Finance Xpress

With a new year comes new goals. It’s a great time to take control of your finances. Here are eight budgeting moves to make for 2019.

January is a time when we’re naturally trying to re-set some things. You might take some time this month to look at different life goals. While you’re in the process, don’t forget to think about budgeting. Now is the perfect time to evaluate your finances and fine-tune your approach so that you can reach your financial goals. Here are eight moves you should make right now to start the year off right.

1. Review last year’s annual expenditures

Getting a big picture overview of your last year’s expenses can be helpful. You can do this in a couple of ways:

1. Download all your bank transactions for the past year. This can get complicated if you use multiple debit and credit cards. But if you generally stick with one account, it’s easier. Then, group your transactions by broad category. Don’t get too much into the weeds, or this will take approximately forever. This gives you a big picture overview of where your money has gone over the course of the year.
2. The other option is to use your current budgeting software. If you’re using a program like Mint or YNAB, you can get a historical overview of your spending with the category assignments you’ve used throughout the year.

Breaking down your spending into large categories like this can help you see where your money has gone on a large scale. This lets you know if you’re on track with your spending or if you need to make some major adjustments. For instance, if you’re spending a huge percentage of your income on dining out, maybe it’s time to re-prioritize for 2018.

2. Re-set periodic expenses

It can be hard to budget for periodic expenses like insurance, vacations, holiday gifts, and car repairs. Pull a list of these expenses into a separate report or spreadsheet. Then, figure out what you spent, in total, on each one. Budgeting for irregular expenses isn’t difficult. But you do need to go through the steps in the process. It looks like this:

1. Calculate the annual cost. Use last year’s numbers as a starting point, but then try to estimate for any changes in the coming year.
2. Divide by 12.
3.  Add the result to your monthly budget. You can set that money aside in a short-term savings account to be used for the specified expense when the time comes.

You may already be budgeting for the expenses in this category that you expect annually. This could include your bi-annual car insurance payment or a specific home maintenance project you do every year–like having your furnace tuned. But when it comes to discretionary expenses, such as your annual family vacation or Christmas spending, take some time to think about these expenses. Related: How to Create a Family Vacation Budget Are you happy with what you spent last year? Do you want to cut back on that spending or do you anticipate needing to spend more this year? Either way, take this into account when you’re re-doing your budgeting for annual and periodic expenses.

3. Re-evaluate 401k contributions

By now you’ve likely been through your year-end review at work for 2017, if you have a traditional job. If that review gave you a raise, even a small increase, consider making an increase in your 401k contributions, if you aren’t already maxing that account out. Even a small increase can make a huge difference over time.

4. Plan for an IRA contribution

A lot of people make a lump sum IRA contribution, but it’s a good idea to plan if you’re not able to make a big deposit. Divide your planned IRA contribution by 12, then set up an automatic monthly contribution from your checking account to your IRA account. If you start in January, your IRA will be fully funded by the end of the year with no lump sum required. If you need to open an IRA, here are some of the best IRA options.

5. Plan for your HSA contribution

If you have a high deductible health insurance plan combined with an HSA you should plan now how you’re going to fund it. You can use the same formula that I use for an IRA. Just take the amount of the HSA and divide it by 12, then begin making monthly contributions to fund it. The great part about an HSA is that you can use it throughout the year, but you don’t lose the funds. So try to put at least as much in this account as you’re likely to spend on medical expenses this year. And then fund the account beyond that if possible. Again, having last year’s spending numbers in hand can be helpful here. If you’re not sure how much you spent on medical care in 2017, just look over those numbers. Then you can see the minimum amount you should contribute to your HSA.

6. Conduct a spending audit

This is the ideal time of year to go through the “One-N-Done” method of cutting back on your spending. Basically instead of trying to nickel and dime your way to wealth, you figure out where you can save month after month. Go through each of your monthly bills and decide whether you really need a product or service. Do you use that gym membership? How often do you watch shows on Netflix, and could you do something different with that down time? Even if it’s only a few bucks a month, by the end of the year, that could spell serious savings. Once you’ve figured out any bills you can eliminate, then go through your bills to figure out which ones you might be able to reduce. If it’s been a while since you’ve shopped around for insurance–life insurance, homeowners insurance, car insurance, etc.–you may be able to save there. You should shop for car and home insurance about once a year just to be sure you’re getting the best possible rates. You may even be able to negotiate with your internet provider, cable provider, and cell phone provider to get lower rates on these services. In all, finding ways to save on monthly expenses is the easiest way to save big money over the course of a year. It’ll take some time now, but could pay off big in the long run.

7. Re-evaluate your plan to get out of debt

Take stock of where you are when it comes to paying off debt. Are you making progress towards this goal? Could you make progress more quickly by changing the order in which you pay off debts? Could you boost the amount of money you put towards debt? Or could you save on interest by refinancing your debt to a lower rate? This is where you determine if you’re on track to payoff your debt. Can you refinance the debt into a lower rate loan? Are you paying off the right debts–paying them off in the right order?  Should you increase or decrease the amount of extra money you are putting toward your debt? Deciding what order to pay off your debts is important. If you have a big interest rate differential, paying off the higher interest rate first could save you thousands over time. You can check out different options for paying down your debt with our debt snowball vs. debt avalanche calculator. Once you’ve figured out how to pay off your debt, be sure you’re meeting your goals each month. Make a spreadsheet or chart to keep track of your debt so you can stay motivated to meet your goals.

8. Compare your net worth from the prior year

If you want one indicator of an effective budget, it’s this: an increasing net worth. An increasing net worth shows that you’re spending less than you make, paying off debt, and saving more money. This is why I recommend tracking your net worth at least once a year. Net worth is simply what you own, less what you owe. It can be a positive or negative number. It reflects the sum total of all of your financial decisions during the course of the past year, which is why it’s so important that you track it. Comparing your net worth from one year to the next is the best way to know if you’re moving in the right direction. If you aren’t happy with where your net worth is going, this is the time to make changes. You need to get net worth tracking into operation, and you can check out Personal Capital’s free tool for this purpose. Those are my eight suggestions for the new year, and they’re a way for you to make decisions that can help you to make financial progress in the year ahead. By making the important financial moves in January, you won’t have worry about it later in the year. Listen to the Podcast of this Article With a new year comes new goals. It's a great time to take control of your finances. Here are eight budgeting moves to make for %%currentyear%%.

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Debt consolidation and debt negotiation programs (DNP) are often associated with seedy companies more interested in helping themselves than helping consumers. The debt consolidation industry is largely responsible for earning this questionable reputation. The Federal Trade Commission, for example, warns consumers about the false promises many in the debt business make to consumers. And the FTC has even brought legal action against “non-profit” debt negotiation companies for violating federal consumer protection laws. The FTC has published an excellent article called Knee Deep in Debt that talks in part about DNPs and is definitely worth reading. But the concept behind debt consolidation is still a good one for many people overwhelmed by debt. By consolidating debt, many can lower the interest rate on their debt and lower their monthly payments. This in turn can make paying your debt and providing for your other expenses more manageable. But this still leaves one big question—how? How should one go about consolidating debt? Should you use a debt consolidation company? Should you negotiate directly with your creditors? To help answer these questions, below is a list of 8 ways you can consolidate your own debt. There are advantages and disadvantages to each option, which I’ll explain below. But before we get to the list, there are a few things to consider before you start a debt consolidation program:

• Credit Score: Opening a lot of new accounts for purposes of debt consolidation can weigh on your credit score. While this doesn’t mean you shouldn’t open new accounts to get lower interest rates, do so with care. You can check out How to Improve Your Credit Score for more information.
• Lower Interest: One of the key goals in debt consolidation is to get a lower interest rate on your debt. As a first step, however, contact your existing creditors to see if they will lower your interest rate. You may end up getting a better deal on some or all of your debt and not need to consolidate.
• Don’t be a Yo-Yo: Just like there are some who yo-yo diet (go up and down in weight), there are those who yo-yo debt. They pay off some debt, only to go into more debt. Debt consolidation can actually make this worse in some instances. For example, you may consolidate high interest credit card debt onto a home equity line of credit, only to charge your cards back up. If you think this is a big risk, think twice about debt consolidation, or figure out a way to discipline yourself from going into more debt.
• Student Loan Consolidation: This article does not cover the consolidation of student loans. There are separate programs, some sponsored by the federal government, covering education loan consolidation.

8 DIY Debt Consolidation Techniques 1. Cash Out Home Refinance: Cash out refinancing is when you refinance your mortgage for more than you owe. For example, let’s assume you owe $150,000 on a home that is worth $250,000, and you also owe $25,000 in high interest credit cards. In a cash out refinance, you would refi your mortgage for $175,000, paying off your original $150,000 mortgage and your $25,000 in high interest credit card debt. Advantages

• Home mortgages offer some of the lowest interest rates available.
• The loan can be amortized over 30 years, resulting in lower payments for the consolidated debt.
• If you consolidate all of your debt in a cash out refi, you reduce your monthly payments to just your mortgage.

Disadvantages

• A home loan is secured by a mortgage on your home, meaning that if you fail to repay the loan, you could lose your home.
• Extending debt payments over 30 years could result in paying higher total interest payments on the debt.
• There are fees associated with refinancing a mortgage, and depending on the terms of the loan, they could be significant.

2. Home Equity Line of Credit: A home equity line of credit, similar to a credit card, is a revolving line that allows you to write checks up to the amount of your credit limit. A typical home equity line requires you to pay interest only on the balance for the first 10 years. The existing balance at year 10 is then converted into a loan amortized over 20 years. Once you have a home equity line established, consolidating your debt onto the line of credit is simply a matter of writing checks to pay off your other debts. Advantages

• While interest rates on these lines of credit are higher than on a first mortgage, the rates typically are much lower than credit card rates and interest on other unsecured debt.
• Once established, it is very convenient to access the line of credit to consolidate bills.
• In many cases, there are no fees to establish a home equity line of credit.

Disadvantages

• As with a mortgage, a home equity line of credit is secured by your home. If you fail to make required payments, you could lose your home.

3. Home Equity Loan: A home equity loan is very similar to a home equity line of credit, with one major difference. With a line of credit, your outstanding balance can go up and down as you borrow and repay against the line of credit (again, much like a credit card). A home equity loan works more like a car loan. You borrow a set amount of money and repay it over a fixed period of time. Advantages

• The advantages are the same as with a home equity line. However, you don’t write checks against a home equity loan. Instead, you receive a check from the bank in the amount of the loan that you can then use to pay off your other debts.

Disadvantages

• As with the two options above, a home equity loan is secured by your home. Fail to pay the loan, and you could lose your house.

4. Low Interest Credit Card: Low interest rate credit cards can be used to consolidate higher rate debt. Expect to pay between 2% and 5% of the outstanding balance as a minimum payment. Low interest rate cards generally require excellent credit to qualify. There are two ways to transfer high rate debt to a low interest card. First, you can use a balance transfer to a low rate card. These cards tyically charge no balance transfer fee, but remember, this is not a 0% balance transfer (see below). In other words, while you pay no transfer fee, you do pay interest on the amount transferred (typically between 7% to 9%). Second, you could use the low interest card for everyday purchases, and take the money you would have spent and use it to pay down high interest rate debt. Here is a list of low interest rate balance transfer credit cards. Advantages

• It’s easy to apply for a low interest card online and to transfer balances to the card.
• The interest rates are not introductory teaser rates. While credit card companies can increase rates pursuant to the cardholder agreement and federal law, rates won’t go up simply because an introductory period expired.

Disadvantages

• These low interest credit cards require excellent credit, and as a result, can be difficult for many to obtain.
• It’s still a credit card, and interest rates can go up.

5. 0% Balance Transfer: Unlike a low interest rate card, a 0% balance transfer card offers no interest for a set period of time (typically 6 to 12 months). After that time, any remaining balance is charged the regular interest rate that applies to the card. In addition, these cards do charge a balance transfer fee, typically 3% to 5% of the amount transferred. For short-term debt consolidation, however, a no interest offer can save a lot of money in interest payments. Here’s a list of 0% balance transfer credit cards to consider. Advantages

• Zero percent interest can save hundreds if not thousands of dollars in interest payments.
• It’s easy to apply online and transfer existing high interest credit card debts.

Disadvantages

• The 0% offers don’t last forever, and eventually the interest rates rise to whatever rates apply to the card.
• You will pay up front a balance transfer fee.

6. P2P Loan: Social lending from companies like Prosper or LendingClub have become more mainstream over the last year. With these online companies, you can apply for a 3-year fixed rate loan that must be paid back over 3 years. Unlike a traditional loan, however, the money doesn’t come from a bank or other financial institution. instead, the loan comes from individuals looking to invest in consumer loans. That’s why it’s called social lending or person-to-person lending. Advantages

• P2P loans generally offer competitive interest rates to borrowers, although the rate you receive will depend on your credit history.
• The interest rate is fixed for the life of the loan.
• Loans can be obtained relatively quickly.

Disadvantages

• There are fees associated with obtaining a P2P loan. The fees vary based on a number of factors, including the amount of the loan.
• The loan limit is $25,000, although you can typically obtain up to 2 loans at one time.

7. 401k Loan: Some 401k programs allow you to borrow up to 50% of your retirement balance (maximum $50,000). You then repay the loan with interest, but the interest is paid back to your own retirement account. This can be a great way to consolidate high interest debt, but there are some significant risks to consider. For example, if you leave your job for whatever reason, you must repay the outstanding balance. If you fail to repay the loan, the IRS will consider the outstanding balance to be a distribution, and you could end up paying a 10% penalty on top of taxes. Some also believe it is a mistake with remove your money from the stock market to repay debt. Here, you should consider the interest rate on the debt you would pay off, and how your money is invested in the first place. Regardless, this is an option worth considering. Advantages

• Interest payments are made back to your retirement account, so you don’t lose the money.
• If your company allows 401k loans, they are very easy to obtain.

Disadvantages

• The loan may be considered a distribution if you leave your job and are unable to repay the loan.
• The money borrowed will be removed from your investments.

8. Two or More of the Above: This may be obvious, but it’s worth noting. Debt consolidation does not always mean consolidating debt into a single loan. Depending on the particular circumstances, it may make sense to combine two or more of the above approaches to deal with your debt.Here are 8 simple and effective ways to reduce your interest payments by consolidating your debt.

The post How to Consolidate Your Debt appeared first on The Dough Roller.

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Hey everyone! Michelle speaking for a moment. Today, I'd like to introduce you to my friend Amanda Holden. She runs one of my favorite financial blogs – Dumpster Dog. Below is a guest post from her on why investing for retirement is important for women – and how you can start. Enjoy!

Play along with me for a moment: Imagine a deliciously styled woman in her 70s.

She is having a sip of her morning espresso at a sidewalk café in Paris. She’s perusing a big, beautiful novel alongside her (much younger) Parisian lover, who is bringing her a third croissant for before 10 am (because why not).   

This woman is you.

Or at least, this woman could be you.

Whether or not your retirement dream includes croissants and a Parisian lover, you’re going to need to save and invest to make it happen.

We’re so accustomed to thinking about retirement in terms of an age—age 65—when in reality, retirement is an amount of money saved.

Because young people will not have access to the pension plans of our parents and grandparents, retirement is entirely our responsibility.

After spending six years workin’ in a fancy investment management job, I quit.

Helping the rich get richer just wasn’t going to be “it” for me. So, I created my own business, called Invested Development, to get this information to the demographic that I care most about: young women. My favorite part of this work is that “ah-hah moment” when students realize that investing is absolutely within their capacity.

Part of this work is addressing the specific hurdles that women face and finding solutions to those problems so that my students can live out their Golden Years in style.

Here are four reasons women need to save and invest for retirement—and how to do it.

 

1. Retirement is the single biggest lifetime expense for everyone, not just women.

Can we real-talk for a hot minute? It’s hard as hell to get motivated to save for retirement. Retirement is so frickin’ far away and you’ve likely got more immediate financial goals you’d like to achieve, like a down payment for a home or building a luxury palace for your collection of rescued street cats.

But, here’s the rub: Retirement will likely be the single-biggest expense in your lifetime. That’s right: Bigger than a house (at least, for most of us), and bigger than kid’s college. Take a step back, and simply think about what retirement is: You’re living for 20 or 30 years with no working salary.

Ask yourself: How much money do you need to spend in one, single year? How about for twenty or thirty years?

Without getting too caught up in the numbers, you get the idea: That’s a heckuva lot of money to save. Saving money is going to be the foundation to achieving retirement—but investing is the secret sauce.

 

2. Women live longer than men.

The job of saving and investing for retirement is already big. And for women, it will be even bigger.

In 2019, women have a life expectancy of 81.6, while the average for men is 76.9. That’s nearly five more years to account for. And the tough truth is—these years aren’t usually cheap or easy or healthy.

This means that women need to plan to be alive for longer than men, which means they need more money for retirement. And really, we should all plan to live to be at least 90 or even 100.

The worst thing you can do is make a plan that assumes you’ll live to be 81.6, and then live to be 100 with nothing in the bank. (This is especially important as life expectancies are expected to rise over the next several decades.)

 

3. Women need their own money.

Hey! Would you like to feel very angry right now? Well then allow me to introduce you to: The National Institute on Retirement Security!

Their data shows us year after year that women are significantly more likely to live in poverty than men in retirement, and it’s worse for women of color and single women. Any of us could be single, divorced, or widowed. I’m still single IF YOU CAN BELIEVE IT!

It’s rare that life ends up the way that we expect it to.

Planning for a scenario where no one gets sick and no one gets divorced is more than just dumb, it’s dangerous—especially for those of us living in countries with waning social safety nets.

We all know, in theory, that a partner is not financial plan; the hard part is making a plan into reality and doing the work now, and not waiting until disaster or heartbreak strikes.

(Because really, I can think of no worse time to learn about Modern Portfolio Theory, expense ratios, AND THE DAMN BANK PASSWORD than after a messy divorce or the unexpected death of a spouse.)

 

4. Women Earn Less Than Men

Think of what investing is: Investing is using your money to make even more money.

That’s right, ladies: Let’s make money do some of the heavy lifting around here! Putting our money to work is especially important for women, who are likely to earn less than men over the course of a lifetime. Women will have less money to work with, making it critical that we make the most of the money we do have.

I do not think this is fair.

My absolute first choice would be to close this wage and opportunity gaps and for moms to have support at work. While we are working towards the cultural shift and legislative changes necessary to leveling the playing field for women, women must work within the system we’ve got.

And that means learning about investing and prioritizing her future self, even when it’s so hard.

 

How to Invest for Retirement

Your first step is to understand your options for retirement accounts. Where should your investments go?

Are you already covered by workplace retirement account, like a 401(k) or 403(b)? Or are you self-employed?

If so, that you’ll need to open your own at a brokerage bank of your choosing—think Fidelity or Charles Schwab. Depending on your needs, you could open a Roth IRA, SEP IRA, and/or Solo 401(k).

Next, you’ll have to decide how to invest within your retirement account.

A 401(k) is not an investment—a 401(k) holds investments. Just like your checking account holds cash, but a 401(k) holds cash, stocks, mutual funds, and so on. You can think of your 401(k) or Roth IRA as a glorified adult Caboodles (with special tax treatment)—it just holds your investments.

The treasures held inside are the investments.

Many people will opt for a mix of stocks and bonds appropriate to their goals and risk tolerance. You may find it easiest to invest in stocks and bonds using mutual funds. A mutual fund bundles together some other investment type—you can think of them as big ol’ suitcases. And just like a suitcase, what is packed inside is the most important part, and will say a lot about the type of trip you’re about to take.

Many money experts prefer index mutual funds or index ETFs which are funds that aim to return the average of whatever market they “mimic,” with very low fees. Basically, you’re just along for the ride.

No matter which strategy you choose, you’ll need to minimize what you pay in fees. Any fees you pay to an advisor, plan administrator, or broker, are fees that will come directly from your potential investment returns—so you’d better be damn certain of the value you get out of that service. Remember, the goal here is to make you rich, not to fund some overpaid mutual fund manager’s Viagra-blue sportscar.

 

Finally, Become Confident in Your Saving and Investing Plan

Are you ready to learn how to invest, make the most of your money, and make your badass granny dreams a reality?

Take Invested Development, which is a live, virtual, four-part Investing 101 course taught by me. (That’s right, you can take the class from the comfort of your home—popcorn, sweatpants, greasy topknot and all!) I’m committed to helping my students learn by making them laugh and providing a judgment-free place to ask questions. You will walk away with a plan of action you’re confident in.

Feeling in charge of your money and investments: It’s a powerful place for a woman to be. 

And often, learning requires the right teacher: I’m a writer and educator specializing in teaching women how to invest. Through my business, Invested Development, I’ve taught thousands of women to invest, revolutionizing what they think is possible for themselves and their financial futures. I take women who are unsure of their knowledge and turn them into confident, wealth-building badasses. 

I also write a blog called The Dumpster Dog Blog, which has been nominated for Money Blog of the Year and Women’s Money Blog of the Year for two years running.

Invested Development has upcoming classes in January and February. Because it is live, virtual, and classroom style, spaces in the class are limited. Use the code SENSEOFCENTS for a $20 discount and claim your financial independence. Invested Development will show you that investing is something that is absolutely within your capacity: don’t put it off for one day longer. Your future granny depends on it.

Invested Development is great for beginners and for those looking to step up their investing game. Use the code SENSEOFCENTS at checkout for $20 off the price of the course. See you in class!

Are you saving for retirement? Why or why not?

The post Why Investing for Retirement is So Important for Women (and How To Do It)  appeared first on Making Sense Of Cents.

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The Setting Every Community Up For Retirement (SECURE) Act recently passed and it will go into effect for all Americans in 2020.

The goal of the SECURE Act is to make it easier for Americans to save for retirement and live comfortably in retirement. Based on the data, we know that the median and average American is severely lacking in retirement funds.

At the same time, we also know that the average American is truly living the good life by spending $61,224 a year of their $78,635 income. When you’ve got Social Security, a belief that the government will save you, and a YOLO mentality, it’s logical to live it up with your one and only life.

Just the other day, I decided to order a sangria at my favorite tapas restaurant instead of a plain lemon water because I was feeling the YOLO in my veins.

How The SECURE Act Changes Retirement Planning

The problem with new bills is that you’re never quite sure what the changes are and whether the changes will last long enough to matter. You could be doing the right thing for decades and then the government decides to move the goalpost. As a result, the fundamentals of saving for retirement should never change:

• Max out your tax-advantageous retirement accounts e.g. 401(k), IRA, 403(b), Roth IRA, SEP IRA, Solo 401(k)
• Save at least 20% of your after-tax and after tax-advantageous retirement account maximum contribution
• Generate extra income beyond your day job
• Get in the mindset of never expecting the government, your parents, or your rich aunt to save you
• Always have at least disaster insurance

No matter what happens with retirement laws in the U.S., so long as you do the above five things, you’ll probably be fine.

The SECURE Act changes your retirement planning strategy at the margin. Here are the five things to be aware of.

1) Required Minimum Distribution Starts at Age 72 from 70.5

For those of you who have followed my advice of building a healthy taxable retirement portfolio, good news! You can now wait until you’re 72 years old before being forced to withdraw money from your traditional retirement accounts.

Given our population as a whole is living longer, extending the RMD from 70.5 to 72 makes sense. We should be allowed to have our investments compound tax-free for a longer period to pay for our longer lives.

Those who turn 70½ on or after Jan. 1, 2020, are subject to the new rules and will have an extra year and a half before they need to start withdrawals.

Your goal: Amass a large enough taxable retirement portfolio so that you can wait until 72 to withdraw from your retirement funds. You want your retirement funds to compound tax-free for as long as possible. Once you start withdrawing from your retirement funds, withdraw the minimum amount necessary to keep your taxable income in the lowest tax bracket possible. Finally, live as long past 72 as possible.

2) Contributions Can Be Made To Your Traditional IRA After Age 70.5

If you are fortunate enough to still have the energy, ability, and desire to still have W2 income after age 70.5, you’ll now be allowed to contribute to a traditional IRA. Working beyond the traditional retirement age of 65 is one of the best ways to solidify your finances.

The maximum IRA contrition for 2020 is $6,000, the same as in 2019. The IRA catch-up contribution limit will remain $1,000 for those age 50 and older for a maximum possible IRA contribution of $7,000 in 2020.

Unfortunately, the government still doesn’t allow all Americans to contribute to a traditional IRA. For some reason, it believes that once a single individual makes over $139,000 a year in 2020, they no longer want or need to save for retirement.

It befuddles me that the government believes a 25-year-old making $150,000 in a high-cost city with tremendous student loan debt doesn’t have the same retirement benefits as everybody else.

It also makes no sense that once a married couple makes over $206,000, they aren’t eligible to contribute to a traditional IRA as well. $139,000 + $139,000 = $278,000, not $206,000. The government is either bad at math or doesn’t believe in equality.

Your goal: Save so much in your taxable and pre-tax retirement accounts that you don’t need a job after 70.5 to fund a traditional IRA. If you want to work in your 70s, that’s fine. But do so as a freelancer where you can set your own hours and rules.

3) No More Stretch IRA

A stretch IRA was an estate planning strategy that extended the tax-deferred status of an inherited IRA when it is passed to a non-spouse beneficiary. Theoretically, an IRA could be passed on from generation to generation while beneficiaries enjoyed tax-deferred and/or tax-free growth. That’s now gone thanks to the passage of the SECURE Act.

Under the new law, most beneficiaries will have to withdraw all the distributions from their inherited account and pay taxes on it within 10 years. Exceptions are made for spouses and the chronically ill or disabled.

For those who inherit an IRA after January 1, 2020, the stretch IRA is no more. For those who inherited an IRA before January 1, 2020, you can defer your tax liability as usual.

Your goal: Talk to an estate planning lawyer. He or she will tell you things that you probably have not considered before, like the GRAT. Set up a revocable living trust if you have children. At the very least, have a clearly written will. Estate planning is an act of kindness for your beneficiaries.

4) Watch Out For Annuity Options In Your 401(k)

Annuities, like whole life insurance, is a very profitable product for financial companies. Annuities are insurance products that turn a lump sum investment into a lifetime of guaranteed income.

Besides the hidden cost of owning an annuity, one of the concerns companies had for offering them in a 401(k) plan was the viability of the annuity provider. What if it went bust? Think about other products you own such as life insurance, house insurance, and car insurance. If your insurance company got into financial trouble, as some did during the 2008-2009 financial crisis, they might not pay out.

The SECURE Act increases legal coverage for employers, just in case their employees sue them because their annuity provider goes out of business and does not pay.

If you are an employer, you’d be foolish to offer an annuity option in your 401(k) plan, despite the increased legal protection.

No employee is going to join an employer or stay at an employer because of its great annuity option in the 401(k). Instead, when it comes to retirement benefits, the #1 reason why an employee might stay is due to generous 401(k) matching and profit sharing.

In 2020, the maximum 401(k) contribution is not only $19,500 by the employee. In 2020, the total maximum 401(k) contribution is $57,000 because the employer has the ability to contribute up to $37,500 to your 401(k) as well.

Your goal: Find an employer who will contribute the most money to your 401(k). If you want to work at a sexy startup, know that you are not only taking a salary cut for lottery tickets, you’re likely also giving up employer retirement contributions as well. Skip annuities because they are complicated to understand, cost more than they need to, and take away your liquidity and flexibility.

5) 401(k) Accounts May Become More Prevalent For Part-Time Workers Or Employees Of Small Businesses

The SECURE Act makes it easier for small businesses to offer retirement plans by reducing their cost of providing a 401(k) plan. The cost is reduced by allowing small businesses to band together to get something similar to a group discount. It’s similar to the idea of getting a group discount for health insurance or pooling your capital to buy commercial real estate.

Below is some interesting research from the Pew Research Group about benefits businesses with 5 – 250 employees provide. As you can see, only 53 percent of small businesses provide retirement benefits. Employers that do not offer plans pointed to the financial cost (37 percent) and organizational resources (22 percent) needed to start a plan as barriers. One-sixth said they do not offer a plan because their employees are uninterested.

Perhaps the most exciting thing about the SECURE Act is that it now requires employers who offer 401(k)s to expand its access to part-time workers who work at least 500 hours a year for three consecutive years or 1,000 hours for one year.

To put these hours into perspective, a full-time worker who works 40 hours a week, will work 2,080 hours a year. Therefore, working 1,000 hours for one year is a piece of cake! We’re talking only an average 20-hour workweek.

At the margin, the offering of more 401(k) plans to part-time workers will probably further increase the rise of part-time and remote workers. As a result, I foresee a continued demographic shift towards lower cost areas. I’m pretty sure that by 2030, there will be more 1099 workers than W2 workers.

Your goal: Find part-time and remote work opportunities with employers who offer a 401(k) plan with a match. Because there is so much dead time working a full-time job with one employer, if you are reasonably efficient, you can make much more money working multiple part-time jobs.

6) 529 Plans Get More Flexible

After the Tax Cuts and Jobs Act passed in 2017, owners of a 529 plan could not only use the funds from the plan to pay for qualified college expenses, owners of the plan could also use up to $10,000 of the funds annually for K – 12 expenses.

With the passage of the SECURE Act, a 529 plan can now also be used for Apprenticeship Programs and qualified expenses including fees, books, supplies, and equipment. Further, 529 plan funds can be used to pay for principal and interest of qualified education loans as defined in IRC Section 221(d).

Finally, an additional $10,000 may be distributed as a qualified education loan repayment to satisfy outstanding student debt for each of a 529 plan beneficiary’s siblings.

Your goal: While a college degree is getting devalued each year, it’s still worth opening up a 529 plan if you have children. Your contributions grow tax-free and if you don’t end up using all the funds, you can change the beneficiary over to someone else. When you’ve got to save for retirement and pay for your children’s future, you might as well take advantage of tax breaks to make doing both as efficiently as possible.

The SECURE Act Is A Net Positive For Retirement

Our do-little and highly discriminatory government has finally done something financially positive for millions of Americans. Let’s just hope the SECURE Act stays in place for a long time and we see further bills that make saving for retirement easier for all.

If I was President, I’d certainly propose to raise the traditional IRA income limit to at least $250,000 / $500,000 for single and married people. By doing so, more Americans who live in high-cost areas could also benefit.

Use the SECURE Act as motivation to always max out your 401(k) and traditional IRA if eligible. Then do your best to find a better way of working now that 401(k)s will be offered to more types of employees.

Even though the government has taken a small step to help us out, let us never rely on the government to save us. I have no doubt retirement rules will eventually change again.

Looking for a free retirement planning tool? Sign up for Personal Capital to track your net worth, analyze your portfolio for excessive fees, and make sure your retirement is on track with their Retirement Planner. I’ve used the free tool to track my finances since I retired in 2012. There is no rewind button in life. Make sure your finances are in order.

Readers, anything else in the SECURE Act you’ve found helpful to your retirement planning? What else should we be doing with the passage of the SECURE Act?

The post How The SECURE Act Changes Your Retirement Planning appeared first on Financial Samurai.

from Financial Samurai


via Finance Xpress

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As I type this, there are only a few days left in the 2010s, and holy shit what a decade it has been.

Ten years ago, a 35 year old MMM and the former Mrs. MM were four years into retirement, but not feeling very retired yet. We stumbled out of 2009 with a precious but very high strung three-year-old, a house building business that was way more stressful than it should have been, and a much more rudimentary set of life skills. It was a time of great promise, but a lot of this promise was yet to be claimed.

Ten years later, despite the fact that I have one less marriage, one less surviving parent, and ten years less remaining youth, I am in an even better place in life right now, and would never want to trade places with the 2009 version of me. And on that measure alone, I can tell it has been a successful decade.

This is a great sign and it bodes well for early retirees everywhere. Compared to the start of the decade, I am healthier and stronger physically, wealthier financially, and (hopefully) at least a bit wiser emotionally. I’ve been through so much, learned so much in so many new interesting fields, and packed so much living into these 3653 days. A big part of that just flowed from the act of retiring from my career in 2005, which freed me up to do so many other things, including starting this blog.

It has not always been easy, in fact the hard times of this decade have been some of the hardest of my life. But by coming through it all I have learned that super difficult experiences only serve to enrich your life even more, by widening your range of feelings and allowing you to savor the normal moments and the great ones even more.

Ten Years of Learning in Three Points

I think the real meaning of “Wisdom” is just “I’ve seen a lot of shit go down in my lifetime and over time you start to notice everything just boils down to a few principles.”

The books all say it, and the wise older people in real life all say it too. And for me, it’s probably the following few things that stand out the most:

1) This Too Shall Pass: nothing is as big a deal as you think it is at the time. Angry or sad emotions from life traumas will fade remarkably quickly, but so will the positive surprises from one-time life upgrades through the sometimes-bummer magic of Hedonic Adaptation. What’s left is just you – no matter where you go, there you are.

2) But You Are Really Just a Bundle of Habits: most of your day (and therefore your life) is comprised of repeating the same set of behaviors over and over. The way you get up, the things you focus your mind on. Your job. The way you interact with other people. The way you eat and exercise. Unless you give all of this a lot of mindful attention and work to tweak it, it stays the same, which means your life barely changes, which means your level of happiness barely changes.

3) Change Your Habits, Change your Life: Because of all this, the easiest and best way to have a happier and more satisfying life is to figure out what ingredients go into a good day, and start adding those things while subtracting the things that create bad days. For me (and quite possibly you, whether you realize it or not), the good things include positive social interactions, helping people, outdoor physical activity, creative expression and problem solving, and just good old-fashioned hard work. The bad things mostly revolve around stress due to over-scheduling one’s life, emotional negativity and interpersonal conflict – all things I am especially sensitive to.

So while I can’t control everything, I have found that the more I work to design those happiness creators into my life and step away from things that consistently cause bad days, the happier and richer life can become.

Speaking of Richer:

I recently read two very different books, which still ended up pointing me in the same direction:

This Could Be Our Future, by former Kickstarter cofounder and CEO Yancey Strickler, is a concise manifesto that makes a great case for running our lives, businesses, and even giant corporations, according to a much more generous and person-centric set of rules.

Instead of the narrow minded perspective of “Profit Maximization” that drives so many of the world’s shittier companies and gives capitalism a bad reputation, he points out that even small changes in the attitude of company (and world) leaders, can lead to huge changes in the way our economy runs.

The end result is more total wealth and happier lives for all of us – like Mustachianism itself, it really is a win/win proposition rather than any form of compromise or tradeoff. In fact, Strickler specifically mentions you and me in this book, using the FIRE movement as an example of a group of people who have adopted different values in order to lead better lives.

Die with Zero*, by former hedge fund manager and thrill seeking poker champion Bill Perkins sounds like a completely different book on the surface: Perkins’ point is that many people work too long and defer too much gratification for far too long in their lives.

Instead, he encourages you to map out your life decade by decade and make sure that you maximize your experiences in each stage, while you are still young enough to enjoy each phase. For example, do your time in the skate park and the black diamond ski slopes in your 20s and 30s, rather than saving every dollar in the hopes that you can do more snowboarding after you retire in your 60s.

Obviously, as Mr. Money Mustache I disagree on a few of the finer points: Life is not an experiences contest, you can get just as much joy from simpler local experiences as from exotic ones in foreign lands, and spending more money on yourself does not create more happiness, so if you die with millions in the bank you have not necessarily left anything on the table. But it does take skill to put these truths into practice, and for an untrained consumer with no imagination, buying experiences can still be an upgrade over sitting at home watching TV.

However, he does make one great point: one thing you can spend money on is helping other people – whether they are your own children, family, friends, or people with much more serious needs like famine and preventable disease.

And if you are going to give away this money, it’s better to do it now, while you are alive, rather than just leaving it behind in your estate, when your beneficiaries may be too old to benefit from your gift anyway.

So with this in mind, I made a point of making another round of donations to effective causes this year – a further $100,000 which was made possible by some unexpected successes with this blog this year, combined with finding that my own lifestyle continues to cost less than $20k to sustain, even in “luxury bachelor” mode.

And here’s where it all went!

$80,000 to GiveWell, who will automatically deliver it to their top recommended charities. This is always my top donation, because it is the most serious and research-backed choice. This means you are very likely doing the most good with each dollar, if your goal is the wellbeing of fellow human beings. GiveWell does constant research on effective charities and keeps an updated list on their results – which makes it a great shortcut for me. Further info in my The Life You Can Save post.

Strategic Note: I made this donation from my Betterment account where I keep a pretty big portion of my investments. This is because of tax advantages which multiply my giving/saving power – details here at Betterment and in my own article about the first time I used this trick.

$5000 to the Choose FI Foundation – this was an unexpected donation for me, based on my respect for the major work the ChooseFI gang are doing with their blog and podcast and meetups, and their hard-charging ally Edmund Tee who I met on a recent trip. They are creating a curriculum and teaching kids and young adults how to manage their money with valuable but free courses.

$2000 to the True Potential Scholarship Fund, set up by my inspiring and badass Omaha lawyer friend Ross Pesek. Ross first inspired me years ago by going through law school using an extremely frugal combination of community and state colleges, then rising to the top of the pack and starting his own firm anyway. Then he immediately turned around and started using some of the profits to help often-exploited immigrant workers in his own community with both legal needs and education.

$1000 to plant one thousand trees, via the #teamtrees effort via the National Arbor Day Foundation. I credit some prominent YouTubers and Elon Musk for promoting this effort – so far it has resulted in over 20 million trees being funded, which is a lot (roughly equal to creating a dense forest as big as New York City)

$5000 to Bicycle Colorado – a force for change (and sometimes leading the entire United States) in encouraging Colorado leaders and lawmakers to shift our spending and our laws just slightly away from “all cars all the time” and towards the vastly more effective direction of accommodating bikes and feet as transportation options. Partly because of their work, I have seen incredible changes in Denver, which is rapidly becoming a bike utopia. Boulder is not far behind, and while Longmont is still partially stuck in the 1980s as we widen car roads and build even more empty parking lots, these changes slowly trickle down from leaders to followers, so I want to fund the leaders.

$5000 (tripled to $15,000 due to a matching program that runs until Dec. 31) to Planned Parenthood. Although US-centric, this is an incredibly useful medical resource for our people in the greatest need. Due to emotional manipulation by politicians who use religion as a wedge to divide public opinion, this general healthcare organization is under constant attack because they also support women’s reproductive rights. But if you have a loved one or family member who has ever been helped during a difficult time by Planned Parenthood, you know exactly why they are such an incredible force for good – affecting millions of lives for the better.

And finally, just for reasons of personal and local appreciation, $1000 to the orchestra program of little MM’s public middle school. I have been amazed at the transformation in my own son and the hundreds of other kids who have benefited from this program. They operate a world-class program on a shoestring (violin-string?) budget which they try to boost by painstakingly fundraising with poinsettia plants and chocolate bars. So I could see that even a little boost like this could make a difference. (He plays the upright bass.)

You could definitely argue that there are places that need money more than a successful school in a wealthy and peaceful area like Colorado, and I would agree with you. Because of this, I always encourage people not to do the bulk of their giving to local organizations. Sure, it may feel more gratifying and you may see the results personally, but you can make a much bigger difference by sending your dollars to where they are needed the most. So as a compromise, I try to split things up and send the lion’s share of my donations to GiveWell where they will make the biggest difference, and do a few smaller local things here as a reward mostly for myself.

So those are the donations that are complete – $99,000 of my own cash plus an additional $10,000 in matching funds for Planned Parenthood. But because environment and energy are such big things to me, I wanted to do one more fun thing:

$5000 to build or expand a local solar farm.

This one is more of an investment than a donation, but it still does a lot of good. Because if you recall, last year I built a solar array for the MMM Headquarters coworking space, which has been pumping out free energy ever since. My initial setup only cost me $3800 and it has already delivered about $1000 in free energy, more than the total amount used to run the HQ and charge a bunch of electric cars on the side.

So, I plan to invest another $5000, to expand the array at HQ if possible, or to build a similar one on the roof of my own house, possibly with the help of Tesla Energy, which is surprisingly one of the most cost-effective ways to get solar panels installed these days. These will generate decades of clean energy, displacing fossil fuels in my local area while paying me dividends the whole time, which I can reinvest into even more philanthropy in the future.

What a great way to begin the decade. Let’s get on it!

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* Die With Zero is not yet released, but I read a pre-release copy that his publisher sent me. The real book comes out on May 5th

** Also, if you find the scientific pursuit of helping the world as fascinating as I do, you should definitely watch the new Bill Gates documentary called Inside Bill’s Brain, which is available on Netflix.

from Mr. Money Mustache


via Finance Xpress

Ready to take your investment portfolio to the next level? Real estate crowdfunding is an excellent way to do this. Here’s everything you need to know to get started.

While raising the funding that you need for a real estate project can be difficult, there is a new option that many people are turning towards to make this process easier. Real estate crowdfunding, while still relatively new, is growing in popularity. It’s entirely reasonable to be confused about this type of crowdfunding and to wonder whether or not it is an excellent choice for you, which is why we have put together this guide to answer your questions and give you the boost of confidence that you need if you decide to try this type of crowdfunding for yourself.

What Is Real Estate Crowdfunding?

Regardless if you are new to real estate investing or are interested in investing small amounts of money to get started, you can easily own a stake in a piece of property and receive monthly or quarterly dividends. As long as you know what you are doing. Real estate crowdfunding allows a large number of investors to pool their money together to invest in properties, as well as projects, that are larger and more expensive than they would have been able to afford on their own. Investors can visit online marketplaces and browse the various investment opportunities listed there to find the ones that are right for them. By comparing the type of investment, the geography, and the target return, it’s easy to decide what investment best aligns with their goals. All the money that investors contribute is pooled, and then the investors can enjoy passive income–as long as everything goes according to plan, as explained by Nav Athwal at Landlordology. Real estate crowdfunding consists of various online platforms. There, real estate developers come to raise cash–either in the form of equity investments or debt financing–and investors begin to invest money in those projects. They function as “peer-to-peer” investment sites, connecting those who need capital with those who have it to offer. The platforms are primarily used by individual investors. However, they are growing more popular with institutional investors, such as banks and insurance companies. Because they eliminate the “middleman” (the banker), real estate crowdfunding platforms can offer investors higher rates of return on their money. At the same time, they can charge lower interest rates to real estate developers. This makes it a win-win situation for both sides and explains the growing appeal of these sites. Loans and equity can be obtained on projects ranging from single-family homes to large apartment buildings and even retail shopping centers.

Is This the Best Option for Real Estate Investing?

Real estate investing as a whole has become more accessible in recent years. This means there are plenty of options you can enjoy if you want to invest in real estate. It’s crucial you understand that not all investments are the same and that there are different advantages and disadvantages that you need to consider, no matter what type of real estate investing you are interested in pursuing. Make sure that you consider a few different factors when comparing crowdfunding to property ownership, traditional direct investing, and even public REITs. I recommend that you examine the ease of diversification, stock market correlation, investor freeloads, liquidity, minimum investment, and day-to-day management duties. Depending on how hands-on you want to be with your investment or how much you are willing to invest, crowdfunding can be a great choice. If you have questions about your personal investing and whether or not crowdfunding makes the most sense for you, then I recommend talking to your financial advisor, as they will be able to see your whole financial picture and can point you in the right direction for your needs.

What Are the Types of Investments?

There are two main types of real estate crowdfunding–debt investments and equity investments. Understanding the difference between them will ensure you get the best results from your investments. Debt investments are when you invest in either a group of mortgages or a single mortgage. By funding these loans, you will receive income in the form of repayments as well as interest from the real estate developer. When you invest in a loan, it will be secured by the property that is being built, and the typical term for investment is between six months and two years. The exact time of your exit from the investment will be set in an agreement at the beginning of the investment, so you shouldn’t think that you can exit early and take your money with you. At Fit Small Business, you can get more information about debt investments and the difference between syndicated and platform issued debt investments. Equity investments, on the other hand, offer you passive ownership in a piece of property. They are ideal if you are interested in long-term investments and want to receive your return from the appreciation of the property, as well as rental income. By investing in a portfolio of properties or a single property, you can enjoy shares. These investments are generally for much more extended periods and can last up to 10 years, as the properties are usually new developments or ones that need a lot of repairs. You can enjoy quarterly distributions, which will allow you to receive passive income without any extra work. Another way to get paid is by getting your money back when the property is sold–hopefully for a higher price than what it was purchased. There are two types of equity investments to consider: preferred equity and common equity. They have varying risk levels, returns on investment, and what they are secured by, so choosing the right one for you is essential.

How Does it Work?

Approved investment opportunities will be marketed to interested investors through online websites. The page about the opportunity will include an overview of the project, descriptions of the local market and sponsor, a financial summary, information about potential cash flows, and a review of all fees, risks, and legal structures. Investors can review the material and complete any further due diligence that they want and then select the investment they want to invest in, sign the necessary documents, have funds debited from their bank account, and then wait until the project is entirely funded and they begin to receive their distribution payments, as long as the project performs as hoped. It’s important to remember that you are not signing up for a guaranteed return, as investments can underperform for many different reasons. Some of these include the sponsor being unsuccessful in how they market their plan or simply having poor timing with their market. I recommend you never invest money you can’t afford to lose. This means you need to make sure you’ve paid off all your debt before investing in crowdfunding and that you have other investments set aside as well. This will reduce any problems you face if you lose your investment.

Accredited and Non-Accredited Investors

There’s a distinction between the type of investors that crowdfunding sites for real estate will cater to. They will cater to either non-accredited or accredited investors, so you need to know what type of investor you are so that you can choose the right sites for your needs. It’s up to the Securities & Exchange Commission (SEC) to determine the eligibility of investors. Accredited investors have to meet one of three criteria to be able to invest:

• Individual or a joint net worth of at least $1 million, with the primary residence value excluded
• Individual income of at least $200,000, or a joint income of at least $300,000 for two years
• Being a director, general partner, or executive officer for an issuer of nonregulated securities

Non-accredited investors are the people who just don’t meet the criteria and qualifications to be considered an accredited investor. By knowing which one you are, you will be able to quickly determine the sites that you can use to invest in crowdfunding for real estate, as some sites are set up where only accredited investors can invest, while others are open to both types.

Why You Should Consider Real Estate Crowdfunding

To break it down, I’m going to discuss the list of pros of adding crowdfunding real estate to your investment portfolio. I think that this helps a lot of people better understand whether or not this is the right option for them and can help you see clearly if you want to continue down this path. Learn More: A Simple Trick to Increase Returns Without Raising Risk Crowdfunding has recently made real estate a lot more affordable for people, making it an alternative that people can use to quickly and easily diversify their portfolios without a lot of work. Some of my favorite reasons for investing through real estate crowdfunding include:

• Invest in new areas: By investing in crowdfunding for real estate, you have the opportunity to invest in metropolitan areas that are rapidly growing, even if you don’t live there. You no longer have to travel to an area to research it and make a purchase.
• Passive investments: I love any way that you can make passive income, and unlike being a landlord, you don’t have to be involved in time-intensive responsibilities when you select and invest in real estate through crowdfunding.
• Two diversification levels: Real estate behaves very differently from bonds and stocks, and with crowdfunding, you can diversify even more. This means that you can diversify across property types, geographic location, development strategies, and more.
• Lower minimum to invest: It’s costly to invest directly in real estate without taking advantage of crowdfunding. Minimums and fees are a lot smaller.
• The ability to hand-pick your investments: You can quickly pick investment opportunities that match your goals.
• Enhanced transparency: When you choose the right crowdfunding site that is transparent with tracking the performance of your investment, you can keep up to date on your money.
• Lower fees: I find that many crowdfunding sites offer lower costs than other investment options. Some sites will take a portion of your profits as well as charge a fee, but only after all investors get paid.
• Easy diversification: Crowdfunding makes diversifying your investment portfolio incredibly fast and easy. It’s simple to take your portfolio from “just bonds and stocks” to something a lot more diverse in very little time.
• Invest in large projects: You can invest in a larger real estate project that you wouldn’t have been able to afford otherwise. Apartment complexes and high-rise buildings are no longer out of your budget.
• Small initial investment: You can invest on most real estate crowdfunding platforms with as little as $5,000. Since individual investments can be had for as low as $1,000, your initial investment can be spread across several different projects.
• More control than what REITs offer: While there are similarities between real estate crowdfunding and real estate investment trusts (REITs), crowdfunding allows you to control the specific projects you invest in directly. You can even invest in local, single family, fix-and-flip projects.

My Story: 10 Things I Learned From Flipping Real Estate

Why Real Estate Crowdfunding May Not Be for You

Of course, there are some cons to real estate crowdfunding that you have to understand and be aware of so that you can make the best decision for your investments and future. I would be remiss if I didn’t list these so that you can make an informed decision.

• Non-guaranteed returns: There is always the potential that your actual returns won’t be as high as you projected.
• Capital Calls: Due to the complexity of real estate projects, an investment may require more capital than initially anticipated. In that situation, the project manager can issue a capital call, which is a request from investors for additional money. You should be aware of this possibility on any investment you make.
• Confusion for non-experts: Not all investors are clear on how the deal is structured, which makes it difficult for investors to understand the agreement altogether.
• You must typically be an accredited investor: Accredited investors have certain income and net worth requirements that generally exclude small investors. And that’s the primary point. Since real estate investments are complex, you must be a sophisticated investor with high net worth. This will help you understand the risks of the investments, as well as be able to absorb potential losses.
• Lack of due-diligence: It can be challenging to complete necessary due diligence if you do not live in the area where you are investing.
• Investments aren’t liquid: Real estate investments tend to be long-term in nature, and are not traded on national exchanges. Once you commit money to an investment, you will usually be required to remain invested until it matures. The platforms themselves typically don’t offer a secondary market to sell your investments, either.
• The possibility of total loss: These investments are unsecured, and there is the possibility of losing your investment.

How Do You Choose the Best Crowdfunding Site?

Choosing the right crowdfunding site can be really tricky, as there are a lot of factors that you need to consider, such as Andrew Savikas at Yield Talk discusses. Some of the most critical factors that you need to take into consideration before signing up with a site include:

• The platform’s track record
• What kind of investments are available
• What type of security you will receive
• What kind of return you are able to expect
• The different fees and expenses that you have to pay
• What type of regulations do the investments fall under

As you can see, there are many things that you need to consider before signing up with the first crowdfunding site that you find. I recommend taking some time and really researching available sites to find one that best aligns with your values and your goals. Here are some of our most recommended real estate crowdfunding sites:

RealtyShares

RealtyShares is an online real estate investment platform that focuses its business on smaller projects. These include single-family house fix-and-flips, rather than large projects, such as retail shopping centers or apartment complexes. The platform has been involved in investing over $300 million in more than 550 projects, and lists over 92,000 registered investors on the platform. They have investments in over 220 cities throughout 35 states across the country. However, they generally prefer investment properties located in large metropolitan areas. Investments are either in the form of equity funding or financing. You can invest in anything from a single family property to a large complex. You can even introduce investments to the platform, to be funded by you and by other investors. You can invest in a slice of a real estate investment, or you can hold the entire position alone. To invest in RealtyShares, you need a minimum initial deposit of $5,000. However, individual investments are available for as little as $1,000. You can also open a self-directed IRA, but the minimum investment is $10,000. Investment terms can run anywhere from six months to 10 years, which is referred to as the holding period. Related: How to Hold Real Estate in an IRA You can register on the platform for free, and once you do, you are free to browse through any of the real estate investments listed on the site. If you are participating in equity investment, RealtyShares charges a 1% annual fee to manage the investment. They may also charge what is known as an over-raise fee, that covers initial legal costs related to the investment or other specific expenses. If you are participating in debt investments, RealtyShares collects a servicing fee that represents a spread between the interest rate charged to the borrower and the net interest paid to the investors.

RealtyMogul

RealtyMogul is an online real estate capital marketplace. The platform was launched in 2013 and now has more than 100,000 investors holding more than $250 million in real estate, and has paid out $55 million to investors. Also, the platform claims that it has experienced “$0 Principal Lost by RealtyMogul Investors.” The platform has an A+ rating from the Better Business Bureau. To invest with RealtyMogul, you must make a minimum initial investment of $5,000, but individual investments within the platform can be created with as little as $1,000. The platform is available for investment by both accredited and non-accredited investors. However non-accredited investors are limited to investing in the MogulREIT 1 offering, while accredited investors can invest in private placements on the platform. Investments can be made either in real estate loans or in equity investments. Loan investments can run from a few months to as long as a few years. The holding period on equity investments ranges from one to ten years. You are investing in commercial real estate–including office and retail space–self-storage facilities, and apartment buildings. You can invest in the platform through an IRA account, as long as your IRA trustee permits you to do so. Unlike RealtyShares, RealtyMogul does not have flat investment fees. Instead, the costs depend on the type of investments and on the nature of the transaction. However, you will know what the charges are in connection with each investment before you invest any money. When you invest with RealtyMogul, you don’t actually own the underlying real estate. Instead, you are holding what is known as a platform note, which is secured by real estate. Once on the platform, you can track the details of each investment from the dashboard. It reveals the details of a particular investment, including current funding, estimated return, type of property, expected holding period, and the minimum investment requirements for that specific property type.

PeerStreet

PeerStreet is open to accredited investors who can invest in high-quality private real estate loans. Those loans are typically secured by first liens on real estate. These are short in term duration–often between six months and 24 months–with loan-to-values usually below 75%. PeerStreet maintains that typical loan investments will earn an average APR of between 6% and 12%. You can invest in PeerStreet through a regular taxable account, but also through either a traditional or Roth IRA. You can also do a rollover account from a 401(k) plan, 403(b), 457, or other employer-sponsored retirement plans into a PeerStreet IRA. PeerStreet also has an automated investment feature. They will match you with loans that match your investment criteria. You can set those criteria in advance, and you will be alerted of investment opportunities that fit within those criteria. PeerStreet can include loans made on single-family residences, either to rent the property or to do a rehab on it to increase the value. You must have a minimum investment of at least $1,000 in any transaction. You can invest either in whole loans or in pieces of whole loans, which will enable you to diversify your portfolio across many different loans. PeerStreet charges a servicing fee on each loan that is offered, which is the spread between the interest rate that is due from the borrower, and the interest that investors will receive from those loans. The servicing fee ranges between 0.25% and 1.00% of each loan. Learn More: PeerStreet Review

Bottom Line

If you are looking for a way to diversify your investment portfolio, then crowdfunding real estate projects may be an excellent option for you. You have to be prepared to do your due diligence and not to invest more than you can afford to lose. Have you ever had success with this type of investment? I’d love to hear about it and to get any tips or tricks that you have to offer to others who are just getting started and looking for success.Ready to take your investment portfolio to the next level? Real estate crowdfunding is an excellent way to do this. Here's everything you need to know to get started.

The post Real Estate Crowdfunding: Everything You Need to Know appeared first on The Dough Roller.

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At last! The last post of the year is here!

My theme for 2019 was: live the good life. 

After a raging bull market since 2009, I’ve started to get more comfortable spending more on a better life rather than always trying to save and invest as much as possible.

2018 was a bad year for the stock market. At one point in 4Q2018, I was probably down ~$500,000, even with my relatively conservative public investment portfolio. However, we recovered tremendously in 2019. With the rebound, I figured, better to start spending our money than lose it all in the market again!

Here’s a review of my goals for 2019. It’s a really long post because I can’t help but reflect during the holidays. The beginning portion is what I wrote at the start of 2019. The italics portion is my review.

Financial Samurai 2019 Goals

1) No gray hair, no chronic pain. I’ve learned over the years that our bodies reveal our true stress levels no matter what we do or what we say. My goal is to keep things like sciatica, lower back pain, TMJ, grey hairs, wrinkles, hair loss, migraines, and excessive weight gain at bay in order to live longer and feel healthier. Stress is the silent killer of our generation.

Specific activities for the year include: exercising and stretching 3X a week, taking walks with my son 5X a week, incorporating 15 minutes of meditation 3X a week, and eliminating sugary drinks. I will continue to maintain a bodyweight of between 165 – 170 lbs at 5′ 10″.

Grade: B. I was sick the entire month of January and didn’t fully recover my normal breathing until the middle of the year. I suffered from more allergies than normal and probably some asthma for the first time in decades. I saw a pulmonologist who told me kids who had asthma tend to relapse after age 40.

I also got sick for a couple weeks at the end of November and into mid-December. Now that our boy is in preschool, he catches and transfers more colds to us. Bummer.

For about one month, I also had some lower back pain for some reason. Perhaps it was due to too much softball and tennis. But my back held up well for most of the year.

On the brighter side, I’ve maintained my weight and still don’t have any grey hairs at 42. Overall, health-wise, 2019 turned out good, but not great.

Related: The Surprising Benefits Of Early Retirement I Did Not Anticipate

2) Remain unemployed until September 2019. My son turns two in April 2019, and I plan to remain a stay at home dad at least until then. Although, I’ve given myself a green light to find full-time work after two years, my ultimate goal is to remain a stay at home dad until he is eligible for preschool in September 2019 if he is mature enough to attend. If he is not, then my goal is to remain a SAHD until September 2020 for 3 years, 9 months total.

In order to stay unemployed, I need to make sure my risk exposure is appropriate so I don’t stress out about losing too much money again. I’ve also got to get out of the house more often and play some sports. One of my big goals is to finally take a family trip to our vacation property in Lake Tahoe.

Result: A+. I continued to remain unemployed in 2019, although things will probably change in 2020. It’s been a great 7.8 year run so far. One of the absolute highlights of the year was finally going up to our property in Lake Tahoe for a week. It’s been a dream of mine since I bought the property 12 years ago.

There is no price I can put on the picture below. I’m so excited to go on future family adventures together!

3) Hire help for Financial Samurai. After almost 10 years of running Financial Samurai with only my wife, it’s time to get some help with writing and site maintenance. I’ll be slowly looking for someone who is WordPress savvy, trustworthy, intelligent, reliable, dedicated, believes in my five core principles, enjoys writing and wants to earn some steady side hustle income. The fit has to be fantastic, otherwise, I’ll just continue to operate the site as usual.

I realize many sites my size have 4-10 people working to write content and handle some of the business elements. Now that I’ve discovered how great it is to hire help around the house, it’s only logical to hire help for our business.

Result: C-. I hired one person to do some freelance work for me for a month and another person to help me update some old content for a week. I tried to hire a virtual assistant out of the Philippines, but that didn’t work out. As a result, I’ve been mostly solo with my wife all year. Luckily, I have yet to burn out.

4) Focus on revenue. Since I’m going to hire help for the business, I want to get a return on my investment. To not get an ROI on my capital expenditure would make me a foolish businessman.

I or my new hire will write more review posts, develop more affiliate partnerships, build my blog marketing business, update my severance negotiation book, and maybe create a new Financial Samurai product. I’ll still publish my usual style posts 2-3X a week. There will just be more content all around as there is no limit to how many posts and pages a website can publish.

It’s going to feel great to finally start seriously focusing on monetizing Financial Samurai after 10 years. I already get the occasional flak from readers who criticize my work and don’t pay me a cent. So I now plan to unabashedly take full advantage of my platform to take care of my family, especially if the economy softens.

Grade: B-. My wife and I updated our severance negotiation book so that it’s now in its 3rd edition and ready for 2020. I really didn’t focus on monetization more than normal until I wrote the post, The Secret To Your Success: 10 Years Of Focused Work in 2H2019. When I didn’t get much positive feedback from the post, I finally got motivated to focus more on monetization.

I did work with some big name financial firms to create blog marketing campaigns and I have developed new relationships with a couple great companies I’m excited to work with in 2020. But I could have easily quadrupled my efforts this year. Despite the lack of focus, because traffic on Financial Samurai grew, revenue has naturally followed suite.

5) Grow the Financial Samurai Forum. For four years, I was a forum junkie in college. It was one of the best ways I learned about investing and finance. But in order for a forum to grow, it needs to be nurtured. Therefore, I plan to continue posting and corresponding at least 5X a week on the forum to build the FS community.

I have a 5-year plan to grow the Financial Samurai Forum into one of the best financial forums on the web. Specifically, I want to double its traffic in 2019. The forum is geared towards people who fundamentally believe that making more money is a better way to grow wealth than mainly through saving. I want to build a community that is open-minded and always curious about new ways to get better. I’m aiming for thought diversity, not groupthink.

Grade: B-. I realized I kind of don’t want to grow the Financial Samurai Forum because it’s so easy to manage right now. For this reason, I don’t advertise the FS Forum on the home page or in my author box after each post.

If it grows big, I’ll need to spend more time moderating the boards, deleting spammers, and playing peacekeeper. That said, the FS Forum has slowly grown to over 2,000 registered users.

6) Help my boy reach the following milestones by year-end. Being a full-time parent is an incredibly rewarding job because you get to teach and witness progress on a daily basis. I’ve discovered that through Financial Samurai, foster youth mentoring, and coaching high school tennis that I enjoy being an educator. Below are some specific goals we are looking to help him develop by 2 years 9 months.

Play and Social Skills

• Sit comfortably in circle time for more than 10 minutes – check
• Enjoy playing with the piano, guitar, and drums – check
• Play with toys without mouthing them – check
• Screw and unscrew jar lids and turn door handles – check
• Build towers of more than 6 blocks – check
• Copy a circle with pencil or crayon – check
• Show affection for friends without prompting – check
• Be away from parents with supportive and familiar people for 4 hours or more to prepare for pre-school – check

Coordination

• Walk down stairs unassisted – check
• Maintain balance while catching a ball or when gently bumped by peers – seems OK
• Throw and attempt to catch ball without losing balance – throwing OK, but doesn’t catch
• Walk and maintain balance over uneven surfaces – check
• Use both hands equally to play and explore toys – check
• Learn to pedal a tricycle – haven’t been practicing

Daily Activities

• Able to self-calm in car rides when not tired or hungry – check
• Tolerate diaper changes without crying or whining – most of the time
• Has an established sleep schedule of 10 hours or more a night and 1-2 hours of nap time after lunch at least 5X a week – naps regularly, but only sleeps through the night 2-3X a week
• Able to self-calm to fall asleep – check
• Able to tolerate and stay calm during dental visits – yes, after we changed dentists
• Able to brush his teeth without whining or crying 3X a day – brush teeth twice a day, and we mostly brush his teeth for him
• Is potty trained before preschool starts in September – half potty trained before September
• Dresses and undresses self by figuring out buttons, zippers, and straps – 70% of the way there

Communication

• Is able to consistently use 3-4 word phrases e.g. “I am hungry,” “The garage door is white,” “Walk with daddy,” “Financial Samurai is the best!” – speaks in 7-9 word sentences no problem
• Uses “in” and “on” – check
• At least 75% of speech is understood by any caregiver – check
• Follows 2-step unrelated directions, e.g. “give me the ball and go get your coat” – check
• Understands “mine” and “yours” – I think so
• Says words like “I,” “me,” “we,” and “you” and some plurals (cars, dogs, cats) – Confuses “you” and “me” a lot and still refers to himself in 3rd person most of the time
• Understands half of what we communicate to him in English, in Mandarin – Check. Has also learned Spanish.

Grade: A. At 33 months old, his communication skills are A+, but I have yet to teach him how to catch a ball or pedal a tri-scooter yet. We’re still working on potty training and he only sleeps through the night 30% of the time. I believe everything will come in time, so I’m not stressing.

7) Spend $1,500 more a month on life. We have frugality disease. We are spending less today than we were in our late 20s, despite having a much higher income and net worth. Our estate planning lawyer sessions really made us realize we will likely die with too much.

We will allocate the extra $1,500 in spending towards more babysitting help, more massages, bi-monthly house cleaning, and quarterly gardening. We will purchase at least economy plus tickets for all our parents to come visit. Further, if we take our first flight as a family, we will purchase economy plus tickets as well.

We are also going to regularly give to two charities all year. One will be to a center for foster kids and abused youth. Another will be for children with nystagmus, a visual condition. I also like supporting public park tennis initiatives.

Result: A. We definitely spent at least $1,500 more a month to pay for a better life. We focused our spending on childcare help before our son went to preschool, house cleaning, and in-home massages. We also upgraded some furniture and consistently donated to a foster youth center, a rehabilitation center for children, and the American Nystagmus Network.

See: Great Things To Buy With Your Massive Investment Gains

8) Pay off $200,000 of mortgage debt. Paying off my SF rental condo in 2015 felt wonderful. I don’t care whether it goes up or down in value because I truly plan to own it forever. Selling my SF rental house and paying off an $815,000 mortgage in the process also felt terrific. No matter how much more I could have made investing in risk assets, I’ve never regretted paying off debt.

Our ultimate goal is to be debt-free by 2022 when our boy is ready for kindergarten. Paying down $200,000 a year in extra mortgage debt will help accomplish this goal.

Result: C-. We decided not to aggressively pay off mortgage debt because the yield curve inverted and mortgage rates went way down. We refinanced our primary mortgage to a 7/1 ARM at 2.625%. Therefore, it was really hard to aggressively pay down the mortgage when, for most of the year, we were earning an online savings interest rate of over 2%. Further, the stock market kept on going up.

Overall, we paid off about $60,000 in mortgage debt through regular monthly payments and sending an extra $20,000 towards principal pay down. If the economy had been tanking, we would have probably paid down our principal more aggressively.

To get real mortgage refinance quotes, check out Credible. They are one of my new financial partners. Although refinancing can be a PITA, once it’s done, you will really feel great saving so much money each month. I’m thankful to be paying less a month to live than I was in 2014 when I bought the house.

9) Aggressively search for a larger house. I dodged a missile in 2018 by not buying a larger house for more money. I wrote two offers for San Francisco homes that both were rejected. I was seriously trying to buy this one expensive SF house in a great neighborhood, but by the time I was going to put in an offer, they had already accepted another offer on November 1 2018, for asking. If I had bought the house I’d be feeling nervous today since the stock market corrected by 20% soon after. It’s not unreasonable to assume the house is now worth $200,000 (4.5%) less today.

At the same time, I want a bigger house in SF so my parents, in-laws and sister can come visit for a longer period of time. A bigger house is also important if we are to have another child. One more bathroom and 500 sqft more of space would be ideal.

Result: A. The San Francisco property market was strong in 1H2019, but has since faded. I’m still very glad I didn’t spend a fortune on that house in November 2018 because I would have felt silly living in such a big house with only the three of us.

That said, I feel the time to buy a new property is upon us. I plan to use my investment profits to snag a deal on a larger house. I’ve found a house just a block away with panoramic ocean views at a great price. It’s 600 sqft larger than my old house with two extra rooms and one extra bathroom. I’ll write more about the house in future posts.

10) Be a voice for ~50% of the population. Due to the high cost of living, there are very few personal finance bloggers who live in an expensive coastal city. This makes rational sense, especially if you are a FIRE blogger. But roughly 50% of the national population lives in expensive coastal cities and other big cities around the country that face slightly different challenges. Therefore, I have an opportunity to establish Financial Samurai as a go-to resource for big-city audiences.

Result: A. I’ve been very consistent writing about financial issues that are relevant to at least half the population living in more expensive cities around the country.

It’s easy to write about such issues because I’m going through them in real-time myself. Due to my focus, I’ve received plenty of coverage from organizations such as The Atlantic, CNBC, Drudge Report, MarketWatch, and more.

Here are some relevant posts:

• The Importance Of Money And Status For Getting Your Kid Into Private School
• Why Households Need To Make $300,000 To Live A Middle Class Lifestyle Today
• How To Retire Early With Kids: An Almost Impossible Task
• The Amount Of Money Needed To Retire Early And Live In Abject Poverty
• How To Get Healthcare Subsidies Even As A Multi-Millionaire
• The Making Of 529 Plan Millionaires: A Growing Necessity
• Here’s When You’ll Become A 401(k) Millionaire

11) Be more forgiving of myself. No matter what project I undertake, I always run through the finish line. Financial Samurai’s finish line is July 1, 2019, after I made a promise in 2009 to publish 3X a week for 10 years. After that, who knows the future.

The funny thing about this finish line is that it is completely arbitrary. There is absolutely no need to put pressure on myself to produce so much content, especially if I’m having a rough week or sick. Financial Samurai surpassed my expectations by 10X long ago. Therefore, I’m going to give myself four weeks where I’ll just publish one post plus I’ll take it easy the entire month of June when traffic is slowest.

With more sleep and less stress, I hope to improve my overall mental health and happiness. My desire to constantly grind stems from mistakes made in high school, plenty more rejections as an adult, and an indoctrination since I was a kid that I need to try harder as a minority to get ahead in America.

Result: B. I never ended up taking one week off, let alone four weeks off to just publish one post a week. At the minimum, there were several weeks where I only wrote two posts because I was feeling a little burnt out. But I also published a newsletter during those weeks as well. For those of you who have subscribed, you know most of my newsletters are pretty chunky as well.

After reaching my 10-year publishing goal in July, I just kept on going as usual because there was always something interesting to write about each week. My sleep, unfortunately, continued to be short. No matter how hard I try, I can’t sleep for longer than 5-6 hours straight.

Finally, I decided not to entertain an enticing offer to sell Financial Samurai after I reached my 10-year writing goal. Now I’ve got to make sure my decision was the right one.

12) Celebrate big and small wins. To make the hustle more worthwhile, we will celebrate all our achievements as parents, writers, and entrepreneurs. A celebration can be as small as opening a nice bottle of wine. These celebrations will also help us fulfill our goal of spending more.

Regularly highlight something specific I appreciate about my wife so she always feels recognized and loved. She is an incredible full-time mom who also launched the FS Forum, finalized our revocable living trust, registered the third edition of How To Engineer Your Layoff and the lullaby Cutie Baby with the Library Of Congress, and is responsible for all ongoing business accounting. I haven’t done a good enough job appreciating her efforts over the years, which is why I’m committed to doing more for her in 2019 and beyond.

Result: A. We celebrated a lot this year by going out to eat, getting lots of in-home massages, and taking a couple great family vacations. Being able to defend our Northern California Section high school tennis title was also an extremely satisfying personal victory. It showed our first victory ever in the school’s 43-year history wasn’t a fluke.

Overall, I think I’ve done a good job appreciating my wife by verbalizing my appreciation, writing out my appreciation in public posts, being a stay at home dad for 33 months, and maintaining a high-quality lifestyle for both of us.

My main priorities are to ensure my wife never has to go back to work if she doesn’t want to and to give our son a wonderful childhood. I often feel a tremendous pressure to provide, but I’ve continued to grind it out because I know I’ve had way more luck than most. I refuse to take my luck for granted because I know it will eventually run out.

One Of The Best Years Ever

2019 will go down as one of the best years ever for my family. Financially, I was hoping to increase our net worth by 5% after a shaky 2018. Instead, our net worth has grown by ~18% according to what I track on Personal Capital.

Depending on how my private equity, venture debt, and real estate crowdfunding investments play out, our net worth might be up closer to 25% in 2019. As of now, all our private investments are valued at cost in my net worth dashboard, which I’m assuming is conservative.

I absolutely did not expect the S&P 500 to do as well as it did this year. As a result, I was too conservative with my public investment allocation with a 40% equity / 60% bond ratio. But thankfully, bonds did quite well as well.

As two unemployed parents, this bull market is a blessing. I don’t think I could have remained comfortably unemployed since 2012 if it wasn’t for such healthy investment returns. I probably would have aggressively tried to monetize Financial Samurai and find part-time consulting if the markets were flat or down.

The fact that Financial Samurai’s visitors grew by double digits YoY according to Google Analytics makes me even happier given Financial Samurai is my passion. It feels much more rewarding to see progress from something you actively work on versus investments you passively invest in.

Finally, I’m just so happy to have my family. My family has given me so much motivation to write, stay healthy, and appreciate every day. There were certainly some really rough times with hours that regularly spanned from 5 am – 11 pm. But I’m appreciative to have the energy to last so long. I just want my boy to stay 2.5 years old forever because time is flying by.

Overall, I give 2019 an A. I’m sad it’s over. But I’m looking forward to a prosperous 2020.

Thank you everyone for coming along for the ride, sharing my posts, and inputting your thoughts on various issues!

Readers, how was your 2019? What were some of your wins and losses? Thanks for reading and sharing all throughout the year!

To subscribe to my newsletter, you can click here. I try to send one out once a week.

The post Financial Samurai 2019 Year In Review: One Of The Best appeared first on Financial Samurai.

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