services through your account.
Can’t deposit cash.
Can’t send domestic or international wires (international wires available through TransferWise integration, however.)
No recurring payments available with bill pay.
$27 fees for insufficient funds/uncollected funds returned.
Novo business checking at a glance
Minimum opening deposit requirement:
How Novo business checking works
Novo is a mobile business banking platform that allows you to open a business checking account and manage your finances online. Novo Bank is completely digital, with no physical branch locations, and deposit account services are provided by Middlesex Federal Savings, Novo’s partner bank. Each account is insured by the Federal Deposit Insurance Corp. up to $250,000 through Middlesex Federal Savings.
You can apply for Novo business checking by creating an account and submitting an application through the Novo website. You will need to provide information about yourself, your business and any additional business owners, as well as personal identification and legal business documents.
To be eligible for a business checking account from Novo Bank, you’ll need to be at least 18 years old, a U.S. citizen or permanent resident and have a U.S.-based business. You’ll also need to provide a valid U.S. mailing address, Social Security number and mobile phone number.
Once you’ve submitted your application, Novo will review it and reach out directly if it requires additional information or documentation. Generally, you’ll receive a decision within two to three business days. After you’ve been approved by Novo, you’ll be able to fund your account, log in to online banking using the username and password you created during the application process and download the Novo mobile app for iOS or Android.
You’ll also be able to integrate your account with business tools you already use; Novo offers direct integrations with QuickBooks, Xero, Stripe, TransferWise, Shopify, Zapier and Slack.
If you opted to receive a Novo business debit card when completing your application, your card will be delivered to your designated mailing address. Although you can only have one debit card per user with the Novo business checking account, you can use the mobile app to ask to add multiple users to your account and then order debit cards for those users. Added users will have full account access, including the ability to transfer and withdraw funds.
Where Novo business checking stands out
Fee-free: Novo Bank’s business checking account has no monthly fees, no minimum balance requirements, no transaction fees and no incoming wire fees. In addition, there are no fees for incoming or outgoing ACH transfers, stop payments, debit card replacements or paper statements.
Novo business checking also includes free mobile check deposit, free bill pay with physical checks (which are mailed out from the mobile app) and free bank checks. The only instances in which you’ll face fees with Novo are insufficient funds and uncollected funds returned, both of which will incur a $27 fee.
Free ATM access: Novo does not offer fee-free ATM access through a specific partner network, unlike most online business checking account competitors. Instead, Novo allows you to use any ATM in the U.S. or abroad, without charging you any fees. Additionally, Novo will reimburse all fees that you face from those banks for using their ATMs, depositing the refund directly into your account at the end of each month.
Online and mobile banking: Novo business checking is designed to make it easy for small-business owners to manage their finances regardless of location, focusing on mobile tools to avoid the hassle of visiting a physical bank. With the included online and mobile banking features, you can deposit checks, make payments, send money and even mail paper checks for payment.
In addition, you can perform transfers, track your account activity and contact Novo customer service for support. Plus, with the Novo Reserves budgeting tool, you can set aside funds within your checking account to budget for different types of expenses.
Invoicing: A particularly useful tool for freelancers and contractors, Novo’s integrated invoicing feature allows you to create, send and manage an unlimited number of invoices directly within your checking account. You can accept payments by ACH transfer, or — if you’re using the Novo Stripe integration — you can accept payments through your Stripe account. Invoicing is available through the Novo web app, but is not yet supported by the iOS or Android mobile app.
Integrations with business tools: Novo offers direct account integration with QuickBooks, Xero, Stripe, Shopify, TransferWise, Zapier and Slack. You can also connect your Novo business checking account to Square, PayPal and Wave, even though Novo doesn’t currently offer direct integration with these tools. Additionally, you have the option to connect Novo to Venmo, as well as Apple or Google Pay.
Although some online business checking account competitors offer proprietary financial tools or add-ons, Novo stands out with the ability to seamlessly connect to popular tools many small-business owners already use.
Discounts on software and services: Through the Novo Bank perks program, you can access discounts on certain business software and services with your checking account. Novo partners with providers including Stripe, QuickBooks, Gusto, Google, HubSpot and others to offer savings opportunities for account holders. For example, Novo account holders can access a 30% discount on all new GoDaddy purchases, as well as $150 in Snapchat ads credits.
Where Novo business checking falls short
Can’t deposit cash: Novo business checking cannot accommodate traditional cash deposits. If you have cash that you’d like to deposit, instead of simply depositing it at an ATM, you’ll have to purchase a money order and then use Novo’s mobile check deposit feature to deposit the check into your account.
Although this may not be problematic if you need to deposit cash once in a while, it’s less than ideal if your business needs to deposit cash on any regular basis. In comparison, many other online-based business checking accounts offer the ability to deposit cash through their partner ATM networks.
No recurring payments with bill pay: Novo allows you to pay bills, fee-free, with ACH transfers and mailed checks. Additionally, although you cannot send domestic or international wires using Novo business checking, you can send international wires using the TransferWise integration (with associated fees). Regardless of the method of the payment, however, Novo Bank’s business checking account does not offer recurring payments, a common feature included with online bill pay.
You can save your payee’s information within your Novo account for future payments, but you can’t set payments to automatically send — meaning you’ll need to actively monitor your bills and initiate payments before their due dates.
Life can feel overwhelming when you’re saddled with loads of debt from different creditors. Maybe you carry multiple credit card balances on top of having a high-interest personal loan.
Or maybe you have a loan with an adjustable-rate and your payments are starting to rise each month, making your budget more and more uncomfortable.
In these situations, it may be wise to look at a debt consolidation loan. For some people, it’s a smart choice that gets your debts organized while potentially lowering your monthly payments. Ready to learn more? Let’s get started.
Best Debt Consolidation Loan Lenders of 2021
We’ve compiled a list of the best debt consolidation loans online, along with their basic eligibility requirements. Research each one carefully to see which one can help you with your debt consolidation.
Different lenders are ideal for different borrowers. Review these options and take a look at which ones best suit your needs as well as your credit profile. Once you have your own shortlist, you can get prequalified to compare loan options and find the best offer.
Since 2012, DebtConsolidation.com has worked with borrowers to find the best debt consolidation service for their unique situation. If you are not really sure where to get started with your debt repayment process, then this is a good place to start.
The company offers many resources, tools, and relief programs on how to get out of debt quickly. Wherever you are at on your debt repayment journey, they may be able to help.
After you provide some information about your debts, the website will present the best way forward. You may be matched to debt consolidation loans, debt settlement companies, or credit counseling depending on your individual situation.
You can easily compare several different options through this service which is a great way to start your debt repayment journey off right!
It is completely free to use their services. However, when you are matched to a partner, the partner may charge fees for their services. Always make sure to understand the exact terms of your debt consolidation loan before moving forward with any company.
Marcus by Goldman Sachs
If you’re looking for an online-only lender, then Marcus by Goldman Sachs may be the right choice for you. Marcus offers personal loans that can be used for debt consolidation.
If you have a credit score of 660 or higher, you may qualify for a personal loan between $3,500 and $40,000. The APR range is between 6.99% and 28.99%.
One of the best things about taking out a loan through Marcus is how transparent the bank is. There are no hidden fees and that includes late fees, which is pretty rare among other lenders.
Plus, the bank gives you the option to choose your own payment due date. After making 12 months of consecutive payments, you can defer one monthly payment if you want.
The only real downside is that you’ll need good to excellent credit to qualify. And Marcus won’t let you apply with a co-signer.
Read our full review of Marcus
Avant is designed for borrowers with average credit or better and offers a number of perks for debt consolidation.
You can get help with your debt management by getting free access to resources, plus you receive regular updates on your VantageScore to track your credit repair process.
In fact, the average borrower using the funds for debt consolidation sees a 12-point increase within the first six months. So who can get a loan through Avant?
Most borrowers have a credit score between 600 and 700. While you don’t need to meet a minimum income threshold, most customers earn between $40,000 and $100,000 each year.
One of the great things about borrowing with them is that once you are approved and agree to your loan terms, you can get funding in as little as a day. This is a great benefit if you have a number of due dates coming up and want to get started paying off your current creditors as soon as possible.
Their loan terms range anywhere between two and five years, so you can choose to either pay off your debt aggressively or take the slow and steady route.
Read our full review of Avant
If you have fair to good credit, you may be eligible for a debt consolidation loan from Payoff. The company offers debt consolidation loans with competitive rates and flexible repayment terms. Payoff focuses on helping borrowers pay down their high-interest credit card debt.
Payoff does this by providing debt consolidation loans between $5,000 and $35,000. The APR range is between 5.99% and 24.99%, depending on your credit score. The repayment terms will be between two and five years.
One of the advantages of taking out a debt consolidation loan through Payoff is the additional support they provide. Payoff doesn’t just want to help you repay your debt; they want to help you build a solid financial future.
The lender will provide financial recommendations, tools, and resources to help you stay on track. This will help you meet your short-term goals and build positive long-term financial habits.
Read our full review of PayOff
Upstart’s target borrower is a younger person with less established credit. So maybe you don’t have a problem with bad credit, but you have a problem with no credit. When you apply for an Upstart loan, more emphasis is placed on your academic history than your credit history.
They’ll review your college, your major, your job, and even your grades to help make you a loan offer. The minimum credit score is 620. Most borrowers are between 22 and 35 years old, but there are no technical age restrictions.
However, one requirement is that you must be a college graduate, which obviously limits the applicant pool. And while loan amounts range up to $25,000, you only have one term option: three years.
They don’t offer the most flexibility, but it does have competitive rates and a unique approval model that may help some borrowers who want a loan.
Read our full review of Upstart
PersonalLoans.com directly helps individuals with low credit scores so this is a great place to come if you’re still in the credit repair process.
However, there are a few restrictions: you cannot have had a late payment of more than 60 days on your credit report, a recent bankruptcy, or a recent charge-off. But if you meet these basic guidelines, PersonalLoans.com may be a good option for you.
PersonalLoans.com is unique in that it’s a loan broker, not an actual lender. Through the application, you’ll get offers from traditional installment lenders, bank lenders, and even peer-to-peer lenders.
Your actual loan agreement that you choose is signed between you and the lender, not PersonalLoans.com. This provides a convenient way to compare rates and terms through just a single application process.
Read our full review of PersonalLoans.com
LendingClub is a peer-to-peer lender. That means rather than having your loan funded directly by the lender, your loan application is posted for individual investors to fund.
Additionally, your interest rate and terms are determined by your credit profile. The minimum credit score is just a 600, but the average borrowers is higher.
LendingClub boasts competitive rates; in fact, its website claims that the average debt consolidation borrower lowers their interest rate by 30%. You can use the website’s personal loan calculator to determine how much you could actually save by consolidating your debt.
There’s also a large-cap on loans, all the way up to $40,000. That’s on the higher end for many online lenders, especially those open to individuals with lower credit.
Read our full review of LendingClub
Upgrade appeals to all different types of borrowers. When assessing a new borrower, the lender considers various factors, including their credit score, free cash flow, and debt-to-income ratio.
The company offers personal loans that can be used for many different purposes, including debt consolidation. Upgrade will even make payments directly to your lender for added convenience.
If you have a minimum credit score of 600, you may qualify for a personal loan between $1,000 and $50,000. When you apply, the lender will do a soft pull on your credit so it won’t affect your credit score.
Upgrade is one of the best options for borrowers with poor credit and borrowers with a high debt-to-income ratio. And the lender offers a hardship program, so if you fall on difficult times financially, you may receive a temporary deduction on your monthly payments.
Read our full review of Upgrade
Discover offers personal loans for borrowers with good to excellent credit. You can use a personal loan from Discover to consolidate your existing high-interest credit card debt.
If you qualify, you’ll receive a personal loan between $2,500 and $35,000. The APR range is 6.99% to 24.99%. And the bank never charges any origination fees.
You must have a minimum credit score of 660 to qualify, so Discover isn’t a good option for borrowers with bad credit. And unfortunately, Discover doesn’t give borrowers the option to apply with a co-signer.
Read our full review of Discover
With an A+ rating from the Better Business Bureau, OneMain is a lender committed to customer satisfaction. While they offer debt consolidation loans up to $25,000, you can also get a loan for as little as $1,500.
This is one of the lowest loan minimums we’ve seen, which is perfect if you have just a small amount of debt you’d like to consolidate because of exorbitant or adjustable interest rates.
In addition to applying online, you can also elect to meet with a financial adviser at a OneMain branch location.
In fact, part of the application process entails meeting with someone either at a branch or remote location to ensure you understand all of your loan options. This is a great step that most online lenders lack, allowing you to really take the time to weigh your options and decide which is best for you.
Read our full review of OneMain
Best Debt Settlement Companies of 2021
Taking out a debt consolidation loan is just one option when you want to lower your monthly payments. Another way to go is enrolling in a debt settlement program. Rather than paying off your lender in full, a debt settlement company can help negotiate an amount to repay so that the debt is considered settled.
In the meantime, you agree to freeze your credit cards and deposit cash each month into an account that will eventually be used to pay off the settlement.
However, the downside is that to make this strategy work, you must stop making payments on your owed amounts, which will cause them to go into default. That means your credit score will take a nosedive. But, the goal is to pay less than what you owe.
If you have enough debt that it seems impossible for you to ever repay, debt settlement might be a better option than filing for bankruptcy. Below are Crediful’s top two picks for debt settlement companies. You can find the full list here.
Accredited Debt Relief
Accredited regularly works with major banks and lenders to help clients negotiate settlements. These include Bank of America, Wells Fargo, Chase, Capital One, Discover, and other financial institutions of all sizes, both large and small.
They’ll even work with retailers if you have store cards with major balances. While results vary from person to person, they offer examples of clients saving anywhere between 50% and 80% on their amounts owed.
Read our full review of Accredited Debt Relief
National Debt Relief
National Debt Relief has an A+ rating with the Better Business Bureau and prides itself on trying to help those who truly have financial hardships in their lives.
One benefit of working with this company is that your funds are held in an FDIC-insured account that is opened in your name.
That means you have full control over the account and don’t run the risk of being scammed out of your money — you can rest assured that National is a reputable company.
Plus, the team is fully versed in consumer and financial law so you can trust that your interests are being served to the fullest legal extent possible.
Read our full review of National Debt Relief
What is debt consolidation?
Debt consolidation allows you to pull all of your smaller existing debts into one new debt that you pay each month. When you take out a debt consolidation loan, you receive funds to pay off all of your existing debt, like your credit card balances and high-interest loans.
You then make a single monthly payment to your lender, rather than making multiple payments each month. Keep in mind that this is different from debt settlement in that you’re not negotiating a new amount owed. Instead, you keep the same amount of debt but pay it off in a different way.
Depending on your personal situation, debt consolidation comes with both pros and cons. It’s important to weigh both sides carefully before deciding if a debt consolidation loan is right for you.
Let’s delve into the details so that you can get closer to making a decision.
Advantages of Debt Consolidation
There are a number of advantages associated with debt consolidation loans.
Lower Your Monthly Payments
The biggest benefit is the ability to lower your combined monthly payments. Because interest rates on credit cards are so high, it’s possible that you can find a lower interest rate on a debt consolidation loan instead, which means lower payments.
However, your actual interest rate depends on several factors, especially your credit score. It’s important to compare interest rates and the total cost of the debt consolidation loan to your current payments to make sure you don’t end up paying more over time. The goal is to save you money.
Improve Your Credit Score
Another advantage of debt consolidation is that it can actually help increase your credit score. While your amount of debt stays the same, installment loans are viewed more favorably than credit card debt.
So if the majority of your debt comes from maxed-out credit cards, you could potentially see a rise in your credit score because your credit utilization on each individual card has gone down.
A debt consolidation loan streamlines your monthly payments. Rather than being inundated with multiple due dates each month, you simply have one to remember. This also contributes to building a healthy credit score because it lowers your chance of having a late payment.
Disadvantages of Debt Consolidation
In some cases, debt consolidation loans might not be a great idea. We talked about the total cost of the loan, which needs to be reviewed holistically, not just as a monthly payment. This is true for several reasons.
First, most lenders charge some sort of fee when you take out a new loan. The most common is an origination fee, typically charged as a percentage of the total loan amount.
So if you need a $10,000 loan and there is a 4% origination fee, you’ll only actually receive $9,600. Next, compare interest rates and loan terms.
Even if the monthly payments look good on paper, you may be paying a lot more over an extended payment period. You can use the APR to compare interest rates and fees, but you also need to consider how much you’ll spend on interest over the entire loan term.
Changing Your Spending Habits
Finally, it doesn’t necessarily fix the root problem of your debt.
This isn’t something you need to worry about if your debt results from a one-time incident, such as an expensive medical procedure or temporary job loss. But if you habitually spend more than you earn and are still incurring new debt, then debt consolidation loans will not help you in the long run.
If this sounds like you, try to figure out how you can curb your spending to stop accruing more debt. You can even talk to a debt counselor to help create a sound management plan for your finances.
A payday loan is a short-term loan with a high annual percentage rate. Also known as cash advance and check advance loans, payday loans are designed to cover you until payday and there are very few issues if you repay the loan in full before the payment date. Fail to do so, however, and you could be hit with severe penalties.
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Lenders may ask the borrower to write a postdated check for the date of their next paycheck, only to hit them with rollover fees if that check bounces or they request an extension. It’s this rollover that causes so many issues for borrowers and it’s the reason there have been some huge changes in this industry over the last decade or so.
How Do Payday Loans Work?
Payday lending seems like a simple, easy, and problem free process, but that’s what the payday lender relies on.
The idea is quite simple. Imagine, for instance, that your car suddenly breaks down, payday is 10 days away, and you don’t have a single cent to your name. The mechanic quotes you $300 for the fix, and because you’re already drowning in debt and have already sold everything valuable, your only option is payday lending.
The payday lender offers you the $300 for a small fee. They remind you that if you repay this small short-term cash sum on payday, you won’t incur many fees or any real issues. But a lot can happen in 10 days.
More bills can land in your mailbox, more expenses can arrive out of nowhere, and before you know it, all of your paycheck has been allocated for other expenses. The payday lender offers to rollover your loan for another month (another “payday”) and because you don’t have much choice, you agree.
But in doing so, you’ve just been hit with more high fees, more compounding interest, and a sum that just seems to keep on growing. By the time your next payday arrives, you’re only able to afford a small repayment, and from that moment on you’re locked into a debt that doesn’t seem to go anywhere.
Payday loans have been criticized for being predatory and it’s easy to see why. Banks and credit unions profit more from high-income individuals as they borrow and invest more money. A single high-income consumer can be worth more than a dozen consumers straddling the poverty line.
Payday lenders, however, target their services at low-income individuals. They offer small-dollar loans and seem to profit the most when payment dates are missed and interest rates compound, something that is infinitely more probable with low-income consumers.
Low-income consumers are also more likely to need a small cash boost every now and then and less likely to have the collateral needed for a low-interest title loan. According to official statistics, during the heyday of payday loans, most lenders were divorced renters struggling to make ends meet.
Nearly a tenth of consumers earning less than $15.000 have used payday loans, compared to fewer than 1% for those earning more than $100,000. Close to 70% of all payday loans are used for recurring expenses, such as utility bills and other debts, while 16% are used for emergency purchases.
Pros and Cons of Taking Out a Payday Loan
Regardless of what the lender or the commercial tells you, all forms of credit carry risk, and payday loans are no exception. In fact, it is one of the riskiest forms of credit available, dragging you into a cycle of debt that you may struggle to escape from. Issues aside, however, there are some benefits to these loans, and we need to look at the cons as well as the pros.
Pros: You Don’t Need Good Credit
Payday loans don’t require impeccable credit scores and many lenders won’t even check an applicant’s credit report. They can afford to do this because they charge high interest and fees, and this allows them to offset many of the costs associated with the increased liability and risk.
If you’re struggling to cover your bills and have just been hit with an unexpected expense, this can be a godsend—it’s a last resort option that could buy you some time until payday.
Pros: It’s Quick
Payday loans give you money when you need it, something that many other loans and credit offers simply can’t provide. If you need money right now, a payday lender can help; whereas another lender may require a few days to transfer that money or provide you with a suitable line of credit.
Some lenders provide 24/7 access to money, with online applications offering instant decisions and promising a money transfer within 24 hours.
Pro: They Require Very Little
A payday loan lender has a very short list of criteria for its applicants to meet. A traditional lender may request your Social Security Number, proof of ID, and a credit check, but the average payday lender will ask for none of these things.
Generally, you will be asked to prove that you are in employment, have a bank account, and are at least 18 years old—that’s it. You may also be required to submit proof that you are a US citizen.
Cons: High Risk of Defaulting
A study by the Center for Responsible Lending found that nearly half of all payday loans go into default within just 2 years. That’s a staggering statistic when you consider that the average default rate for personal loans and credit cards is between 1% and 4%.
It proves the point that many payday lender critics have been making for years: Payday loans are predatory and high-risk. The average credit or loan account is only provided after the applicant has undergone a strict underwriting process. The lender takes its time to check that the applicant is suitable, looking at their credit history, credit score, and more, and only giving them the credit/loan when they are confident it will be repaid.
This may seem like an unnecessary and frustrating process, but as the above statistics prove, it’s not just for the benefit of the lender as it also protects the consumer from a disastrous default.
Con: High Fees
High interest rates aren’t the only reason payday lenders are considered predatory. Like all lenders, they charge fees for late payments. But unlike other lenders, these fees are astronomical and if you’re late by several weeks or months, those fees can be worth more than the initial balance.
A few years ago, a survey on payday lending discovered that the average borrower had accumulated $458 worth of fees, even though the median loan was nearly half that amount.
Cons: There are Better Options
If you have a respectable credit history or any kind of collateral, there are better options available. A bank or credit union can provide you with small short-term loans you can repay over many months without accumulating astronomical sums of interest.
The interest rates are much lower, the fees are more manageable, and unless your credit score is really poor, you should be offered more favorable terms than what you can get from a payday lender.
Even a credit card can offer you better terms. Generally speaking, a credit card has some of the highest interest rates of any unsecured debt, but it can’t compare to a payday loan. It also has very little impact on your credit score and many credit card providers offer 0% on purchases for the first-few months.
What’s more, if things go wrong with a credit card, you have more options than you have with a payday loan, including a balance transfer credit card or a debt settlement program.
Why Do Payday Loans Charge So Much Interest?
If we were to take a cynical view, we could say that payday loans charge a lot simply because the lender can get away with charging a lot. After all, a payday loan lender targets the lowest-income individuals, the ones who need money the most and find themselves in desperate situations.
However, this doesn’t paint a complete picture. In actual fact, it all comes down to risk and reward. A lender increases its interest rate when an applicant is at a greater risk of default.
The reason you can get low rates when you have a great credit score and high rates when you don’t, is because the former group is more likely to pay on time and in full, whereas the latter group is more likely to default.
Lending is all about balancing the probabilities, and because a short-term loan is at serious risk of defaulting, the costs are very high.
Payday Loans and Your Credit Score
Your credit will only be affected if the lender reports to the credit bureaus. This is something that many consumers overlook, incorrectly assuming that every payment will result in a positive report and every missed payment in a negative one.
If the lender doesn’t report to the main credit bureaus, there will be no changes to your report and the account will not even show. This is how many payday lenders operate. They rarely run credit checks, so your report won’t be hit with an inquiry, and they tend not to report on-time payments.
However, it’s a different story if you miss those payments. A lender can report missed payments and defaults and may also sell your account to a debt collector, at which point your credit score will take a hit.
If you’re concerned about how an application will impact your credit score, speak with the lender or read the terms and conditions before applying. And remember to always meet your payments on time to avoid any negative marks on your credit report and, more importantly, to ensure you’re not hit with additional fees.
Payday Loans vs Personal Loans
A personal loan is generally a much better option than a payday loan. These loans are designed to help you cover emergency expenses, pay for home improvements, launch businesses, and, in the case of debt consolidation loans, to clear your debt.
The interest rates are around 6% to 10% for lenders with respectable credit scores, and while they often charge an origination fee and late fees, they are generally much cheaper options. You can repay the loan at a time that suits you and tailor the payments to fit your monthly expenses, ensuring that they don’t leave you short at the end of the month.
You can get a personal loan from a bank or a credit union; whenever you need the money, just compare, apply, and then wait for it to hit your account. The money paid by these loans is generally much higher than that offered by payday loans and you can stretch it out over a few years if needed.
What is an Unsecured Loan?
Personal and payday loans are both classed as unsecured loans, as the lender doesn’t secure them against money or assets. Secured loans are typically secured against your home (mortgage, home equity loan) or your car (auto loan, title loan). They can also be secured against a cash deposit, as is the case with secured credit cards.
Although this may seem like a negative, considering a lender can repossess your asset if you fail to meet the payment terms, it actually provides many positives. For instance, a secured loan gives the lender more recourse if anything goes wrong, which means the underwriters don’t need to account for a lot of risk. As a result, the lender is more likely to offer you a low interest rate.
Where cash advance loans and other small loans are concerned, there is generally no option for securing the loan. The lender won’t be interested, and neither should you—what’s the point of securing a $30,000 car against a $1,000 loan!?
New Payday Loan Regulations
Payday lenders are subject to very strict rules and regulations and this industry has undergone some serious changes in recent years. In some states, limits are imposed to prevent high interest rates; in others, payday lenders are banned from operating altogether.
The golden age of payday lending has passed, there’s no doubt about that. In fact, many lenders left the US markets and took their business to countries like the UK, only for the UK authorities to impose many of the same restrictions after a few years of pandemonium. In the US, the industry thrived during the end of the 2000s and the beginning of the 2010s, but it has since been losing ground and the practice is illegal or highly restricted in many states.
Are Payday Loans Still Legal?
Payday loans are legal in 27 states, but many states have imposed strict rules and regulations governing everything from loan amounts to fees. The states where payday lenders are not allowed to operate are:
It is still possible to apply for personal loans and title loans in these states, but high-interest, cash advance loans are out of the question, for the time being at least.
Debt Rollover Rules for Payday Lenders
One of the things that regulations cover is something known as Debt Rollover, whereby a consumer rolls their debt over into the next billing period, accruing fees and continuing to pay interest. The more rollovers there are, the greater the risk and the higher the detriment to the borrower.
Debt rollovers are at fault for many of the issues concerning payday loans. They create a cycle of persistent debt, as the borrower is forced to acquire additional debt to repay the payday loan debt.
In the following states, payday loans are legal but restricted to between 0 and 1 rollovers:
Other states tend to limit debt rollovers to 2, but there are some notable exceptions. In South Dakota and Delaware, as many as 4 are allowed, while the state of Missouri allows for 6. However, the borrower must reduce the principal of the loan by at least 5% during each successive rollover.
Are These Changes for the Best?
If you’re a payday lender, the aforementioned rules and regulations are definitely not a good thing. Payday lenders rely on persistent debt. They make money from the poorest percentage of the population as they are the ones most likely to get trapped in that cycle.
For responsible borrowers, however, they turn something potentially disastrous into something that could serve a purpose. Payday loans still carry a huge risk, especially if there is any chance that you won’t repay the loan in time, but the limits imposed on interest rates and rollovers reduces the astronomical costs.
In that sense, they are definitely for the best, but there are still risks and potential pitfalls, so be sure to keep these in mind before you apply for any short-term loans.
As of early 2020, student loan debt in the nation had reached more than $1.5 trillion. More than 44 million individuals have student loan debt, and the average person with student loans owes a bit over $32,000—which is more than half of the average household income in the United States. As a new school year approaches, more individuals are searching for ways to fund their education without going into debt for years. Luckily, student loans aren’t the only way to get help paying for college.
Learn more about student loans vs. financial aid below,
and get some information about various ways to help fund your education.
Student Loans vs. Financial Aid: What’s the Difference?
Both student loans and financial aid can come from the federal government or the private sector. The main difference between student loans and financial aid is whether or not you need to pay back the money you are given. Student loans generally require that you pay back the loan with interest, while financial aid packages like scholarships and grants typically do not need to be paid back.
That distinction can make a big difference. “Every dollar you receive in scholarship or grant form is a dollar you don’t have to pay interest on,” says Zina Kumok, an editor at Dollar Sprout. And saving that money opens up possibilities after graduation, too. “Students who don’t have to take out as many loans will have more career options and afford to start their own businesses, work in lower-paying fields, or even take time off to travel abroad.”
But as with any financial agreement, make sure you
understand the terms upfront before signing anything. Not all financial aid
comes without strings.
How to Apply for Financial Aid
To qualify for federal loans and other types of federal financial aid, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). You might need to complete the FAFSA with some of your parents’ income information if you are still a dependent.
To apply for private loans and financial aid, you must
research the program in question and complete the appropriate application
process. For example, academic or extracurricular scholarships are often
offered by various colleges and universities. You’ll have to look on those
university websites or contact financial aid departments at various schools to
find out about how to apply to these programs. Scholarships offered by private
organizations will have their own processes as well.
Student loans provide credit extended to you or your parents for the purpose of paying for college. Student loans do have to be repaid, but typically not until you’re out of school. In some cases, such as if you’re going to work in certain public sectors, you might be able to apply for a student loan forgiveness program.
Subsidized and Unsubsidized Federal
When you apply with the FAFSA, you may find out you qualify for federal loans. Subsidized federal loans tend to have slightly better terms than unsubsidized loans. Another benefit of a subsidized loan is that the interest on it is covered by the Department of Education as long as you meet enrollment requirements. The amount you can borrow is limited, and interest rates range from 2.75 to 4.3%.
Learn more about federal student loans and economic protections from COVID-19: What You Need to Know about CARES, HEROES, and HEALS.
Private Student Loans
If you don’t qualify for federal student loans or want another option, you can apply for private student loans from commercial lenders. Whether you can get approved for these loans or get favorable terms and rates might depend on your credit score.
Don’t know your credit score? Sign up for ExtraCredit to find out.
takes many forms, and most often does not need to be paid back after you
graduate. These types of aid can be offered by your school, other private
institutions, or the government. They are most often divided into needs-based
aid and merit-based aid.
When applying for
any type of financial aid, you will need to research the deadlines,
requirements, and payment specifics carefully.
Be wary of scholarship and other aid programs that charge fees. “Fees are a dead giveaway of scholarship scams,” says Doug Whiteman, editor-in-chief at MoneyWise.com. “Be very careful about handing over a credit card number or other personal information.”
Scholarships are awarded for need or merit, and they’re offered by a wide range of organizations. Schools, private businesses, local and national associations, religious organizations, and charities are all potential sources for scholarships. Most scholarships do not require you to pay them back.
“Students should be more aggressive about applying for scholarships,” says Kumok. Whiteman agrees, citing a recent New York Times article that estimates there are 44,000 private scholarship programs. “The typical student probably has no idea that there’s so much money available,” he says. “Too often students and their families have seen student loans as an easy fallback, before they’ve fully explored scholarship and other financial aid possibilities.”
Grants are a type of financial aid that you typically don’t have to pay back. Federal and state governments offer grants, as do private and nonprofit organizations. Make sure to do ample research to ensure you get your application right, and pay attention to the grant terms. While many grants don’t have to be repaid, some do.
Be careful not to depend fully on grants, though. “Grants might not be available for the length of your degree program,” advises Anna Serio, a staff writer at Finder.com. “Some only cover the first year, while others are only available during the second, third, or fourth year of school. Even if a grant program covers all four years, you might have to reapply every year to be considered.”
Work-study jobs help you pay your way through school or
cover expenses. Some work-study jobs are paid internships, where you practice
skills and knowledge you’re learning in school or for your future career.
Others might simply be on-campus jobs in dining halls, fitness centers,
tutoring or writing centers, or other areas.
programs are best for students who want to build up their resume,” says Serio. “Work-study
makes it easier to land a job without experience or in a new field if you’re in
graduate school. Sometimes, work-study jobs can turn into a regular part-time
or even full-time position.”
If you pay qualifying expenses for school, you may be able to claim a certain amount as a tax credit to reduce your tax burden or even get a refund. The American Opportunity Credit, for example, allows up to $2,500 credit per eligible student, while the Lifetime Learning Credit allows qualified individuals to claim up to $2,000 for qualified education expenses per tax year.
State Aid Programs
Almost every state offers grants or other financial aid opportunities for college students. The National Association of Student Financial Aid Administrators provides a detailed list of state financial aid opportunities.
Schools may offer many of their own programs, but they
aren’t always well published. When you’re in the process of considering and
visiting schools, during the application process or even after you’ve been
accepted, make it a point to visit the financial aid office. School financial
aid officers can help ensure you’ve applied for all applicable financial aid.
Employer Education Assistance
If you’re already working, your employ might offer
funding for education. Some employers have programs that cover all or part of
the cost of degree programs if you agree to work for them for a certain amount
of time. Others pay for training seminars, workshops, and one-off classes that
are likely to make you a more valuable employee. Talk to your supervisor or human
resources department to find out if your employer offers such benefits.
Leave no stone unturned when seeking financial aid for
college. Numerous programs exist to help fund education for people in specific
For example, the Educational and Training Vouchers Program provides assistance to those who are or were in foster care. The National Health Service Corps Loan Repayment Program helps pay for student loans for those who work at Indian Health Services facilities. Be creative! The Tall Clubs International Foundation has a scholarship program for college women who are 5’10” tall and men who are at least 6’2”. Consider what makes you unique and look for scholarship opportunities that may reward you for it.
Did you know that there are also some tuition-free schools around the United States? Residents of certain states may qualify for free tuition programs. Be sure to do your research into these schools, as you would with any other. “The programs in the US often require you to work in exchange for your degree,” says Serio. “This can help you develop valuable skills and gives you a leg up entering the job market after you graduate.”
Get the Financial Aid You Need
If you need help paying for schooling, there are plenty of financial aid options available to you. Reach out to your school’s financial aid office for assistance and direction. If you’re interested in learning more about student loan options, you can look through our resource center for more information.
It might be a couple weeks before we’re sure who will be in the White House for the next four years. But we’ll have someone. And we’ll have federal, state, and local officials too. I’m convinced that these folks can implement creative personal finance policies that will help you and me. So here are seven ideas for future personal finance policies.
Table of Contents show
P.S.—If you know Joe, send him this link.
Basic Tenets and Rules Behind the Ideas
I wanted these personal finance policies to meet three basic criteria.
1) Large Marginal Benefits
$1000 means more to a single, working-class mother than it does to Bill Gates. The marginal benefit for her is greater. Maximizing these marginal benefits is a utilitarian choice.
I’ve written extensively about the role of luck in society. The lucky owe a debt. The unlucky deserve a credit. This first tenet is an extension of those thoughts.
2) Incentivize Positive Behavior
You don’t want to give money for nothing (or chicks for free). Instead, we want our tax dollars to incentivize good behavior. Or even better, we’d like the benefits to scale upwards as the good behavior scales upwards. This is a principle of behavioral economics (e.g. nudge theory).
3) Find a Fiscal Balance
Some believe the government owes you nothing. Others think the government owes you everything. Most of us are somewhere in between. That’s why I aim for a “fiscal balance” in today’s proposals.
And One Tacit Assumption
I’m making an overarching assumption in this post. Namely, the assumption that positive personal finance behavior is a virtue.
I’m assuming that keeping money in people’s hands is not only good for those individual people, but also good for society.
I’m assuming that paying credit card interest and student loan interest is bad for individuals, and therefore bad for society.
Financial stability leads to happiness. It leads to better health outcomes. And when more people are happy and healthy, society improves.
We all do better when we all do better.
There Will Be Shortcomings
I’m jotting these ideas down on election night. I’m doing a little research, but I’m sure I’ll miss something. I’ll mistakenly create a perverse incentive. Maybe I’ll mess up my math and propose a trillion-dollar aid package. Or maybe you’ll just think my ideas are just dumb.
If (when) I mess something up, drop me a message. Real politicians have teams of aides and trusted advisors. I have you—and I’m very thankful for that.
And with that, let’s get started on my list of seven ideas for future personal finance policies.
1) Help with Student Loan Interest
I wrote a detailed, mathematical explanation of this idea. I think we should help students with their student loan interest, which is different than helping them with loan principal. Let me give you the summary.
First off, interest is the killer. It’s “normal” for someone to spend $200K to repay a $100K loan. How? Because of interest.
My proposal is that government funding can help pay the interest, but only if the debtor is willing to contribute a significant amount of their income. The more income the debtor contributes, the more the government contributes.
Let’s apply some hard numbers.
Imagine a former student with $100,000 in total student debt
…at a 5% interest rate
…with the ability to make $750 per month payments
In the current reality, this person must pay principal and interest. They’ll end up paying a total of $144,535 over 16 years.
But If We Encouraged Them to Pay More?
But what if we had an incentive system that encouraged people to contribute more to debt repayment in exchange for government-funded interest-only payments? Hard numbers: what if this person contributed $1000 per month and the government covered 50% of the interest payments?
In this scenario, the debtor pays $111,935 over 12 years. They save $33,000 and get out of debt four years earlier.
But at what cost? The government picks up $11,935 worth of interest payments over those 12 years, or about $106/month on average.
We asked the debtor to increase their monthly payments by 33%. Get out of debt faster—that’s good. We’ve spent $12K in tax dollars to give the individual $33K—some of which will surely end up back in the tax coffers eventually!
Who loses? I’m sure the loan servicing industry will raise some questions. Over the long haul, they are losing out on interest payments—and that’s how they make their money.
Also, there are some ~45 million Americans in student debt, with an average of $30,000 debt per person. That’s ~$1.35 trillion total. If my proposal has the government contributing interest payments equal to ~10% of each person’s loan principal, then we’re looking at a $135 billion bill (spread out over many years). Not exactly couch cushion money.
So maybe it’s smarter to set the bar lower. Perhaps $135 billion is way too high. But the principle stands. By merely helping with student loan interest, we can help a lot of people out.
2) Government-Funded Matching
Many of us get an “employer match” as an employment benefit. If we contribute to our retirement account (e.g. 401(k)), then our employer will also contribute to that account. It’s free money.
What if Uncle Sam did something similar?
Now, it couldn’t be too much free money. And I doubt the money could be doled out at a 1:1 ratio (e.g. you contribute $1000, Uncle Sam contributes $1000). But I do think we could incentivize positive behavior (contributing to a retirement account) via a small financial incentive (government-funded matching).
How about something like a 10% match on the first $5000 contributed each year into a retirement account. If 100 million U.S. workers took full advantage of this program, it would cost $50 billion per year to fund.
But keep in mind! That would also mean that 100 million people are making significant contributions to their retirements. That is very good for the welfare of our citizenry.
Assuming someone takes advantage of this benefit from age 22 to 62, the U.S. government will have provided them with $20,000 in benefits. But assuming historical average S&P 500 returns, this person can expect those benefits to grow to ~$100,000. The first year’s $500 will have grown to $7000 assuming a 7% annual real rate of return.
As for marginal utility, it probably doesn’t make sense to offer this benefit to millionaires. The extra $500 per year doesn’t do them much good. So, like many other government programs, it makes sense to cap this benefit at a certain income and then taper off the benefit.
And where does this money go? I’m sure that there is some issue with the government pouring money into S&P 500 index funds, even if on behalf of individual citizens. The details need to be worked. I still think it’s a cool idea.
3) “Baby Bond” Investments
Or maybe “Baby Stock” investments. When a kid is born, the U.S. government should invest in their name until they are “X” years old. They can’t touch it until then.
First, this employs a similar benefit to government-funded matching idea. Namely, the government puts forth a small investment today and the individual reaps a large benefit in the future.
Secondly, if “X” is high enough, then this investment can teach a very valuable lesson. Investments grow! How better can a young person learn about investing than by watching their investments grow throughout their childhood?
About 4 million kids are born in the U.S. each year. If they each received a $1000 investment, it would cost the U.S. government $4 billion to fund. Not bad compared to my first two ideas.
By the time that child retires (at age 60), that small $1000 investment will have grown to $58000—again, this assumes a 7% real rate of return.
4) Personal Finance Education
The American education system does many things well. Finger painting, carrying the zero, reading Shakespeare. It’s not easy to educate millions of kids and young adults every year, and our schools do alright.
But our education system is woefully insufficient at financial education. I’m not talking about the intricacies of trickle-down economics or how to broker a merger on Wall Street. Forget about index funds and the Trinity Study. I’m simply talking about savings accounts and credit cards, about how to create (and stick to) a budget, or how (and when) to start thinking about retirement. Basic stuff that everyonemust deal with.
I understand that Pythagoras is important. I know that the mitochondria is the powerhouse of the cell. These are good things to be aware of. Just like personal finance.
So why didn’t anyone ever teach me about personal finance?!—a topic I’d have to think about on a weekly (if not daily) basis for the rest of my life.
You’ve probably asked that question. I know I have. And in my pursuit of answers, I started a blog.
But the real point is that all adults realize—eventually—that personal finance education is a requirement for success. Just stick to the simple stuff. It’s hard to function in society without a cursory knowledge of money and credit cards and bank accounts.
Public personal finance education could solve a lot of the money issues we talk about here. That’s money well-spent. It might be the most useful of the personal finance policies I discuss today.
And with the marvel of the Internet, imagine if we created a comprehensive, online personal finance course that anyone could take from the comfort of their own home. Anyone want to start a non-profit with me?!
5) HSA-like Accounts for Personal Finance
A Health Savings Account offers significant tax benefits if you to put money away for medical costs. And if you never use that money for medical needs, you can access it at retirement like a Roth IRA. In the interim—between now and retirement—you can even invest those HSA funds. Utilizing an HSA is an excellent idea if you’re able.
I’d propose a parallel account—the Personal Finance Savings Account. It would offer similar tax-advantages as an HSA. But you would use the PFSA funds to do things like pay for tax preparation or investing fees. You could buy personal finance education material or buy budgeting software. The PFSA would incentivize smart money choices.
And if you never use your PFSA funds? Then you can access them at retirement. That’s smart too.
Imagine if you could set aside $250 per year in tax-free dollars. That might cost the government ~$50 per person in lost tax revenue. There are ~30 million HSAs. If an equivalent number of people take advantage of PFSAs, then the Uncle Sam would lose roughly $1.5 billion in tax revenue per year.
6) Credit Score Bonus
I have two related ideas here. The first is an incentive to have a high credit score. The second is an incentive to increase one’s credit score. These two options are analogous to the growth vs. proficiency debate in education. Either way, the goal is to incentivize improved credit scores.
“But Jesse, there’s already an incentive for having a good credit score! You get to pay lower interest rates!”
That’s true. But “paying lower interest rates” is both too far out in the future and not tangible. What’s the different between a 3.1% mortgage rate and a 3.3% rate? If you have to get out a calculator or spreadsheet to answer, then my point is made. It’s not tangible enough.
But a $100 check in the mail? That’s tangible!
7) Personal Finance Testing
Pass a personal finance test, get paid. I know this is a pipe dream. I’m just spit-balling. But in some sort of anti-cheating utopia, this would be an effective method of encouraging personal finance education.
What Are Your Personal Finance Policies?
What are your ideas?
Where could we allocate money to incentivize the best personal finance behavior?
What dumb things have I written above?
Thanks For Reading
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If you’re one of those investors with very little time to research and invest in individual stocks, it might be a good idea to look into investing in mutual funds.
Whether your goal is to save money for retirement, or for a down payment to buy a house, mutual funds are low-cost and effective way to invest your money.
What is a mutual fund?
A mutual fund is an investment vehicle in which investors, like you ad me, pool their money together. They use the money to invest in securities such as stocks and bonds. A professional manages the funds.
In addition, mutual funds are cost efficient. They offer diversification to your portfolio. They have low minimum investment requirements.
These factors make mutual funds among the best investment vehicles to use. If you’re a beginner investor, you should consider investing in mutual funds or index funds.
Investing in the stock market in general, can be intimidating. If you are just starting out and don’t feel confident in your investing knowledge, you may value the advice of a financial advisor.
Types of mutual funds
There are different types of mutual funds. They are stock funds, bond funds, and money market funds.
Which funds you choose depends on your risk tolerance. While mutual funds in general are less risky than investing in individual stocks, some funds are riskier than others.
However, you can choose a combination of these three types of funds to diversify your portfolio.
Stock funds: a stock fund is a fund that invests heavily in stocks. However, that does not mean stock funds do not have other securities, i.e., bonds. It’s just that the majority of the money invested is in stocks.
Bond funds: if you don’t want your portfolio to fluctuate in value as stocks do, then you should consider bond funds.
Money market funds: money market funds are funds that you invest in if you tend to tap into your investment in the short term.
Sector funds. As the name suggests, sector funds are funds that invests in one particular sector or industry. For example, a fund that invests only in the health care industry is a sector fund. These mutual funds lack diversification. Therefore, you should avoid them or use them in conjunction to another mutual fund.
Index funds. Index funds seek to track the performance of a particular index, such as the Standard & Poor’s 500 index of 500 large U.S. company stocks or the CRSP US Small Cap Index. When you invest in the Vanguard S&P 500 Index fund, you’re essentially buying a piece of the 500 largest publicly traded US companies. Index funds don’t jump around. They stay invested in the market.
Income funds: These funds focus invest primarily in corporate bonds. They also invest in some high-dividend stocks.
Balance funds: The portfolio of these funds have a mixed of stocks and bonds. Those funds enjoy capital growth and income dividend.
Related Article: 3 Ways to Protect Your Portfolio from the Volatile Stock Market
The advantages of mutual funds
Diversification. You’ve probably heard the popular saying “don’t put all of your eggs in one basket.” Well, it applies to mutual funds. Mutual funds invest in stocks or bonds from dozens of companies in several industries.
Thus, your risk is spread. If a stock of a company is not doing well, a stock from another company can balance it out. While most funds are diversified, some are not.
For example, sector funds which invest in a specific industry such as real estate can be risky if that industry is not doing well.
Mutual funds are professionally managed. These fund managers are well educated and experienced. Their job is to analyze data, research companies and find the best investments for the fund.
Thus, investing in mutual funds can be a huge time saver for those who have very little time and those who lack expertise in the matter.
Cost Efficiency. The operating expenses and the cost that you pay to sell or buy a fund are cheaper than trading in individual securities on your own. For example, the best Vanguard mutual funds have operating expenses as low as 0.04%. So by keeping expenses low, these funds can help boost your returns.
Low or Reasonable Minimum Investment. The majority of mutual funds, Vanguard mutual funds, for example, have a reasonable minimum requirement. Some funds even have a minimum of $1,000 and provide a monthly investment plan where you can start with as little as $50 a month.
Related Article: 7 Secrets Smart Professionals Use to Choose Financial Advisors
The disadvantage of mutual funds.
While there are several benefits to investing in mutual funds, there are some disadvantages as well.
Active Fund Management. Mutual funds are actively managed. That means fund mangers are always on the look out for the best securities to purchase. That also means they can easily make mistakes.
Cost/expenses. While cost and expenses of investing in individual stocks are significantly higher than mutual funds, cost of a mutual fund can nonetheless be significant.
High cost can have a negative effect on your investment return. These fees are deducted from your mutual fund’s balance every year. Other fees can apply as well. So always find a company with a low cost.
How you make money with mutual funds.
You make money with mutual funds the same way you would with individual stocks: dividend, capital gain and appreciation.
Dividend: Dividends are cash distributions from a company to its shareholders. Some companies offer dividends; others do not. And those who do pay out dividends are not obligated to do so. And the amount of dividends can vary from year to year.
As a mutual fund investor, you may receive dividend income on a regular basis.
Mutual funds offer dividend reinvestment plans. This means that instead of receiving a cash payment, you can reinvest your dividend income into buying more shares in the fund.
Capital gain distribution: in addition to receiving dividend income from the fund, you make money with mutual funds when you make a profit by selling a stock. This is called “capital gain.”
Capital gain occurs when the fund manager sells stocks for more he bought them for. The resulting profits can be paid out to the fund’s shareholders. Just as dividend income, you have the choice to reinvest your gains in the fund.
Appreciation: If stocks in your fund have appreciated in value, the price per share of the fund will increase as well. So whether you hold your shares for a short term or long term, you stand to make a profit when the shares rise.
Best mutual funds.
Now that you know mutual funds make excellent investments, finding the best mutual funds can be overwhelming.
Vanguard mutual funds.
Vanguard mutual funds are the best out there, because they are relatively cheaper; they are of high quality; a professional manage them; and their operating expenses are relative low.
Here is a list of the best Vanguard mutual funds that you should invest in:
Vanguard Total Stock Market Index Funds
Vanguard 500 Index (VFIAX)
Total International Stock index Fund
Vanguard Health Care Investor
Vanguard Total Stock Market Fund
If you’re looking for a diversified mutual fund, this Vanguard mutual fund is for you. The Vanguard’s VTSAX provides exposure to the entire U.S. stock market which includes stocks from large, medium and small U.S companies.
The top companies include Microsoft, Apple, Amazon. In addition, the expenses are relatively (0.04%). It has a minimum initial investment of $3,000, making it one of the best vanguard stock funds out there.
Vanguard S&P 500 (VFIAX)
The Vanguard 500 Index fund may be appropriate for you if you prefer a mutual fund that focuses on U.S. equities. This fund tracks the performance of the S&P 500, which means it holds about 500 of the largest U.S. stocks.
The largest U.S. companies included in this fund are Facebook, Alphabet/Google, Apple, and Amazon. This index fund has an expense ration of 0.04% and a reasonable minimum initial investment of $3,000.
You should consider the Vanguard International Stock Market fund of you prefer a mutual fund that invests in foreign stocks.
This international stock fund exposes its shareholders to over 6,000 non-U.S. stocks from several countries in both developed markets and emerging markets. The minimum investment is also $3,000 with an expense ratio of 0.11%.
Vanguard Health Care Investor
Sector funds are not usually a good idea, because the lack diversification. Sector funds are funds that invest in a specific industry like real estate or health care. However, if you want afund to complement your portfolio, the Vanguard Health Care Investor is a good choice.
This Vanguard mutual fund offers investors exposure to U.S. and foreign equities focusing in the health care industry. The expense ration is a little bit higher, 0.34%. However, the minimum initial investment is $3,000, making it one of the cheapest Vanguard mutual funds.
Mutual funds are great options for beginner investors or investors who have little time to research and invest in individual stocks. When you buy into these low cost investments, you’re essentially buying shares from companies.
Your money are pooled together with those of other investors. If you intend to invest in low cost investment funds, you must know which ones are the best. When it comes to saving money on fees and getting a good return on your investment, Vanguard mutual funds are among the best funds out there.
They provide professional management, diversity, low cost, income and price appreciation.
What’s Next: 5 Mistakes People Make When Hiring A Financial Advisor
Speak with the Right Financial Advisor
If you have questions beyond knowing which of the best Vanguard mutual funds to invest, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.