Categories
Investing

One Simple Tip To Investing Smartly.

Don’t look back!

You’re doing it! You’re doing it! You’re riding a bike.

Look LaTisha! You’re riding a bike!

I still remember the first time my dad let go and allowed me to ride a bike all by myself for the first time. I had been riding with training wheels and so ready to have them taken off. I was so confident that I could do it!

I begged my mom. I talked to my dad. Eventually they agreed and I had a chance to practice riding a bike without my training wheels.

As I got on I remember how difficult it was to stay upright. I leaned to the left a bit, and then leaned to the right a bit. If I leaned too much I found myself falling.

Eventually I learned to make the tiniest shifts left and right to stay balanced.

And as I rebalanced a bit here, a bit there, my dad saw that I had the hang of it and let go.

Riding a Bike for the First Time and Investing Smartly

What the heck does this have to do with investing? You might be asking that very same question.

When you first invest as a college student or if you are investing for the first time as a young adult, you might be unsure how to start investing or even where to put your money. The number one question that I get is ‘where do I start?’

I always recommend starting with what you know and understand. If you are a baseball fan then you are going to understand stats. Each stock has its own set of stats. Learn the important ones and let that be the way you invest.

If you are more of a qualitative investor and you prefer to follow the story of a company then scour the news, investor update calls, and commentary of companies that you already know and love.

Maybe you think that choosing and purchasing individual stocks is a waste of time and you would rather invest alongside the index.

Not sure what type of investor you are? Take this quiz to determine your investing style.

If you decide to take a balanced approach like I did in the investing throwdown, then you will likely need to rebalance your portfolio to make sure it does not swing one or the other too much. For example, I invested 60% passively and 40% actively. If the index does really well, then my portfolio could end up being 65% passive and 35% active. This could throw off my entire plan and I might very well fall off my ‘bike’.

In order to keep my allocation and portfolio optimized I will need to invest smartly and do a bit of rebalancing.

How and Why Rebalancing Works

When you rebalance a portfolio you consistently sell what’s working and buy more of what is not working. Essentially, you are taking your emotions out of the equation; buying low and selling high.

As someone who has lost money in the markets because of emotions, I understand the effects of emotional investing.

Rebalancing your portfolio helps to keep your pre-determined allocation in place. If you decide that you want 50% of your portfolio allocated to stocks and 50% to bonds, then an annual or cash flow based rebalanced will help keep that allocation in check.

Rebalancing often could eat into your returns if your account is subject to high fees. However, if you rebalance each time you add cash to your account then you can avoid unnecessary fees.

How to Rebalance an Active Portfolio

Rebalancing an active portfolio is pretty simple. You would sell from the winners and put those gains towards the losers. Deciding when to rebalance will be your biggest decision. Do you give your winners time to run? And why would you buy more of the losers?

Welcome to active investing.

Those decisions are difficult to make but as an active investor, that is what you have chosen to do.

On average, financial planners suggest that you rebalance about once a year.

How to Rebalance a Passive Portfolio

Rebalancing a passive portfolio is much easier. If you have chosen a low cost broker/dealer for your account, it is likely that they are handling the rebalancing for you behind the scenes.

For example, with my managed ETF account (like this one from our partners at Ally Invest), each time I am paid dividends or when I deposit cash, they are automatically rebalancing my account. They use the cash flow to rebalance my portfolio in a tax-efficient manner. Which minimizes taxes, and keeps me happy.

And with an evenly balanced portfolio I can ride without the training wheels.

Do you rebalance your portfolio? When did you first learn how to ride a bike? All investing related and childhood stories welcomed!

Originally posted 2014-03-19 11:51:42.

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

The 60/40 Passive Active Investing Portfolio

It’s time to get invested!

Read this post for details on the Grow Your Dough Throwdown. In short summary, I am competing with several other bloggers in a challenge to invest and grow one thousand dollars in an investing portfolio.

In this post I will explain my specific investing decisions.

The 60/40 Investing Plan

I plan to invest 60% passively and 40% actively. Passive investing simply uses index funds to mimic the return of an index. Active investing is the process of choosing individual investments, stocks in this case, in order to beat the return of an index.

I plan to invest $600 dollars with Betterment. I’ve mentioned before that Betterment is my preferred ETF broker. With one easy step, I deposit funds with them and they invest in a diversified index portfolio on my behalf.

I think it is the easiest way for young adults to start investing.

How to Add a New Goal in Betterment

I already have an account with Betterment and I detailed the account opening process here. For this challenge, I will be adding a new goal in my current account.

In a few short steps, I added the Investing Portfolio Throwdown goal.

Betterment Goal Setup1

Betterment Goal Setup2

Betterment Goal Setup3

You’ll notice that they recommended a pretty conservative portfolio allocation for me. Because I mentioned that I would need the funds in 1 year, the allocation is skewed more towards bonds; which are typically used to minimize volatility and therefore risk of lost funds. (Although bonds are thought to be less risky, there is still a chance of losing funds.)

However, I would personally prefer to experience the returns, highs and lows of a more stock based portfolio, so I changed the allocation manually.

Betterment Allocation Change

On Tuesday, December 31st, I deposited $600 dollars into this account. The deposit process takes 1-2 business days so the funds were in my account and invested by January 2nd on the first trading day of the year.

Betterment Portfolio Allocation

For this challenge, I chose a 80/20 split of stocks and bonds. I will have the following Exchange Traded Funds in my account.

Stock ETFs

  • VTI: US Total Stock Market 14.6%
  • IVE: US Large-Cap Value 14.6%
  • IWS: US Mid-Cap Value 4.7%
  • IWN: US Small-Cap Value 4.1%
  • VEA: Developed Markets 33.9%
  • VWO: Emerging Markets 8.3%

Bond ETFs

  • SHV: Short-Term Treasuries 0%
  • VTIP: Inflation-Protected Bonds 0%
  • AGG: US High Quality Bonds 6.6%
  • LQD: US Corporate Bonds 3.4%
  • BNDX: International Bonds 7%
  • VWOB: Emerging Markets Bonds 3%

These percentages should stay relatively constant. Betterment handles the rebalancing to maintain your allocation decision. This means that they will sell and buy so that the account continues to be 80% stocks and 20% bonds.

They also reinvest dividends as they come into the account. This account should do as well as the broad market. No one really knows what the markets will do and a passive investing strategy, like this one, is expected to perform in line with the market.

Investing in Stocks with Loyal3

Loyal3

I plan to invest $400 dollars with Loyal3. Investing with Loyal3 is a new experience for me. This broker allows you to invest as little as ten dollars in companies that you know and love. There are a limited selection of companies so I plan to choose from the options available to me.

Loyal3 Browse Stocks2

Loyal3 Browse Stocks

Loyal3 Stock Choices

Creating a Portfolio With Morningstar.com

To narrow down this list, I went to Morningstar.com and created a portfolio with the full list of options. I have to be honest, it took me a few hours to decide how I wanted to invest.

Was I looking for good long term names or did I want names that would allow me to win the challenge over the next year?

In the end, I decided to create a dividend portfolio that pays monthly, with names in 4 of the biggest sectors in the S&P 500; Consumer Discretionary, Consumer Staples, Information Technology and Financials. I used this site to find constituents, or members, of the S&P 500.

SP500 Sector Allocation

It would be nice if these names helped me win the challenge over the next year, but if not, they are still names that I would be willing to own long term.

Here are the companies I chose.

Consumer Discretionary
LB: Limited Brands, pays dividends in Feb, June, Aug, Nov
YUM: YUM Brands, pays dividends in  Jan, Apr, Jul, Oct
AMZN: Amazon.com
BUD: Anheuser Busch

Consumer Staples
MDLZ: Mondelez International Inc., pays dividends in Mar, June, Sep, Dec

Information Technology
AAPL: Apple Inc., pays dividends in  Feb, May, Aug, Nov
FB: Facebook, Inc.

Financials
BRK.B: Berkshire Hathaway

I’m going to split the $400 dollars evenly across the 8 names. On December 24th and 31st, I deposited $200 in the account. The funds typically take 1-3 business days to show up in your account. On Thursday January 2nd, I placed my purchase orders for all 8 stocks but at $25 dollars each. The $200 that I deposited on the 31st was available for use on January 3rd but I didn’t invest the remainder until the 9th.

Loyal3 places orders in batches once per day. My purchases were executed on January 3rd and January 10th.

buy apple stock with Loyal3

This is the process to buy stock with Loyal3.

How to Invest in Facebook Stock

Step 1: Select an investment amount

select amount to invest in Facebook

Step 2: Click to confirm

click to invest in FB stock

Step 3: That’s it!purchase Facebook IPO

Using the free Instant X-Ray tool available via Morningstar, this is how my individual stock portfolio looks.

Instant X-Ray Morningstar Portfolio

Morningstar X-Ray Portfolio Stats

Based on the stocks that I chose, my portfolio is weighted towards domestic stocks and the style skews towards growth.

Morningstar X-Ray Portfolio Allocation

On a final note, my portfolio is positioned to be more sensitive to the economy’s changes. A portfolio with cyclical names, tend to be more volatile. This is because when the economy is not doing so well, in general, people tend to cut back on unnecessary or discretionary spending. Then when things are good again, people tend to spend more.

This affects sectors like Consumer Discretionary and Information Technology especially. You may be less likely to buy expensive beers or go out to eat as much when you have less certainty over whether or not you will be paid.

Sectors such as Consumer Staples are less sensitive to economic changes.

side eye emoji

You will always need toilet paper, right?

Right??

Morningstar X-Ray Portfolio Sensitivity

Now that I have my investing portfolio, I don’t plan on making many changes. In the challenge we are allowed to buy and sell as much as we like. I prefer to see investing as a long term strategy where you buy stock in companies that you like and that are expected to grow over the long term.

What do you think of my portfolio? Are you interested in joining the challenge? Do you have questions about investing? I’m all ears!

See the investing portfolio challenge results here.

Use this link to open a Betterment account and get $25 dollars added to your account.

Disclaimer

Just because I chose these stocks, doesn’t mean that I am recommending them for purchase.

All investing involves risk, past performance is not indicative of future results. There is no guarantee that I will make money. I could lose everything. When mentioning how I plan to invest, it should not be taken as a recommendation or investing advice. You should consult your personal financial advisor to determine what type of investing suits your personal situation and risk tolerance level. There can be substantial risk of loss in trading stocks. You should, therefore, carefully consider whether such trading is suitable for you in light of your financial condition. All transactions in the financial markets are risky. No information I present is intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor.

S&P and S&P 500 are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a part of McGraw Hill Financial. Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Past performance of an index is not a guarantee of future results.

It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index.

Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise.

Originally posted 2014-01-10 06:00:38.

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
Investing

How to Save Up to Buy a House

This is a question that is being asked over and over again. How much will my house cost? Can I refinance my mortgage? Especially now that rates are so low, many homeowners are looking to refinance. Maybe you haven’t purchased a house yet but you want to in the future. If you want to know how much you need to save to buy a house you may want to use a mortgage calculator to see what your monthly payment may be. Let’s take a look at what determines home values and how you can figure out how much your home may cost.

What Determines My Home’s Value?

Public School Zone Districts

There are several factors that determine the value of your home. In America, one of the biggest factors is the school zone. Because your property taxes pay for the local school, bigger more expensive homes naturally contribute more in property taxes and usually have better schools. The public schools can afford to hire better teachers, stock the classroom with more supplies and sponsor extra curricular learning activities like field trips. Usually schools in low income neighborhoods have less in the way of funding and therefore, the teachers are usually not as good. So when you are looking for a home remember that a good school zone is a factor in the price of your home whether you have children or not.

Government Properties

Some homes have a lower cost because of government subsidies. For example, there is a program for Veterans that will allow you to purchase a home for a cheaper price if you have served time in the military. There is also a program called Section 8. With this program the government offers a subsidy to those with low income.
There are also programs to help with the upfront cost of purchasing a new home. If you are asking how much can I borrow then you should also know about private mortgage insurance. If you put up cash of less than 20% of the home’s value, then you will have to pay private mortgage insurance. There are government programs like the US Department of Housing and Urban Development. They can provide education on what it will take to purchase a home. Even if your home had a lower cost, it doesn’t necessarily mean that it has a lower value. You should seek the advice of a qualified appraiser to find out what your home is worth.

Location Location Location

The last and possibly most important factor in the value of a home is the location. If you are in a location with lots of development, you can be confident that the developers see opportunities in your area. When you are ready to sell your home most likely there will be buyers ready to purchase your home.

Whether you decide to refinance or you are looking to buy your own home, you need to make sure you are doing your research and save enough to avoid unnecessary fees. Compare mortgage rates in your area.

How to Save Up to Buy a House

Getting on the first rung of the property ladder has become increasingly difficult in recent years. Banks usually ask for a deposit of twenty per cent, a fact which generally leaves prospective first time buyers reeling.

So saving up to buy a house can be trying, especially if you have to pay rent on your current house or flat. It is essential to be prepared to cut back on your current expenditure to be able to save up for your deposit.

Here are a few ways you can get your spending into line and raise enough money for your dream house.

Set a target

You should try and set yourself a target for every month, this will help to motivate you and keep you on track. By calculating how much money you need to save every month and setting up a direct debit, which takes money out of your account every month after you have been paid, you will have a realistic idea of how long it is going to take to save up enough money for your deposit.

Shop around for the best interest rate

By looking into all the different types of bank accounts you will be able to get the best interest on your savings. Bank accounts offer differing interest rates, so make sure you shop around for the best deal. Search to compare mortgage rates in your area.

Curb your spending

Every time you avoid spending money on luxury items you should pay the amount you would have spent into your deposit savings account. You will be able to put away a significant amount of money by doing this.

It also keeps you in the saving frame of mind and every time you look at the balance on the account you will be spurred on.

Find cheaper accommodation

Moving in with your parents, if possible, will save a huge amount on your bills and rent. If this is not an option then you could consider finding cheaper accommodation. Every dollar you save on your rent can be put towards your new home.

Compare energy prices

There may be cheaper companies out there and by switching energy providers you could save a significant amount of money. You should also look at your bills; do you really need a car or cable TV?

Could you repair a garden hose on your own and save money on your water bill? By cutting out little luxuries you will be surprised at how fast you can reach your target.

Save every dime

Put all your loose change to one side at the end of every week. It may be a small amount of money, but every little counts.

What type of tactics do you use to save for a large purchase?

Search to compare mortgage rates in your area.

Originally posted 2012-09-10 06:00:28.

Categories
Investing

How to Open a Betterment IRA and Invest Today

A Betterment IRA??

Imagine my excitement when I got this email in my inbox! Betterment.com, my financial advisor, is working on offering IRA’s!

This would definitely give me reason to move my Roth from where it currently is into Betterment. (I am a brand ambassador for Betterment and this is a partner link.)

Or at least I could open a new Betterment IRA and just split the contribution max.

Can I Open an IRA with Betterment?

If you are not familiar with an IRA, that is an Individual Retirement Account. It is a great way to save and invest for retirement.

There are two main types of IRAs, the Roth and the Traditional.

There are also IRAs for those that are self employed but we will just focus on the Traditional and the Roth.

Betterment Offers a Traditional IRA

An option to open a Betterment account as a traditional IRA would be appealing to many investors. I’ve already mentioned in my review of Betterment that I thought the only thing that they were lacking is an IRA option. A traditional IRA offers a way to shelter your current income from current taxes.

When you contribute to a traditional IRA, you do so with pre-tax income.

That means that if you’ve already paid taxes on the money, you will get a tax refund based on the amount of the contribution as long as it falls in the allowable parameters. TurboTax or your accountant can help you with this.

If you are an independent contractor and you are not paying taxes up front then you will not have to pay taxes on that income, at least for right now.

With a traditional IRA you pay taxes upon retirement at the point of withdrawal. And you pay taxes based on your tax rate at the time of withdrawal.

But what if you don’t want to pay taxes in the future, and you’d rather pay them now?

Betterment IRA for a Roth Account

A Roth IRA is also a possibility for you if you meet the requirements.

Everyone is not eligible to contribute to a Roth IRA.

There are certain income restrictions. I know that one day I will meet those income restrictions so I am contributing to a Roth today.

If Betterment does offer the option for a Roth IRA I will be opening one.

The benefit of a Roth IRA is that I do not have to pay taxes on my withdrawals when I retire, as long as I meet the qualifications. The rules could change so be sure to visit IRS.gov to get the details on that.

Some people who expect to be in a higher tax bracket at the time of retirement may opt for a Roth IRA.

The reason I prefer a Roth IRA to a Traditional IRA, is the fact that I do not have to pay taxes on the gains in a Roth IRA. Because I’ve already paid taxes on the initial contribution, everything else, interest, dividends, and capital gains are mine to keep, tax free.

Should I Keep my Personal Betterment Account?

So if I open a Betterment IRA, should I keep my personal Betterment account?

I plan to.

I like the personal account because I am using it as a travel fund and I plan to make contributions and deductions often.

There are penalties for withdrawing funds early from a retirement account so I know I will still use my personal account.

Click here to open an IRA with Betterment.

Should You Choose Traditional or Roth IRA?

Not sure which type of IRA is right for you? Use this tool.



Originally posted 2018-10-24 08:00:15.