Categories
Investing

How Can a College Student Invest? Easy Tips

In my opinion college students are the best investors. They are constantly learning and not afraid to make mistakes. As you get a college education, you should be getting an education in building wealth. You don’t need tons of capital to start your investing journey: you just have to know how to do it.

This article will focus on the most popular option for college investors: online investing. If you are wondering how can a college student invest here are some tips to get you started.
If you want to get started investing the process is so much easier than you think. Great guide for beginners!

How Can a College Student Invest Starting with Stocks?

When you first start investing you will most likely want to start with stocks. The reason most first time investors start with stocks is that they are easy to relate to and they are widely discussed. You can start up a conversation about stocks with almost anyone and they should be able to voice at least an opinion. While some believe that there are certain best stocks for college students, I believe a general education on how to invest is important.

Establishing Your Online Investment Portfolio

According to financial experts, college investors have a significant advantage over other types of investors. They have time – lots of it. Considering the amazing powers of compound interest (i.e. a type of interest that earns additional interest), we can say that time IS money.

Experienced investors state that even a small amount of money, if invested properly, can reap huge profits in the future. That means you really have to think about building your personal investment portfolio while you are still in college.

Here are the things you have to do to jumpstart your career as an investor:

  1. If you are beginning with small capital (e.g. $25 to $50), find a broker that will accept the small account. Then, you can increase your overall capital by investing more money on a regular basis.
  1. You should calculate the total amount of money you are willing to risk. As a college investor, you have to keep in mind that investment always involves risk. Your personality and available funds are two of the most important factors that determine your “risk tolerance.”
  1. If you like to take risks, the possibility of earning large profits probably outweighs your fears of losing money. If you are risk-averse, on the other hand, you have to perform serious calculations regarding the exact amount that you are willing to risk.
  1. There are savings vehicles that guarantee profits and offer minimal risks. Here are some examples: certificate of deposits, federal savings bonds, student savings accounts approved by the FDIC, etc. Yep, I’m talking about saving accounts, CDs and other bank saving products. In general, these financial instruments provide the best protection against risks. However, they also involve the lowest potential for getting large profits. If you will invest in these instruments, your earning potential will be severely limited.
  1. If you can shoulder more risk and invest your money for a longer time period, you may try investing your capital in mutual funds or exchange traded funds (ETFs). These funds are composed of various securities such as bonds, stocks and commodities. Mutual fund corporations collect and manage the money of other people for investment purposes. Since these corporations employ financial experts, lots of college investors opt to put their money in mutual funds or ETFs.
  1. Prior to investing your hard-earned money in these mutual funds, you have to perform your own background research. Some mutual fund companies focus on particular industries (e.g. pharmaceutical, telecommunications, banking, etc.) while others use diversified portfolios (i.e. they make investments in different industries). You should research about the past performance of the company you will be investing on and the industries they work with. Remember: The past performance can in no way guarantee future results.

How Can a College Student Invest in Stocks?

As a college investor, once you become familiar with how the financial market works, you can start to invest in individual bonds or stocks. You can do this through the help of online brokerage firms. Individual investments, as the name implies, require the investor to personally manage all of the securities that he/she owns.

This might sound a bit scary.

However, there are lots of tools that you can use to simplify your investment decisions.

Almost all online brokerage firms provide their clients with reliable tools to monitor their investments. These days, lots of investment companies offer free accounts and minimal balance requirements. That means you can start your personal investment portfolio today.

You may think that investing is difficult or that it is hard to get started. That is not the case. Beginning your investing journey is as easy as opening an investing account. I used to have a few accounts with different brokers because I liked them for different reasons. Now I just have a few ETFs and stocks.

For example, I can buy stocks with an Ally Invest account. But I also like them because I can invest automatically without choosing stocks; you can open an account here with no minimum.

Lesson 1: What is a Stock?

A stock or a share, is an ownership interest in a business. A publicly traded business will use stocks, also called equity, to raise capital. As a stockholder, you own a piece of a business. You have the right to vote on certain changes, and you should be involved in the process. Figuring out what stocks to choose is the tough part. I remember when I made my first investments. I bought stocks based on what reporters were discussing on tv. And I lost horribly. After a few years, I learned how to research stocks and invest with the markets, not against them. I was a college student investing with extra cash and I enjoyed the process.

Lesson 2: How to REALLY Trade Stocks

Once you’ve placed a few trades and are confident in your abilities, it’s time to put some muscle behind your trades. You can beat the stock market if you make the choice to research your trades and take the time to follow the markets carefully.

Lesson 2b: Technical Analysis vs. Fundamental Analysis

This is where you have to do your homework and it’s really not that hard. Fundamental analysis is looking at the story behind the price changes whereas technical analysis is looking at the previous price changes to determine a future.

4 Tips for College Students Who Want to Invest

The following tips are recommended by financial experts. You should consider these before or while investing your money in the markets.

  1. Learn as much as you can – You can acquire investing knowledge and techniques just by reading reliable investing books and articles. The pieces of information you can gain from these resources can help you become a successful investor.
  2. Eliminate high interest debts – Debts (especially those with high interest rates) should be paid off first before making any investment. Risking your money in investments while having high interest loans can greatly worsen your financial condition.
  3. Select a brokerage firm – If you really want to make investments, you have to create a brokerage account. You have two options here: online firms and traditional firms. Online brokerage firms offer easy and computerized investment systems. However, traditional firms may provide personal advice and services.
  4. Diversify your portfolio – Investing all of your funds in a single company can result in financial disaster. Consider putting your money in various industries and investment vehicles. This strategy is called “portfolio diversification.” Even if you think an investment is a “sure thing” never put all of your eggs in one basket. A diversified portfolio is recommended.

6 Fears That Prevent You From Investing

It’s hopefully no secret that investing is the way to build wealth. Stock piling your money in a savings account won’t help you become a millionaire, or even help you achieve your financial goals. Unfortunately, there are a lot of concerns and excuses that young professionals like to throw around that keep them from investing. I hope to dispel a couple of them in this post and to help motivate you to look at investing!

1) Investing is for rich people.

How do you think most of those people got rich? Not by sitting around and working their 9-5 job! It only takes a little bit of money to get into investing, and anyone can start trading stocks online!

2) I just don’t have enough money to make it worthwhile.

It’s the principle of the matter; if you can learn to make a little bit of money, you can learn to make a lot of money!

3) I just don’t have time.

Let’s face it; what young professional does? The fact is, if you don’t purposefully make time for your finances, they’ll easily slip out of control for you. It actually doesn’t take all that much time to research and invest your money, plus there are now more and more affordable services online (Ally Invest, Learnvest) for you to pay a nominal fee to have your money invested.

4) There are too many options out there to invest in.

Well, you’ve gotta start somewhere. Try picking one good mutual fund or an index fund. This is a quick way to diversify your money and lessens the risk of just picking one stock.

5) I’m afraid I’ll lose my money.

That’s a fair point. Firstly, never put more money in than you could see decline. You should always keep an emergency fund as well as a nice pile of cash in the bank before you start investing. Secondly; no risk, no reward. You have to be willing to take a risk with your money in order to get the reward of actually making money. Thirdly; start small and safe with your investing. Don’t go investing in high tech companies that you don’t even understand their business model. Although you won’t ever eliminate the risk, you can certainly learn to mitigate it.

6) I already have a retirement fund, why should I invest more money?

Firstly, good for you for having a retirement fund! Take a look at your savings account right now, how much interest is it paying? I’d be surprised if you said more than 1%. Inflation in 2013 here in the US was 1.5% last year. That means that your money essentially lost some of its value just sitting in the bank.

Although you shouldn’t go out and invest all of your money in the market, investing more than $0 would be a good start.

By investing early, you’ll hopefully be able to enjoy years of compounding interest and will see you total net worth grow!

How did you start investing?

Originally posted 2019-04-20 08:00:27.

Categories
Investing

Review of Betterment How to Invest the Easy Way

This post includes links to Betterment, a trusted partner. If you choose to open an account, we receive compensation as an affiliate. View our full disclosures here.

Let’s face it, most people are lazy… including me and possibly you.

Yeah, we work at what is interesting to us, but otherwise, we’d rather keep things simple.

Here at Young Finances I’ve been trying to teach how to research stocks, build a portfolio and invest for retirement, but some people just hate finance.

And many Americans invest too little.

An Easy Way to Invest

Fortunately, I recently stumbled across a simple way to invest.

It’s called Betterment.com. Betterment.com was founded in 2008 as a simpler, smarter, safer way to invest.

The CEO and Founder John Stein said “I created Betterment because after years working in financial services I was amazed that no one made saving and investing money as simple as it ought to be.”.

How Does Betterment.com Work?

When you open an account at Betterment.com, you can deposit or set up recurring deposits from a checking or savings account.

Then the folks at Betterment will invest on your behalf into ETFs based on your portfolio allocation. Portfolio allocation just means where you want your money to go.

There are two options, stocks and bonds.

You don’t have to do any research or constant monitoring of your portfolio. They manage everything for you.

The only thing you have to do is decide whether you want a low risk portfolio or high return.

What Does it Cost?

I think this is my favorite feature of Betterment.

There are no hidden costs, fees, or minimum balances.

They simply charge a small percentage of funds under management. If you are familiar with hedge funds, you know that they may charge 2% and 20% fees for funds under management and performance.

Betterment.com charges anywhere from 0.25% to 0.40% based on how much you have deposited.

This fee covers everything. At most that’s 40 cents a year for every 100 dollars deposited and there is no minimum balance for a trading account.

Trading in a traditional brokerage account, even if you only made one trade a year, would cost you at least 5 bucks.

Is it Safe?

Betterment LLC is a Registered Investment Advisor with the SEC.

They have to report to the Securities and Exchange Commission and maintain fair dealings within the rules of the SEC.

Remember that it is an investment account not a savings account so your funds are not protected by FDIC insurance.

However, your investments are protected with SIPC (Securities Investor Protection Corporation) just like with any broker-dealer.

And Betterment.com has a systems and security team that works around the clock to protect your account from fraud or malicious activity. If you already have an account that you actively trade stocks in, then this is a great way for you to supercharge your long-term savings.

A good way to use this account is to set up automatic transfers each month.

Making investing automatic and inexpensive will allow you to keep more money in your pocket.

You could use Betterment for a travel fund. The same money that you would likely have sitting in a savings account earning a risk-free rate of pennies a day, could instead automatically invest.

I am no stranger to risk, so I would prefer have the opportunity to earn more for my money. But everyone is different, so choose what works best for you.

Remember that you can withdraw funds at anytime without fees, so it will give you flexibility as well.

Have you tried Betterment.com yet? Click here to open an account today!


Review of Betterment Easy Investing Account

5
LaTisha Styles
September 2018
“Easy way for young adults to invest in 5 minutes…”
“The Betterment brokerage account is an easy way to immediately build a diverse portfolio. Young adults can open an account in 5 minutes.”

Originally posted 2019-04-14 06:00:59.

Categories
Budgeting & Saving

How to Fix Bad Credit?

Wondering how to fix my credit myself? Or how to fix bad credit? There’s no doubt that living in the modern world requires credit. Yes, you can live without a credit card and survive on cash or cashback debit cards.

I know because I did it for over two years as I paid off credit card debt. But what I really wanted to do was improve my credit score immediately.

However, when you are ready to buy a house, you’ll need to get your credit straightened out. In this post I’ll discuss getting a credit repair service as well as what steps you need to take if you decide you want to fix your credit score yourself. You might even be able to fix your credit in just 6 months.

These steps are so easy. Perfect guide for do it yourself credit repair.

Related articles from our approved partners:

How Can I Fix Bad Credit Myself? – 6 MonthCredit Repair Guide

First, watch this video from my friend Dominique over at Your Finances Simplified. He’s going to tell you exactly how to fix your credit.

Watched the video? Good.
Feeling overwhelmed at the next steps?
Yep. I understand.
Let’s take this step by step.

Take a deep breath. People think that having bad credit is the worse thing that can happen. But just calm down. You are taking the first steps which puts you on the right track.

Remember, it’s just money.

No one is going to die. Take control and get back in the driver’s seat!

Fix 1: Check Bad Credit

The first thing you’ll need is your creditor information. Get the most recent credit card statements, loan balances, and installment loan reports along with addresses and phone numbers. I recommend printing everything old-school style. It’s going to come in handy later.

Fix 2: Get a Free Credit Report

Then, take a second to get your free credit report from AnnualCreditReport.com. Each year you are able to pull your credit report for free from the three providers Experian, Equifax, and Transunion.

Optional: Get Your Free Credit Score

You can check an approximation of your credit score for free at Credit Sesame one of our approved partners, but if you are trying to fix your credit, you probably already know your credit score looks a little like this….

bad credit personified

But that’s ok. We’re going to put you on the good foot.

Fix 3: Review your credit report for errors (highlight each error).

You’re getting ready to take charge and stop being a victim. Most people don’t even realize what they could get removed from their credit just because of errors.

What should you look for?

Wait a minute. So, you’re telling me you didn’t watch the video above?

Scroll back up for me right quick and you’ll find out exactly what you should look for.

Or keep reading…

Dispute incorrect names, addresses, SSN, and date of birth via the certified mail.

You will need supporting documentation and letters. You will have to write a dispute letter and include the specifics of the inaccuracies. You want to dispute inaccurate, erroneous, outdated, misleading, and unverifiable information in your credit reports.

Tired of being harassed by your creditors? Maybe you’d prefer that someone else handle all of this for you?

In that case, you might was to work with a credit repair company to improve your credit.


Are you ready to…

  • Remove bankruptcies to rebuild credit?
  • Permanently delete foreclosures and repossessions?
  • Erase debts that were in collection?
  • Completely get credit cards under control?
  • Get approved for loans?
  • Get the best financing on cars and homes?

In that case, check out our partner Lexington Law for more details on how they can help you clean up your credit report.

Finally, fixing your credit permanently also means creating good habits and getting out of debt.

How getting out of debt is like the MTV show, I Used to Be Fat.

I used to watch this TV show on MTV called I Used to Be Fat. The show documents young adults, usually high school seniors and high school graduates who want to lose weight before they start college. Each episode features a different teen. I absolutely LOVE this show. I like seeing the determination and perseverance of these kids, they are really focused on their goals. Most of them thought about quitting along the way but each one makes it to the end and they usually reach their goal.

I was thinking the other day about how the TV show is very similar to a battle with debt. When you’re in debt, it can feel like you’re carrying around a second person, experiencing frugal fatigue, or that you have a spare tire of bills around your waist. I know because I’m working on getting out of debt myself. I realized that there are 3 major points we can learn from the MTV show I Used to Be Fat when trying to take control of our debt.
debt

Improve Your Credit Step 1 – Give Yourself a Deadline

Before the teens even begin a weight loss program, their coach/personal trainer gives them a large tear off number calendar to place on their wall. It has the total number of days until their program completion date, and every day they rip off the next number.

It is a good idea, when you are paying off debt, to set a deadline for your debt-free date, like 6 months. Setting a deadline is a way of making your goal specific. Every time you look at that calendar or see that date it will push your brain consciously and subconsciously to make it to your ultimate goal, to reduce spending and get out of debt.

Improve Your Credit Step 2 – Check in Regularly with a Coach

Every week, the kids had a weigh in. Their personal trainer was making sure that they were on track with how much weight they were supposed to be losing at each stage in the process. Sometimes they were attempting to lose one pound a day! I never thought that was possible or healthy, but most of the teens actually accomplished it under the supervision of their coach.

If you really want to prioritize your goal of becoming debt free then you really have to give yourself check points. You can enlist the help of a friend or even a debt counselor to help you along the way. Having a good support system can make all the difference.

Improve Your Credit Step 3 – Get Rid of Old Habits and Create New Ones

When one of the teens was at a restaurant with her friends, she ordered a lean meal instead of the greasy french fries that her friends had. The personal trainer also taught her how to cook healthier meals so that she would be able to maintain her new lifestyle change.

Becoming debt-free is not a one-time goal. It has to be a lifestyle change. When I decided to start getting out of debt, I had to first evaluate why I was in debt in the first place. I had to eliminate my habit of impulse spending and replace that habit with a good habit. Now I impulse buy stocks and my portfolio loves it! It’s not easy to change a habit that took years to cultivate, but with a good support system, it is entirely possible.

Are you ready to make a change?

Some of you may be thinking, I’m still young, so why should I care about my credit score? Lots of people have debt and less than stellar credit, but they’re still enjoying a cushy lifestyle. As long as I’m able to buy the things that I want, why should I be concerned? The answer is simple. Life is easier when you have good credit.

Take a look at it this way. Landlords, employers, and lenders need to determine whether they can trust you, and they look at your credit score as an indicator of your financial reputation. You may not think credit affects you greatly, but it does. When you ruin your financial reputation (a.k.a. credit score), it will take you a long time to restore it.

Poor credit affects your ability to rent, buy a car, get a home loan, and even open up accounts. Creditors don’t want to work with people with bad credit because the risk of not getting paid is very high. How can they trust that you will pay them back if you haven’t even paid others? If you’ve already tarnished your credit, here are some tips to help you fix your credit score and reestablish your life.

Improve Your Credit Step 4 – Make Your Payments on Time

This may sound trivial, but we all know that money can be tight, and skipping payments on one bill can help pay for other expenses. But, timely payments are the biggest factor affecting your credit score. Keep a budget, and make sure you have sufficient funds to make your credit card and loan payments on time.

Improve Your Credit Step 5 – Consider Getting a Secured Credit Card

Obviously, it will be very hard to get a regular credit card if you have bad credit. If you don’t qualify for a credit card, you can get a secured card instead. This is when the bank gives you a credit line equal to the deposit you make. If used wisely, a secured card can help nurse your poor credit to better health.

Improve Your Credit Step 4 – Add an Installment Loan

You can improve your score quickly if you show that you can be responsible for both major kinds of credit: revolving (credit cards) and installment (mortgages, auto, student loans, etc.). If you don’t have an installment loan and feel you are ready to handle one, consider adding a small personal loan. Stay away from expensive finance companies and “teaser” deals, and use a company that reports the loan to all three credit bureaus.

Improve Your Credit Step 5 – Avoid the Minimum Payment Trap

Credit cards come with high interest rates. We all know how our $2,000 computer ended up costing $8,168 because we only made the minimum payments at 20% on our credit card. Ouch, that hurts! Keep constant payments on your credit card (and don’t run them up again) and your balances will drop.

Improve Your Credit Step 6 – Use Your Credit Cards Lightly and Check Your Limits

Even if you pay your bills on time and in full each month, having big balances can hurt your score. Try to limit charges to 30% or less of your card’s limit. Lenders typically like to see a big gap between how much you’re charging and your available credit limit.

Improve Your Credit Step 7 – Keep Old Credit Cards

Don’t close out old credit cards. The longer your credit history, the better. Leave the accounts open but once you pay them off, stop using them. Closed accounts tend to bring down your score.

Improve Your Credit Step 8 – Suspend Credit Inquiries

The more credit inquiries you have, the more your credit score drops. Fix your credit and wait a while before allowing your credit to be pulled again.

Improve Your Credit Step 9 – Get a Goodwill Adjustment

If you have been responsible about paying your credit cards on time, the lender may agree to erase a late payment from your credit history. For more troubled accounts, communicate with your lender about possible options to erase previous delinquencies. If the lender agrees, it will improve your overall record.

Improve Your Credit Step 10 – Check Your Credit Report for Errors

You can check your credit report without negative scoring (once per year, for free) with the three credit bureaus at AnnualCreditReport.com. Make sure to look for any mistakes that could be hurting your score. If you see something wrong, make the effort to have it corrected.

Improve Your Credit Step 11 – Seek Professional Help

If you are overwhelmed with debt and don’t feel you can handle the problem on your own, consider working with a professional debt relief agent. They can help you explore your options and give you guidance on this post

It’s very easy to ruin your credit, but it takes time to build it back up. No matter how bad your credit is, you can take steps to make it better.

Sometimes we mishandle our budget, and we spend more than we should. (You know that you shouldn’t have bought that expensive flat screen TV). And, sometimes we end up in tough financial situations because of things beyond our control. Whether you have experienced job loss, illness, or another type of financial disruption, it’s important to know that you can turn things around.

It may not be easy, but step by step, you will be able to fix your financial situation. Just don’t delay facing the issue. The longer you wait, the harder it is for you to recover.

Categories
Career

How to Survive Your First Job

Sometimes it seems like I’ve had several different jobs, even though, in reality, I’ve been at my ‘real’ job (the one I work for on a regular basis for real money! Not intern credit!) for nearly 3 years. Over the past 3 years, I had 6 different bosses – which is probably why it feels like I’ve had six different jobs!

With that, I think I have a pretty good handle of what it takes to survive your first few months in a new job. Sure, I don’t have decades of experience, but the experience I do have has taught me a lot about what it means to set yourself up for success… or recognize the job you have isn’t going to work out for you.

How to Survive Your First Job: Be Humble

As the saying goes, first impressions can really make or break you. I found that out first-hand with a young woman at one of my first jobs – she was around my age, but she wasn’t particularly nice. She thought she was hot stuff and everyone should know it – but guess what? No matter how good she was at her job (and she was good at it!), she gave people the impression that she was better than they were. She was denied several promotions in the time she stayed in our organization, and while I can’t confirm it, I have a feeling it was based on her reputation in the office.

No matter how awesome you are (and you obviously are, otherwise you wouldn’t have gotten the job!), be humble and nice to everyone you meet your first month or two. I’m not saying downplay your accomplishments, but just tell the facts. No need to tell everyone you’re a superstar – if you are, they will find out over time!

Listen More Than You Speak

Like your Mom may have told you, you have two ears and one mouth for a reason. Ask more questions of your coworkers than they do of you – first, to learn about them and their roles in the company, but also: this may be one of the few opportunities you have to ask a lot of questions and not look like you don’t know anything. Use this to your advantage!

By listening closely, you’ll figure out who is friends with who, and who is related to who. It seems childish, but it’s a fact of office life: people gossip. And you don’t want to be the one being gossiped about, so keep your mouth shut and your ears open!

Learn How Your Boss Ticks

Listening carefully goes for your boss too – ask him or her a lot of questions now, early in your job, to get a feel for how he or she ticks. What are your boss’ goals? If you notice your boss spends a lot of time in her office, carefully reviewing work and organizing files, make organization and careful work your goal. If you notice your boss out socializing, make a little effort to socialize more too.

I’m not saying become a carbon copy of your boss, but these attributes may be things your boss prioritizes. I’ve had a boss comment to me once that I ‘must be shy’ because I preferred being at my desk versus socializing with coworkers. I thought I came across as a hard worker, but in his mind, I looked like the opposite of a team player. I quickly made an effort to be seen socializing more – and it wasn’t a bad thing!

Starting your first job can be nerve-wracking, but if you keep in mind that this first job could be a long term career, or a great jumping off point to another great career, that should help you to remember these tips. Like Lil Wayne says, it’s not what you walk away from, it’s what you walk away with – and you need to walk away from your first job with some serious skills, a solid resume/portfolio, and professional references for your next awesome job.

What tips would you include for those starting their first job?

Originally posted 2014-10-08 06:00:00.

Categories
Budgeting & Saving

What Should I Do With My Old 401k?

How long have you been with your employer? And how long do you plan to stay there? As a millennial, you may have a feeling of restlessness. An article from Forbes argues that job hopping is the new normal for millennials. And the most recent data released by the Bureau of Labor Statistics states that employees tend to stay with their current employer an average of 4.6 years.

If you have been with your company for a few years, you are probably thinking of that next step. It is important to continue to grow your career and stretch yourself in the process. You may decide to continue your education and go back to college or start a professional certification. Maybe you are thinking of taking some time off to travel and discover what you truly have a desire to do. It is possible that you’ve realized that you can support yourself with your side hustle and you are ready to become a full time entrepreneur.

Free Money

During your time with your employer you have likely contributed to the retirement plan. If your company offers a match program for retirement contributions, you likely contributed to take advantage of the free money.

Staying with your employer? Click here to watch why free money should make you dance.

Now that you are thinking of leaving, you wonder, “What happens to all of that money in my 401(k)?”

Don’t panic.

It’s your money. And you can take it with you.

And that’s where the Rollover IRA comes in.

The Rollover IRA

As an avid reader of Young Finances, you’ve heard of the Roth IRA and the Traditional IRA. You know that IRA stands for Individual Retirement Account and that it is a savings vehicle designed to help you save for retirement. You know that you will need to designate a beneficiary and that I have a preference when it comes to tax free money.

But I have yet to mention the Rollover IRA.

A Rollover IRA, also known as rollover, is simply a transfer of funds from a retirement account such as a 401 (k) into a Traditional or Roth IRA.

Let’s assume that you have already left your job. Starting a rollover will allow you to move assets from a 401(k) at your old employer into a brand spanking new IRA, Traditional or Roth. In essence, you would contact the administrator that holds your 401(k) and let them know that you want to rollover. They would close out your 401(k), cut you a check and you have 60 days to deposit that into an IRA account that you open.

The Rollover Tax Question

Of course, when dealing with retirement distributions, you have to consider the tax implications. Let’s see what the Internal Revenue Service has to say about it.

Will taxes be withheld from my distribution?

IRAs: IRA distributions paid to you are subject to 10% withholding unless you elect out of withholding or choose to have a different amount withheld. Withholding does not apply if the distribution is paid directly to another IRA trustee.

Retirement plans: A retirement plan distribution paid to you is subject to mandatory withholding of 20%, even if you intend to roll it over later. Withholding does not apply if you roll over the amount directly to another retirement account. A distribution sent to you in the form of a check payable to the receiving plan or IRA is not subject to withholding.

Well there you have it. Directly from Uncle Sam himself.

Tax withholding can be avoided if you roll over the distribution from a retirement plan directly to another retirement account.

You may also be thinking, why should I roll over?

Why not take the distribution, pay the tax penalty and buy a yacht to travel the world?

When you roll over a retirement plan distribution, you generally don’t have to pay tax on it until you withdraw it from the new plan. By rolling over, you are saving for your future and your money continues to grow tax-free.

If you want to allow your money to grow tax-free then a rollover may be right for you.

Ready to Rollover Your IRA?

I’ve discussed Betterment here at Young Finances several times. I have a Roth IRA with them and a few sub accounts dedicated to travel, long term investing and a recent investing challenge. I like them because they provide an easy way to invest with low costs. Betterment portfolios are customized based on your personal preferences and risk tolerance and they work around the clock optimizing returns at every level of risk.

It’s free to roll over 401(k) assets or an IRA to Betterment. There are no trading costs and portfolios contain cost-efficient index funds.

They make things easy.

To transfer your 401(k) assets, the direct rollover method is used which prevents any withholding or tax consequences.

Betterment also provides a rollover concierge to you and they are available to speak to your current 401(k) or IRA provider to make sure the transition of assets is completed smoothly.

Not rolling over? Open a Betterment account today and get a month free.

Something that could take days and tons of paperwork is made easy with Betterment. Instead of an overwhelming, time-consuming process, Betterment takes steps to ensure your money is put to work in an optimized portfolio as soon as possible.


Now that you know how easy it is to roll over, what job will you look for next? Or would you rather take a year to travel the world?

Originally posted 2014-10-06 06:00:58.

Categories
Career

How to Negotiate Your Salary

When you first start working full time, it can be very exciting. You successfully passed the interview, and you were extended a job offer with a salary! But before you accept out of pure excitement, you should negotiate your salary.

The majority of people don’t negotiate their salary because they’re afraid, including adults twice your age. According to Salary.com, 32% of people they polled were scared of losing the job offer if they gave any push back to the pay. You’re focused on getting the job, and not always thinking of getting paid what you’re worth.

Don’t be afraid of “scaring off” the company by asking for more money. You’re not being greedy.

What Salary Should I Ask For?

So how do you go about negotiating your salary? The work starts before the job offer. When you’re doing your research for the position and the company before the interview, you should take a look at the average salary is for that position.

You can look for what the pay is in your area, as well as compare it to other areas in the country. Set a goal for what your compensation should be, but also be realistic in regards to your level of experience. Many companies’ job listings will list that salary is DOE, or depending on experience. If you’re toward the lower end of the experience spectrum, expect to be on the lower end of the salary range for that job.

Next, when the job offer is extended to you, be gracious. Of course you’re excited that you got the job, as you should be. However, now is not the time to be arrogant. Of course you want to be paid what you’re worth, but you should never come off entitled during this stage. You want to be humble, yet firm.

How Should I Position My Counteroffer?

When the salary is mentioned, you have a right to counter. Throw your number out there, and explain that you’ve done research and emphasize how this is beneficial to the company. What are you bringing to the table? How will they benefit from having you on the team? Don’t throw out a number because it sounds good. Have a legitimate reason why you deserve $Y as opposed to $X.

Now is also the time to ask about additional compensation with the company, in the form of benefits. Does the company offer medical, dental, vision, and life insurance? Are you able to invest in the company’s retirement program after a certain amount of time? Is there a tuition assistance program you can enroll in?

While these things don’t necessarily add to your paycheck, they are other ways the company is investing in and paying you. A benefit package can make a job offer more feasible, because these are things you don’t have to pay for, and if so, you don’t have to pay as much as you would if you purchased it on your own.

What If They Say No?

If, by chance, they say a hard and firm no, that usually means “not right now”. This should not be the last time you negotiate. You may have more supporting evidence in the next 6 months, such as your superb performance and contribution to the company. This information will add to your case, and numbers are hard for people to ignore. They want to retain top talent, and if you’re a proven top performer, they will work with you to keep you there.

Now is the time to negotiate. You don’t want to simply accept the offer with the pay the company gave you, if you had the chance to make more money. A $5,000 bump in the offered salary is an extra $416 every month, and can translate into big money years down the line. So in the excitement and nervousness, don’t forget to have a dialogue about your compensation, rather than having a company dictate it for you.

Originally posted 2014-09-11 06:00:54.

Categories
Budgeting & Saving

4 Things You Should Save Up For Before Moving Out

You got your first taste of freedom when you went away to college, and you got to live either in the dorms or off campus apartments.

After graduation, the thought of moving back in with your parents was probably cringe worthy. But moving out on your own shouldn’t be a decision you jump into quickly. You’ll learn that being on your own is different than living away from your parents while you’re in school.

You no longer have the same safety net, including borrowing money from mom and dad, or using financial aid to hold you over between your part time checks.

Before you pack your things yet again, here are 4 things you should save up for before you move out on your own:

Your rent deposit

Depending on where you rent and who you rent from, you’ll probably have to put a deposit down to reserve your living space. In some cases it can be first and last month’s rent, and in other cases, it’s another fixed amount.

You’ll want this money set aside before you tell your parents you’ll see them later. I’ve rented several times, and two of those times, I’ve had to borrow money for my deposit from my mom, which was embarrassing.

Before you sign a lease or rental agreement, be sure to save at least two month’s worth of rent for your deposit. Yes, there’s a possibility to get that money back at the end of your living arrangement, depending on the conditions you leave your space.

However, there are some landlords who are notorious from keeping a large portion of your deposit, no matter how clean you leave your place. Don’t rely heavily on getting 100% of that money back.

Expect 50% just so you won’t be disappointed.

Rent reserve

Bottom line, things happen. Sometimes your check is shorter than you anticipated, or maybe an unexpected expense comes up.

When you’re renting, either from a private landlord or a property management company, you’ll soon learn how important the first of the month is. You always want to pay your rent on time, so you should save up for a backup rent resource.

This should be anywhere between one month to three months worth of rent.

This money will hold you over in rough times when you find yourself running short and the beginning of a new month approaching.

Home emergency fund

Although landlords and owners typically take care of repairs when you’re renting, there may be situations where something is not covered, and you’ll have to come out of pocket.

You should save money for home based emergencies. In my first apartment, our garbage disposal broke because a shot glass fell down the drain (don’t ask). It wasn’t covered in our rental agreement, but we were lucky enough to get the maintenance person to replace it for free.

This money can be used if you need to call a locksmith (they can be expensive), or fixing an after-hours emergency because the maintenance person was off the clock.

Another tip: get renter’s insurance! It’s good to have in case your items are damaged or stolen.

Moving expenses

When the day comes when it’s time for you to move, it can be stressful and expensive if you don’t plan ahead.

If you’re moving into a one bedroom apartment, you probably don’t need to hire movers. However, you might decide movers are within your budget. Check different companies’ hourly rates and minimum moving prices.

You should also consider the expenses you don’t typically think about, such as stocking your cabinets and refrigerator from scratch, utility deposits, and furniture delivery.

Living on your own is a very freeing accomplishment, but it’s independence at a cost.

You can move without saving for all of these things, but you’ll learn the hard way, like I did, that living away from home is a shock to your wallet.

You can deal with your parents for a couple more months while you save up for these things before packing your bags.

Originally posted 2014-08-27 06:00:42.

Categories
Young Finances

Should I Pay Off Student Loans or Invest?

As a recent college graduate, it’s likely that you have student loan debt. According to the National Center for Education Statistics,

“From academic years 2006-07 to 2010-11, the percentage of first-time, full-time undergraduate students at 4-year degree-granting institutions receiving any financial aid increased from 75 to 85 percent.”

With an average 4-year tuition cost of 21,000 dollars, and more and more students taking on student loan debt; a portion of your salary will go directly to paying of this debt. (Source)

However, if you research investment strategies, you’ll see the same advice over and over again. Start early and use time to your advantage.

Starting early puts the power of compounding on your side. That means more money. That also means that you are faced with a difficult question. Should you pay off student loans first or invest?

Before you can answer that question, you should evaluation your personal situation.

Do you have any other debt?

Do you have any other debt aside from student loans such as credit card debt, car loans, or medical bills? Even though your balance of student loan debt will typically be higher, these types of debt often have a higher interest rate. In order to save money on fees and interest. You should work on paying these off first. In addition, student loans give you more flexibility in terms of deferring payments whereas, waiting to pay credit card debt will most certainly affect your credit score negatively.

How much money do you have saved?

If you lack emergency savings, and you have an unexpected expense, you will cause yourself more stress than necessary. Emergency savings of 2-3 months of expenses as a bare minimum will help you manage most unexpected expenses such as hospital bills or car accidents. Take some time to build up an emergency savings fund first before you consider investing.

If you have all other debts in check and you have already set aside your emergency cash, now you can consider if it is better for you to pay off student loans or invest.

What types of loans do you have?

Typically, government issued loans have a fixed interest rate. If you do not have a fixed interest rate, then it would definitely be much wiser to pay off that loan as much as possible (or entirely) before you consider putting your money into investments. This is because when it comes to finances, figuring out what is certain and what is uncertain will help you determine where to put your efforts.

Are you ready to risk investing?

There is no such thing as a safe investment. The market can crash and businesses can go under at any time. Some investments are safer than others. When investing, there is a trade off between the risk you take and the reward you earn. The higher the risk becomes, more money will be returned on the investment. Only you can determine what types of risks you’re willing to take in your investing.

One final consideration is how you feel about your student debt. If you are the type of person who is uncomfortable with knowing that you owe someone a lot of money, or you have concerns about making that payment every month, then the answer should be obvious. Pay off your student loans.

There were many questions posed in this article. That is because there are many things to consider with a question such as this. You are the only person who can determine which choice is the correct choice. Evaluate your situation carefully, and make a decision that works best for you and causes you the least amount of worry.

This post was originally published as a part of the PNC Achievement Sessions helping you get smarter about money. Click here for more articles.

Originally posted 2014-08-20 06:00:42.