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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.

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Investing

7 Investing Mistakes That Every Beginner Makes

I remember exactly what I was doing when it happened. I was on my bed, in my dorm room, watching my 19 inch TV which was tuned to CNBC.

My favorite show at the time was Squawk Box and everyday I watched it for stock tips.
The day before I had just saw them mention a new stock that was on the rise. Naturally, I logged into my trading account and bought a few shares.

But today something was wrong.

The stock was down.

I thought they said this stock was moving up?

That was one of the many mistakes that I made when I first started investing.
If you’re new to investing or you want to get started, you might be scared to make mistakes and lose money.

Nobody actually wants to lose money, am I right?

If you want to start investing but you want to avoid rookie mistakes, then pay attention closely. Here are 7 top investing mistakes that every beginner makes.
7 Investing Mistakes beginners make
 

Choosing the Wrong Investment Vehicle

I first started investing inside of a Roth IRA. That is a retirement account where you add money after it is taxed. I figured that would be the easiest way to save for retirement and invest at the same time.
While I had the right idea, the vehicle I chose wasn’t exactly the best one. I was picking individual stocks inside of my retirement account. Knowing what I know now, I would have chosen to invest in index funds instead.

An index fund is a type of fund that just follows the broad market. So if the market goes up, it goes up. And if the market goes down, it goes down. The index is such a large selection of individual stocks that you don’t have to worry about any one stock in particular ruining your retirement plans.

Now I invest in ETFs and mutual funds inside of my retirement account. Mutual funds usually require a higher dollar amount so if you are starting with just a few hundred dollars then you will want to look into ETFs (Exchange Traded Funds) until you have enough to switch over to mutual funds.

Watching the Markets Too Much

As soon as I put my money in the markets, I started watching the ups and downs every day. Every little piece of news made me question my decision. I had no idea that the market moves in natural flows like the ocean.

Typically, if the market hits a new high, the very next day it will be down. The market also moves the same during earnings season as well, if you know what to look for. But then again, there are times when you might think that good news would make the markets go up, only to see that it’s dropped.

Watching the markets everyday helps you to get used to the movements, but if you try to make decisions based on what it does every day, you’ll only ruin your investment account’s growth.

Not Re-investing Dividends

My entire goal when investing was to earn extra money. I figured if I could buy enough dividend paying stocks that I could live off of the quarterly checks. Once again I had the right idea, but the way I went after that idea was not exactly the best way to do it.

I bought individual stocks and decided not to reinvest the dividends. But because I didn’t have tens of thousands invested, my dividend checks weren’t even enough to withdraw. I would have been better off reinvesting those dividends so I could allow my investing account to grow.

I finally decided to start a blog to earn extra money and that started to pay me anywhere from $100 to $200 a month; way more than I could have made from my investing account.

Don’t invest to make extra money. Invest the extra money that you make from a side hustle.

Now I reinvest all of my dividends.

Choosing Stocks Based on TV

As I mentioned at the start of this post, I used to watch Squawk Box on CNBC and invest in whatever stocks they mentioned. Then sometimes I would watch a commercial and think, “that must be a good company.” and I would buy some of their shares.

I had no idea why my stocks weren’t going up in value until I actually learned how to research a stock. And I was so ready to jump into the market I didn’t want my cash just sitting around. I wanted it to start earning for me.

But picking a stock just because you want to invest is definitely not the best way to make a good investing decision.

These days, I set aside an investing fund. I put the cash into an account with ETFs until I find a good individual stock that I want to invest in.

Withdrawing Investment Gain Early

This is another mistake that I see a lot of beginner investors make. When choosing a good stock, you want to pay attention to the 3 and 5 year projections. If you are not prepared to invest for 3 or 5 years then you are really just trading. (There’s nothing wrong with trading but there are different risks and considerations.)

The mistakes and drops smooth out over time and that is how long term investors win. Because they stay in the market and ignore all of the noise.

Check out this chart from the last few years which includes the dip from the Great Recession.

sp 500 chart

If you had started investing beforehand and left your money in the markets, you would have had all of your money back by mid-2013 and close to doubled by 2017.

total returns sp 500

(Source: SpIndices.com)

However, if you were trading and removed your money at the bottom, you would have missed the upswing that came directly after in 2009.

And if you were too scared to invest again you would have missed the positive returns that came every year after that downturn.

The point is, if you’re going to start investing, get comfortable with the long term.

Forgetting to Diversify

“Don’t put all of your eggs in one basket.”

That is the idea of diversification. When you diversify, you spread out your potential loss over many options. You also spread out your potential gains.

(Remember, if you really want to earn extra money, you should be looking into a side hustle. You’ll make way more than you would from investing today. Investing is the long game. A side hustle is the short game.)

I’ll make this quick and easy. One of the easiest ways to diversify is buying more than one exchange traded fund. You want your portfolio to benefit from local growth, small businesses, large businesses, growth from new explorations, overseas opportunities, etc. The most cost efficient way to do that is by buying a diversified ETF portfolio. That’s where a managed investing account like the one offered by Ally Invest comes into play.

Ally Invest will even allow you to create your own diversified ETF portfolio for only $4.95 per ETF. Check them out here. (*partner link)

Investing Too Little

When I wanted to start investing I didn’t have that much to start with. Some people have parents to start them off with an investing account, or a job that pays well enough so they can get started. I didn’t have that. What I did have was a good bit of credit card debt. And even though there are financial gurus who will say don’t invest until you’ve paid off your debt, I say that you can do both.

I budgeted out a percentage to go towards debt and a little bit to go towards investing. It’s all about creating habits no matter where you are in your financial journey.

But even with setting a percentage, I still only had a little bit to start investing.
When you get started you want to put at least $500 into an account.
Take some time to save this up if you have to because it will be a good base for you to start from.

If you really want to start investing but you’re not sure where to even start, then you should take this quiz that I created.

The quiz will tell you what your investing personality is and you can also choose to get a free 5 day email course to help you get started with investing.

In 5 days I’ll show you how to find your first stock so you can start investing.
I’ll even send you my free investing guide for quick reference.

Originally posted 2018-04-02 21:10:11.

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Investing

How You Can Build Wealth (Use This Millionaire Strategy)

If you want to build wealth it’s going to require time and knowledge. There is no get rich quick method. There are a few ways to begin building wealth. Building wealth involves a unique combination of passive income and active income.

Want passive income? Register now to get on the waitlist for my next LIVE passive income class

The Difference Between Passive Income and Active Income

Can You Build Wealth Using Active Income?

Active Income is income you earn based on your own personal efforts to make money by exchanging hours for dollars.

It is the income that comes in when you are actively earning it, but ceases to exist when you stop your earning activity.

That means, if you work you get paid. If you don’t work, you don’t get paid.

It’s a simple concept.

So simple that the majority of humans follow it and exchange their hours for dollars.

For example, you could stand around for 4 hours, pass out samples, and make $200. Or, you could work as a cashier for 4 hours and make $40.

Your choice. Both provide active income.

Earn More | Passive Income

The Problem with Active Income a.k.a. The Rat Race

I first read about the rat race in Robert Kiyosaki’s book Rich Dad, Poor Dad.

In the book Kiyosaki describes the cycle of working for money that leads to nowhere, kind of like a rat running on his spin wheel inside his cage.

Working for money and exchanging hours for dollars is the hardest way to make it out of the rat race, and often it’s near impossible.

Disagree?

How’s it working for you?

This is because once you are in the rat race you spin your wheels to try to maintain or advance your lifestyle and you often create more debt to do so.

Those in the rat race may not know how to get out because they do not know how to use assets and instead they keep creating liabilities.

If you have not read the book Rich Dad, Poor Dad by Robert KiyosakiI recommend it as a must read just to understand the basics of how you must think to build wealth.

See all of my recommended books for personal financial success here.

How to Escape the Rat Race of Chasing Active Income

Most people are not ready to stop working for money, me included.

In the meantime, you can begin building cash for your portfolio. In one of my favorite money books The Richest Man in Babylon by George S. Clason, one of the characters, Bansir, seeks help from Arkad, who is the richest man in Babylon.

Arkad advises the man to pay himself first.

Each time he makes income, he should set aside 10% of that income.

That way, when an opportunity to invest comes his way, he will be ready.

Bansir follows Arkad’s advice and was able to invest in a business venture that provided him with passive income.

It is very difficult, if not impossible, to grow a profitable portfolio without income. Setting aside 10% of every dollar you earn will allow you to grow your investments consistently.

Can You Build Wealth Using Passive Income?

Passive Income is income that not based solely on your ongoing efforts.

It may be a recurring income stream from a one time job, like royalties for a singer, or recurring income from a business that you own.

You might write a book and earn a commission each time someone buys that book.

When you can stop trading hours for dollars and receive dollars even without giving up hours, you will have passive income.

Top 3 Ways to Generate Passive Income

1) Passive Income by Growing a Blog

Believe it or not, growing a blog is a way to generate passive income. This is one of my favorite ways because I created this stream of income right after college.
In order to do be a successful affiliate income generating blogger, you have to create content that converts readers into buyers. Or, you must simply put content in front of a buyer.

(First you must start a blog on WordPress. Here’s a tutorial I created that will take you through step-by-step.)

That content would contain an affiliate link. Affiliate income is one of my sources of passive income. (And I’m going to show you exactly how I do it. More details at the bottom of this post.)

To get approved for affiliate relationships, you have to make sure your site is properly set up. And in order to maximize your affiliate income, you have to approach sales in a certain way. It’s not complicated, but it does require some education. The learning curve is steep.

2) Passive Income by Using Dividends

Dividends can help you to make passive income. Some companies issue their stock with a dividend attached.

If you own the stock, they will pay you directly in cash, or additional shares, from the earnings that they make for that quarter or year.

If you have the right stocks you can also benefit from price appreciation.

Ready to start investing? Take this quiz and find your investing compatibility match.

The stock price and your overall portfolio will increase when the company does well. And even if the stock price declines, you will still receive the dividend as long as the company does not cancel it.

Some investors will not purchase a stock if it does not come with a dividend attached.

3) Passive Income from Teaching

When I say teaching, I don’t mean standing in front of a class. That would be considered active income. Instead, you should figure out what you’re good at then create a course on that topic. You can then sell that course over and over again. And each time you make a sale, you earn income.
When you are actively marketing your course it’s not considered passive income. But if you sell your course through a platform where a buyer can browse and find your class, then it’s considered passive income.

Most investors use a combination of passive income sources to diversify their risk.

It is highly risky to depend on the cash flow from a course, dividend paying stock, or blog only.

Building Wealth

So there you have it.

Passive Income and Active Income.

The two main ways to build wealth mean you’ll either be using active income or growing passive income.

Those who use active income to build wealth will find that there are simply not enough hours in a day to trade for the wealth that they want.

They will continue to spin their wheels in the rat race until they give up in frustration.

The smart investors that learn to use passive income to build wealth will see their net worth grow with less and less work on their part.

Building a profitable portfolio with passive income investments is the key to building wealth. That might be an income producing blog, a course that you’ve created, or a portfolio filled with dividend stocks.

That is why I recommend starting with your personal goals. What do you want your finances to look like?

In order to become a financial success, you have to invest in yourself and be willing to learn.

Now it’s your turn to choose.

Will you build wealth using passive income strategies?

Or will you stick with a job that requires active hours for you to earn?

If you’re determined to earn more money via passive income, then you’re in the right place. I’m going to show you exactly how to do it.

Register now to get on the waitlist for my next LIVE passive income class

Originally posted 2016-06-06 10:00:14.

Categories
Investing

How to Start Investing (Even If You’re a College Student!)

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.

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.

Want to invest but not sure where to start? Take this Investing Compatibility Quiz to figure out your investing style.

Originally posted 2016-06-05 15:44:01.