Contributing to Your 401(k)
Start Investing in an IRA
Start Investing in Your Health Savings Account
Originally posted 2015-12-09 10:00:21.
Originally posted 2015-12-09 10:00:21.
It's January! And time for the final update on my Grow Your Dough Throwdown portfolio. You may remember that at the beginning of 2014 I entered a challenge to grow $1,000 in the markets. I decided to take a combined approach using passive and active methods.
For my active portfolio, I invested $400 with Loyal3. For my passive portfolio, I invested $600 with Betterment. Here is my post that details the stocks that I purchased.
Even though it is not an even split, I decided to call my portfolio the Gemini Portfolio. It's a little of this and a little of that. Sometimes balanced and sometimes not as we Gemini's can be.
The passive side lagged a bit during the year because I had some bond funds in the ETF portfolio. After I updated my allocation, the passive portfolio started keeping up with the markets nicely.
The active side performed poorly for the first few months of the year but then it started kicking butt and taking names! Choosing the right individual stocks helped boost my portfolio performance and I finished the year up 9.71%. If you are an email list subscriber then you know what my annual return goals are. And I'm happy to say that in 2014 I made it!
Up next is the 2015 Grow Your Dough Throwdown! This year I'm adding a $500 dollar portfolio with Motif Investing. I also moved all of the cash from last year into my Loyal3 account and I purchased a few more stocks.
Motif Investing is an online brokerage firm offering an intuitive platform that empowers individuals to invest in real-world ideas through motifs. A motif is a carefully researched and balanced portfolio of up to 30 stocks reflecting a specific idea or trend. Examples include Renter Nation, Caffeine Fix and Seven Deadly Sins. Motifs are fully customizable—you can add and delete stocks, and change their weightings. You’ll pay just one low commission – and no management fees. And, you’ll get important diversification both within a motif and across motifs.
Motif Investing offers brokerage accounts as well as no-fee retirement accounts, including Roth IRAs, Traditional IRAs, and Rollover IRAs.
Motif Investing also provides a social network where its members share and discuss investing ideas. Ask for feedback. Find out what other investors have to say about the motifs that may interest you. You can invite people you trust most to join your own investing circle. Share only what you want, with the people you’ve chosen, or share nothing at all. It’s all up to you. And you’re always in control.
To make it easier to keep up with all of the challengers and our portfolio performance, the guys at Motif created a handy widget that will display the leaders. A quick but VERY IMPORTANT note. All investing involves risk and past performance is no indicator of future results. As I always say DO YOUR RESEARCH before investing.
Use this link to open a Betterment account and start investing today.
Disclaimer
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 2015-01-13 06:00:49.
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 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.
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.
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.
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.
I was working on recording a retirement episode of the WealthFast Podcast and stumbled across a pretty neat fact.
The more you save, the earlier you can retire.
The concept is pretty simple; you need about 25-33 times your annual spending rate to retire and if you save 20% of your income, you can replace your income in 37 years; assuming that your savings grow at 5% per year.
That means, in 37 years, you can retire and live comfortably on what you have saved. That seems like a long time to me.
The calculation involves dividing your savings rate by your spending rate.
20% divided by 80% in this case. This calculation gives you an annuity; how much you can add to your retirement fund each year.
Let's assume that you decide to save half of your income, 50%. Your annual contribution would be 1.
Using a Present Value calculation we plug in the following variables; $0 current balance, 5% interest rate, 1 annual addition, -25 Future value. Solving for N, the number of years, gives us 16.6.
That's 16.6 years until retirement!
It sure beats working in a cubicle for 40 years before retiring.
If you've seen my recent video on Youtube, then you know that I have a plan to pay off 65k in student loan debt in less than three years. Part of this plan involves saving more money by cutting expenses.
Little did I know that by cutting unnecessary expenses and making more money, I would be able to save much more.
In fact, I would be able to save 50% of my income!
That means that each month I deposit an entire paycheck into what I affectionately call my Freedom Fund. Instead of a retirement goal, I have a debt pay down goal and a travel goal.
I used to think that radical savers were crazy couponers that clipped and snipped for an extra 30 cents at the grocery store. Now I know that radical savers have made a lifestyle decision. A little over a year ago (84 weeks to be exact) I read this post over at Frugal Portland about how Kathleen planned to save half of her income.
At the time, I was saving 10% of my pre-tax salary in my company sponsored 401(k) plan. I even commented on that post that I wanted to do the same but only if I could travel as well.
84 weeks later my plan is in place.
I started the blog TravelTish.com to document my goal of travelling more. Because I am saving half of my income from my day job to fund my student loan debt payoff, I will fund my travels with half of my income from my side hustle.
Is it really so hard to believe that you can save 50% of your income and still do what you want to do, like travel the world, buy a house or pay for advanced education?
Apparently it is, because after Kathleen published this post on Yahoo about how she and her fiance planned to save half of their combined income, the trolls came out. Similarly an ugly comment was made on my 65k debt payoff video.
I guess it's radical to save money and pay off debt.
Who knew?
And now the fun stuff. Kathleen and I are starting the "Save 50% Movement" for everyone who is a radical saver. You could be saving to pay down debt, saving to travel, or saving for a house. We're here to encourage each other to save more. Even if you're not quite ready to save 50%, join us and as you see how easily others are doing it you will be ready. (Let's hope it doesn't take 84 weeks.)
Are you radical? Join us.
How to Join:
Optional for bloggers:
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Originally posted 2014-01-22 14:40:55.
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.
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.
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.
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.
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.
For this challenge, I chose a 80/20 split of stocks and bonds. I will have the following Exchange Traded Funds in my account.
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.
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.
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.
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.
This is the process to buy stock with Loyal3.
Using the free Instant X-Ray tool available via Morningstar, this is how my individual stock portfolio looks.
Based on the stocks that I chose, my portfolio is weighted towards domestic stocks and the style skews towards growth.
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.
You will always need toilet paper, right?
Right??
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.
Are you considering starting a business? Not sure if you should jump right in? In today's video I answer a question from Keon about starting a business.
I also show you the moves for starting your own side hustle.
So put on your dancing shoes.
Quiz- Start a Business or Get a Job?
Music Credits: The Hustle by Van McCoy
Did you like this video? Leave a comment, share it with a friend or tell me on Twitter! You can find me at Twitter.com/YoungFinances
Send me an email at LaTisha AT youngfinances DOT com, subject line: What I learned from your videos and tell me ONE thing you learned. I love hearing from you and I read every email.
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Click Here to Download the Transcript for Should I Start My Business Now? (PDF)
Originally posted 2013-12-10 06:00:28.