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Home » Credit » 6 Ways to Help Your Child Build Credit During College
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College students have a lot on their plate already, including the need to study to get good grades, participating in any number of on-campus activities and potentially working part-time to have some spending money.
That said, college students should also focus on their financial future, including steps they can take to build credit before they enter the workforce.
After all, having a credit history and a good credit score can mean being able to rent an apartment, finance a car or take out a loan, whereas having no credit at all can mean sitting on the sidelines until the situation changes.
Fortunately, there are all kinds of ways for young adults to build credit while they’re still in school. Some strategies require a little work on their part, but many are hands-off tasks that you only have to do once.
Teach Them Credit-Building Basics
Make sure your student knows the basic cornerstones of credit building, including the factors that are used to determine credit scores. While factors like new credit, length of credit history and credit mix will play a role in their credit later on, the two most important issues for credit newcomers to focus on include payment history and credit utilization.
Payment history makes up 35% of FICO scores and credit utilization ratio makes up 30% of scores.
Generally speaking, college students and everyone else can score well in these categories by making all bill payments on time and keeping debt levels low. How low?
Most experts recommend keeping credit utilization below 30% at a maximum and below 10% for the best possible results. This means trying to owe less than $300 for every $1,000 in available credit limits at a maximum, but preferably less than $100 for every $1,000 in credit limits.
Add Your Child as an Authorized User
One step you can personally take to help a child build credit is adding them to your credit card account as an authorized user. This means they will get a credit card in their name and access to your spending limit, but you are legally responsible for any charges they make. Obviously, this move works best when you have excellent credit and a strong history of on-time payments and you plan to continue using credit responsibly .
While this step can be risky if you’re worried your college student will use their card to overspend, you don’t actually have to give them their physical authorized user credit card.
In fact, they can get credit for your on-time payments whether they have access to a card or not. If you do decide to give them their credit card, you can do so with the agreement they can only use it for emergency expenses.
Encourage Them to Get a Secured Credit Card
Your child can build credit faster if they apply for a credit card and get approved for one on their own, yet this can be difficult for students who have no credit history. That said, secured credit cards require a refundable cash deposit as collateral are very easy to get approved for.
Some secured credit cards like the Ambition Card by College Ave even offer cash back1 on every purchase and don’t charge interest2. If your child opts to start building credit with a secured credit card, make sure they understand the best ways to build credit quickly — keeping credit utilization low and paying bills early or on time each month.
Opt for a Student Credit Card Instead
While secured credit cards are a good option for students with little to no credit get started on their journey to good credit, there are also credit cards specifically designed for college students. Student credit cards are unsecured cards, meaning they don’t require an upfront cash deposit as collateral, but charge interest on any purchases not paid in full each month.
Many student credit cards offer rewards for spending with no annual fee required as well, although these cards do tend to come with a high APR. The key to getting the most out of a student credit card is having your dependent use it only for purchases they can afford and paying off the balance in its entirety each billing cycle. After all, sky high interest rates don’t really matter when you never carry a balance from one month to the next.
Student Credit Cards…
“One of the safest ways for college student to build their credit by learning valuable money skills.”
Help Your Child Get Credit for Other Bill Payments
While secured cards and student credit cards help young adults build credit with each bill payment they make, other payments they’re making can also help.
In fact, using an app like Experian Boost can help them get credit for utility bills they’re paying, subscriptions they pay for and even rent payments they’re making. This app is also free to use, and you only have to set up most bill payments in the app once to have them reported to the credit bureaus.
There are also rent-specific apps and tools students can use to get credit for rent payments, although they come with fees. Examples include websites like Rental Kharma and RentReporters.
Make Interest-Only Payments On Student Loans
The Fair Isaac Corporation (FICO) also notes that students can start building credit with their student loans during school, even if they’re not officially required to make payments until six months after graduation with federal student loans.
Their advice is to make interest-only payments on federal student loans along with payments on any private student loans they have during college in order to start having those payments reported to the credit bureaus as soon as possible.
“Making interest-only payments as a student will not only positively affect your credit history but will also keep the interest from capitalizing and adding to your student loan balance,” the agency writes.
Of course, interest capitalization on loans would only be an issue with private student loans and Federal Direct Unsubsidized Loans since the U.S. Department of Education pays the interest on Direct Subsidized Loans while you’re in school at least half-time, for six months after you graduate and during periods of deferment.
The Bottom Line
College students don’t have to wait until they’re done with school to start building credit for the future, and it makes sense to start building positive credit habits early on regardless. Tools like a credit card can help students on their way, whether they opt for a secured credit card or a student card. Other steps like using credit-building apps can also help, and with little effort on the student’s part or on yours.
Either way, the best time to start building credit was a few years ago, and the second best time is now. You can give your student a leg up on the future by helping them build credit so it’s there when they need it.
20% APR. Account is subject to a monthly account fee of $2, account fee is waived for the initial six-monthly billing cycles.
College Ave is not a bank. Banking services provided by, and the College Ave Mastercard Charge Card is issued by Evolve Bank & Trust, Member FDIC pursuant to a license from Mastercard International Incorporated. Mastercard and the Mastercard Brand Mark are registered trademarks of Mastercard International Incorporated.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
Home » Make Money » What is Stan Store?
Written By:
Edited By:
Updated: January 9, 2024
6 Min Read
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Advertising Disclosure
GoodFinancialCents® has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.
Quality Verified
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Why You Can Trust GoodFinancialCents®
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Initially, when my wife introduced me to Stan Store, I wasn’t impressed.
It seemed illogical to pay $30 a month for software that just offered a basic sales page, especially without any integrated email service provider.
This was a stark contrast to my experience with platforms like ConvertKit, where I started with a free account until my subscriber count grew large enough where I had to pay.
As I spent more time with Stan Store, my perspective began to shift. I realized that for someone completely new to online marketing, who might be overwhelmed by the complexities of building and creating a landing or sales page, Stan Store could actually make a lot of sense.
It’s tailored for beginners, offering them a straightforward entry point into the world of digital marketing.
Who is Stan Store For?
So, who’s going to love Stan Store? Pretty much anyone aiming to make a buck online through digital products or services. If you’re like me, trying to turn those ‘link in bio’ clicks into actual sales, then Stan Store is your go-to.
Let me break it down for you. Stan Store is a hit with a wide range of creators and businesses, but from my experience, it’s a total game-changer for:
Content Creators, Influencers, Micro-influencers, and UGC Creators
Instagrammers, TikTokers, YouTubers, X’rs
Online Coaches, Mentors, and Teachers
Digital Product Creators (Etsy, you’ve got competition)
Social Media Managers and Content Managers
Designers, Freelancers, and Small Digital Businesses
And hey, even if you’re in the business of selling physical goods, Stan Store can be a killer tool for growing your email list or hosting online events.
Just a heads up though – selling physical products directly through Stan Store isn’t on the table just yet.
How Does Stan Store Work?
Picture this: I’m on TikTok or Instagram Stories, chatting about my latest digital product – let’s say it’s an eBook or a PDF.
In the past, I’d direct my followers to the ‘link in my bio’, which would then send them off to another site, like my website. There, they’d have to play detective to find the product I was talking about, or sit through endless page loads.
But with Stan Store, things get a whole lot smoother. The ‘link in my bio’ is now the store itself. Followers can hit that link, buy what they want right there and then, without being shunted off to a different site.
The best part? They can hop right back to Instagram or TikTok without feeling like they ever left. It’s all about keeping it simple and seamless – and that’s what Stan Store nails perfectly.
Here’s a screenshot of my wife’s personal Stan Store:
We’re still not a big fan of their email signup process so for now our opt-in page (squeeze page) is hosted on Kajabi.
But my wife is selling our Digital Product Quickstart Guide on Stan Store. Here’s how the sales page looks:
Behind the scenes of our sales page is a payment processor and the ability to deliver the digital product with ease. That’s what makes Stan Store so attractive. You can literally start selling your very own digital product in a matter of minutes.
Why Stan Store Stands Out
What truly sets Stan Store apart is its efficiency – you can begin selling your own digital products in just a matter of minutes.
Stan Store Features Overview
Stan Store is packed with features designed to make the life of a digital creator easier and more profitable. Whether you’re a coach, influencer, or digital product creator, here’s what Stan Store brings to the table:
Mobile & Desktop Optimized Store: Your store looks great and works seamlessly on any device, ensuring a smooth shopping experience for your audience.
Calendar Invites & Bookings Product: Easily manage appointments and bookings directly through your store.
Analytics: Get insights into your store’s performance to make data-driven decisions.
Unlimited Course Products: Offer as many courses as you like, with no restrictions.
1-Tap Checkout: A streamlined checkout process that makes purchasing a breeze for your customers.
Recurring Subscription Products: Ideal for memberships and ongoing services, this feature allows for regular income.
Audience/Newsletter Builder: Grow your audience and keep them engaged with integrated newsletter tools.
Stan Store Plans: Creator vs. Creator Pro
Creator Plan
The Creator plan, priced at $29 per month (or $300 per year with a 20% discount), is an excellent starting point for anyone looking to jumpstart their online business. It includes all the essential tools you need:
Mobile & Desktop Optimized Store
Calendar Invites & Bookings Product
Analytics
Unlimited Course Products
1-Tap Checkout
Recurring Subscription Products
Audience/Newsletter Builder
This plan is perfect for creators who are just beginning to monetize their online presence and need a comprehensive, yet straightforward set of tools to get started.
Creator Pro Plan
For those ready to take their business to the next level, the Creator Pro plan is available at $99 per month (or $948 per year with a 20% discount). It includes everything in the Creator plan, plus advanced features for optimizing conversions and offering more to your customers:
Advanced Pricing & Payment Plans
Discount Codes
Limit Quantity
Payment Plans
Order Bumps & Upsells
Funnel Builder
Affiliate Share Feature
Email Marketing
The Creator Pro plan is tailored for creators who are looking to expand their offerings, optimize their sales process, and engage more deeply with their audience.
Benefits of Using Stan Store
Convenience and Accessibility
The convenience and accessibility of Stan Store are what eventually changed my initial skepticism. The platform allows anyone, regardless of their technical skill, to quickly set up a landing or sales page.
This ease of use is a crucial factor for many users, especially those who lack the time or technical expertise to navigate more complex systems.
Competitive Pricing and Deals
The initial pricing, though seemingly high, is justified by the platform’s simplicity and effectiveness, particularly for its target audience – the absolute beginner in online marketing. The recent addition of an email service provider at a higher tier adds more value, making it a more comprehensive tool.
Drawbacks of Stan Store
Limitations in Product Availability
One of the criticisms I had of Stan Store was its limited range of features. While its simplicity is its strength, it also means that users looking for more advanced features might find Stan Store lacking. This limitation can be a significant drawback for users as their businesses and marketing skills evolve.
Stan Store Alternatives
In the journey of online entrepreneurship, it’s crucial to explore various platforms to see what aligns best with your business needs. While Stan Store has been a solid choice for me, I’ve also had experiences with other platforms worth mentioning:
Shopify: Shopify is a robust platform for creating online stores. It’s feature-rich and offers a lot of flexibility for those looking to build a detailed and extensive online shop.
WooCommerce: Ideal for WordPress users, WooCommerce seamlessly integrates with your existing site, transforming it into a fully functional e-commerce platform. It’s versatile but can be a bit complex, especially for beginners.
Etsy: Etsy is the go-to marketplace for unique, handmade, or vintage items. It’s less about building your own store and more about joining a vibrant, existing marketplace.
Teachable and Thinkific: Both are excellent for creating and selling online courses. They offer a range of tools tailored for educators and coaches, focusing on course creation and student engagement.
Gumroad: Simple and straightforward, Gumroad is perfect for independent creators selling digital products like books, music, or art directly to their audience.
Kajabi: Kajabi is an all-in-one platform offering tools for online courses, marketing, and website building. It’s ideal for those offering educational content and looking for a comprehensive solution.
Comparison Table: Stan Store vs. Alternatives
Feature/Platform
Stan Store
Shopify
WooCommerce
Etsy
Teachable/Thinkific
Gumroad
Kajabi
Customization
Moderate
High
High
Low
Moderate
Low
High
Ease of Use
High
Moderate
Moderate
High
High
High
Moderate
Target Audience
Creators
General Retail
WordPress Users
Artisans
Educators
Independent Creators
Educators/Marketers
Product Type
Digital
All Types
All Types
Handmade/Vintage
Courses
Digital Products
Courses/Marketing
Pricing Model
Subscription
Subscription
Free (Plugin)
Transaction Fees
Subscription
Transaction Fees
Subscription
This table gives a quick overview of how Stan Store compares with its alternatives in terms of customization, ease of use, target audience, product type, and pricing model. Each platform has its strengths, and the best choice depends on your specific business needs and goals.
Is Stan Store Worth it?
After diving deep into Stan Store and comparing it with its alternatives, the big question remains: Is Stan Store worth it? Based on my experience and the insights I’ve gathered, my answer leans towards a yes, especially for a specific audience.
Stan Store stands out for its sheer simplicity and focus on digital content creators. If you’re just starting out or find yourself overwhelmed by the complexities of more advanced platforms, Stan Store offers a welcoming and straightforward path. The ease of setting up a sales or landing page, combined with the platform’s focus on digital products, makes it an attractive option for creators who want to monetize their content without the hassle.
The pricing, initially a point of skepticism for me, actually makes sense when you consider the target audience and the features offered. For beginners and those not ready to navigate the complexities of platforms like Shopify or WooCommerce, Stan Store’s $29 monthly fee for the Creator plan is a reasonable investment.
And for those looking to scale up, the Creator Pro plan, despite its higher price, brings in advanced features that could justify the cost as your business grows. If you’re not sure Stan Store is a good fit, the 14-day free trial might be exactly what you need.
Bottom Line – Stan Store Honest Review
In conclusion, while Stan Store might not be the one-size-fits-all solution for every online entrepreneur, it certainly has carved out its niche. It’s a platform that understands and caters to the needs of digital content creators, making it a worthwhile consideration for those in its target demographic.
As with any tool, it’s about finding the right fit for your specific needs, and for many creators, Stan Store could be just that.
To try Stan Store for free, click here for a 14-day trial.
FAQ – FAQs- Stan Store Review
Stan Store is best suited for digital content creators, including online coaches, influencers, micro-influencers, UGC creators, and digital product creators. It’s also a great fit for anyone looking to streamline their ‘link in bio’ to convert followers into customers.
Stan Store seamlessly integrates with social media platforms like Instagram and TikTok. The integration allows creators to direct their social media audience straight to their Stan Store via a ‘link in bio’, facilitating immediate purchases without leaving the social media app.
Stan Store is designed with simplicity in mind, making it extremely user-friendly for beginners. The platform’s intuitive interface allows for easy navigation and quick setup, even for those with little to no technical background.
Stan Store has two pricing plans: the Creator Plan at $29 per month or $300 annually, and the Creator Pro Plan at $99 per month or $948 annually, with each plan catering to different levels of business needs.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
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Home » Make Money » Systeme.io Review
Written By:
Updated: January 8, 2024
5 Min Read
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Advertising Disclosure
GoodFinancialCents® has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.
Quality Verified
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Why You Can Trust GoodFinancialCents®
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Systeme.io has emerged as a versatile tool in the digital marketing landscape, often met with initial skepticism due to its bold claim of being an all-encompassing, free platform. This skepticism is not uncommon; many assume that a free, all-in-one software solution might compromise on quality.
However, as experienced firsthand, Systeme.io defies these expectations, offering robust functionality that genuinely surprises new users.
The platform serves a multifaceted purpose, aiming to simplify the digital marketing process. It’s designed for entrepreneurs and businesses seeking an integrated solution for email marketing, sales funnels, website building, and more. The importance of such a tool lies in its ability to streamline various marketing tasks, which are often scattered across different platforms, into one cohesive system.
How Systeme.io Works
The user interface of Systeme.io is a standout feature, characterized by its user-friendly design. This ease of use is particularly appealing to those who are new to digital marketing tools. The interface is intuitive, making navigation and operation straightforward, which is a stark contrast to the often complex dashboards of similar tools.
At the core of Systeme.io are several key features that make it a comprehensive digital marketing solution. These include email marketing capabilities, sales funnel creation tools, a website builder, options for hosting membership sites, and affiliate program management.
Each of these features is designed to work seamlessly with the others, providing a unified experience. For instance, the email marketing service is notably efficient, rivaling established providers like ConvertKit, AWeber, and MailChimp, especially with its free subscription model that remains functional up to a certain point.
Features of Systeme.io
Email Marketing: Systeme.io’s email marketing tool is not just about sending emails. It allows you to segment your audience, create personalized email campaigns, and track the performance with detailed analytics. For instance, you can segment your audience based on their behavior, like those who clicked a specific link in your last email. This level of customization ensures that your messages are targeted and effective.
Sales Funnel Builder: The sales funnel builder is a standout feature. It’s not just about creating a sequence of pages; it’s about guiding your potential customers on a journey. You can set up a funnel that starts with a landing page, leads to a product page, and ends with a thank you page, all while tracking user behavior. The drag-and-drop interface makes it easy to design each step, and you can add elements like pop-ups or forms to capture leads.
Blogging and SEO: Systeme.io’s blogging platform is straightforward yet powerful. You can create SEO-friendly blog posts with ease, thanks to features like customizable URLs, meta tags, and integration with Google Analytics. This ensures that your content is not only engaging but also ranks well in search engine results.
Automation and Workflow: Automation in Systeme.io is about saving time and creating efficient processes. For example, you can set up an automation rule to send a welcome email to new subscribers or trigger a specific action when someone purchases a product. This feature simplifies complex marketing tasks, making it easier to manage large-scale campaigns.
Affiliate Program Management: With Systeme.io, you can run your own affiliate program. This means you can recruit affiliates, track their performance, and manage payouts all within the same platform. It’s an excellent way for businesses to expand their reach without a significant increase in marketing spend.
One of the most significant benefits of Systeme.io is its cost-effectiveness. The platform offers a surprising amount of functionality without any initial investment, making it an attractive option for entrepreneurs and small businesses with limited budgets. This aspect was particularly striking, as it’s rare to find a platform that provides such a wide range of features for free.
Another major advantage is the all-in-one nature of Systeme.io. It eliminates the need for multiple subscriptions to different services, consolidating essential marketing tools into one platform. This not only simplifies the management of digital marketing activities but also ensures better integration and efficiency. The platform’s ease of use is a testament to its well-thought-out design, catering to users who may not have extensive experience in digital marketing.
Drawbacks of Systeme.io
Despite its many strengths, Systeme.io is not without its limitations. One notable drawback is the limited customization options. While it offers a range of templates and a user-friendly interface, users who desire more advanced customization may find the platform somewhat restrictive compared to more specialized software.
Scalability can also be a concern with Systeme.io. As businesses grow, their needs become more complex, and the platform may not be able to keep pace with these evolving requirements. This is particularly relevant for larger businesses or those with highly specialized needs. Additionally, while Systeme.io integrates well within its ecosystem, it may have limitations when it comes to integrating with external tools and services.
Systeme.io Pricing Structure
The pricing structure of Systeme.io is one of its most appealing aspects. The platform operates on a freemium model, offering significant functionality without any cost for up to 2000 contacts or email subscribers and three sales funnels. This approach allows users to thoroughly test and experience the platform before committing financially.
When compared to competitors, Systeme.io’s pricing is highly competitive. For instance, platforms like ClickFunnels offer powerful functionality but at a higher cost, typically starting at around $100 per month after a free trial. This can be a significant investment, especially for new entrepreneurs or small businesses. In contrast, Systeme.io’s paid plans, which provide access to a broader range of features, are more affordable, starting at less than $30 a month.
Comparative Analysis with Other Tools
To provide a broader perspective, let’s compare Systeme.io with other popular tools in the market:
Feature/System
Systeme.io
ClickFunnels
HubSpot
Kartra
Email Marketing
Advanced segmentation and automation
Basic email functionalities
Comprehensive email tools with CRM integration
Advanced automation and lead scoring
Sales Funnel Builder
Intuitive drag-and-drop builder
Highly customizable funnels
More focused on inbound marketing
Similar to ClickFunnels with added features
Blogging and SEO
Basic but effective SEO tools
Not a primary feature
Advanced SEO and content strategy tools
Limited blogging capabilities
Automation and Workflow
Simple automation rules
Complex automation capabilities
Extensive automation with CRM integration
Advanced automation but steeper learning curve
Affiliate Program Management
Integrated affiliate management
Available but less intuitive
Not a core feature
Robust affiliate management system
Pricing (Starting Plan)
Free plan available
$97/month
$45/month
$99/month
This comparison shows that while Systeme.io offers a comprehensive suite of tools at an affordable price, platforms like HubSpot and Kartra provide more advanced features in certain areas but at a higher cost. ClickFunnels, on the other hand, is more expensive but offers highly customizable funnel-building capabilities.
User Reviews and Testimonials
User reviews and testimonials play a crucial role in understanding the real-world effectiveness of Systeme.io. Many users have shared success stories, highlighting how the platform has helped them streamline their marketing efforts and grow their businesses. These positive experiences often emphasize the platform’s ease of use, comprehensive feature set, and excellent value for money.
However, it’s also important to consider critiques and common issues raised by users. Some have pointed out the limitations in customization and scalability, as mentioned earlier. These critiques are valuable for potential users to set realistic expectations and for the platform’s developers to identify areas for improvement.
Systeme.io for Different Business Sizes
Systeme.io’s suitability for small businesses is one of its key strengths. Its simple interface, combined with a comprehensive set of tools, makes it an ideal choice for small enterprises looking to establish or expand their online presence without a significant investment in multiple tools or platforms.
For medium to large enterprises, the relevance of Systeme.io can vary. While it offers a solid foundation for digital marketing, larger businesses with more complex needs might find the platform somewhat limiting. However, for businesses at the cusp of growth, Systeme.io can be an excellent tool to start with, providing a cost-effective solution for scaling up their marketing efforts.
Final Verdict on Systeme.io
The overall assessment of Systeme.io is overwhelmingly positive, especially when considering its target audience of small businesses and entrepreneurs. The platform offers a remarkable range of features at an unbeatable price point, making it an excellent choice for those starting their digital marketing journey or looking to consolidate their marketing tools.
The recommendation for specific user groups would vary based on their size, needs, and experience in digital marketing. For beginners and small businesses, Systeme.io is an excellent choice, offering everything needed to get started with digital marketing. For more established businesses or those with very specific needs, it might serve as a stepping stone before moving on to more specialized or advanced platforms.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
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Updated: August 15, 2023
5 Min Read
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Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
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GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
Quality Verified
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Why You Can Trust GoodFinancialCents®
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
When I became an accredited investor, I found myself among an elite group with the financial means and regulatory clearance to access investments that many couldn’t. This opened doors to exclusive realms like hedge funds, venture capital firms, specific investment funds, private equity funds, and more.
Even though I had this “exclusive access” it took me awhile to start investing in alternative asset classes.
The Securities and Exchange Commission states that as an accredited investor, I possess a level of sophistication that equips me to craft a riskier investment portfolio than a non-accredited investor. While this might not be universally true for everyone, in my case, I had demonstrated the financial resilience to bear more risk (see barbell investing), especially if my investments took an unforeseen downturn.
One of the intriguing aspects I discovered was that investment opportunities for accredited investors aren’t mandated to register with financial authorities. This means they often come with fewer disclosures and might not be as transparent as the registered securities available to the general public.
The underlying belief is that my status as a sophisticated investor implies a deeper understanding of financial risks, a need for less disclosure on unregistered securities, and a conviction that these exclusive investment opportunities are apt for my funds.
On a personal note, as a practicing CFP®, I hadn’t always worked with accredited investors. Early in my career, I didn’t quite grasp the allure. But as time went on, I began to see the broader spectrum of investment options available to accredited investors.
As I learned more the clearer it became why this realm was so sought after. The variety and potential of these exclusive opportunities were truly eye-opening, reshaping my perspective on the world of investing.
Introduction to Accredited Investors
An accredited investor is an individual or a business entity that is allowed to trade securities that may not be registered with financial authorities. They are entitled to this privileged access because they satisfy one or more requirements regarding income, net worth, asset size, governance status, or professional experience.
The concept of an accredited investor originated from the idea that individuals or entities with a higher financial acumen or more resources are better equipped to understand and bear the risks of certain investment opportunities.
Historically, the distinction between accredited and non-accredited investors was established to protect less experienced investors from potentially risky or less transparent investment opportunities.
Regulatory bodies, such as the U.S. Securities and Exchange Commission (SEC), have set criteria to determine who qualifies as an accredited investor, ensuring that they have the financial stability and sophistication to engage in more complex investment ventures.
Criteria for Becoming an Accredited Investor
To be classified as an accredited investor, one must meet specific criteria set by regulatory bodies:
Criteria
Description
Income Requirements
An individual must have had an annual income exceeding $200,000 (or $300,000 for joint income with a spouse) for the last two years, with the expectation of earning the same or a higher income in the current year.
Net Worth Requirements
An individual or a couple’s combined net worth must exceed $1 million, excluding the value of their primary residence.
Professional Credentials
Recent updates have expanded the definition to include individuals with certain professional certifications, designations, or other credentials recognized by the SEC. Examples include Series 7, Series 65, and Series 82 licenses.
Business Entities
Entities, such as trusts or organizations, with assets exceeding $5 million can qualify. Additionally, entities in which all equity owners are accredited investors may also be considered accredited.
Best Investment Opportunities for Accredited Investors
Here’s a rundown of some of the top investment for accredited investors…
1. Fundrise
Minimum Investment: $500
Best for: Newbie Investors
Fundrise has revolutionized the real estate investment landscape. By democratizing access to real estate portfolios, it allows individuals to invest without the complexities of property management or the need for vast capital. The platform’s innovative approach provides exposure to a traditionally lucrative, yet often inaccessible, sector of the market
Through Fundrise, investors can access a diversified range of properties, from commercial ventures to residential units. The platform’s expert team curates these portfolios, ensuring a balance of risk and reward. With its user-friendly interface and transparent reporting, Fundrise has become a top choice for many venturing into real estate investments.
How it Works: Investors start by choosing a suitable investment plan on Fundrise. Once invested, the platform pools the funds with other investors and allocates them across various real estate projects. As these properties generate rental income or appreciate in value, investors receive returns in the form of dividends or appreciation.
Pros:
Diversified real estate portfolios.
User-friendly platform with transparent reporting.
Cons:
Limited liquidity compared to public markets.
Returns are dependent on real estate market performance.
2. Equitybee
Minimum Investment: $10,000
Best for: Experienced Investors
Equitybee offers a unique platform that bridges the gap between private companies on the cusp of going public and potential investors. This innovative approach provides a golden opportunity for investors to tap into the potential of startups and other private firms before they make their public debut.
The platform’s primary focus is on employee stock options. By allowing investors to invest in these options, they can potentially benefit from their appreciation as the company grows. With a vast array of companies, from emerging startups to established giants, Equitybee presents a diverse range of investment opportunities.
How it Works: Investors browse available stock options from various companies on Equitybee. Once they choose an option, they invest their funds, which are then used to purchase the stock options from the employees. If the company goes public or gets acquired, the investor stands to gain from the increased value of these stocks.
Pros:
Access to pre-IPO companies.
Diverse range of startups and established firms.
Cons:
Platform fee of 5%.
Potential risks associated with private market investments.
3. Percent
Minimum Investment: $500
Best for: Novice Investors
Percent stands as a beacon in the vast sea of the private credit market, illuminating a sector often overshadowed by traditional investments. This burgeoning market, valued at over $7 trillion, consists of companies borrowing from non-bank lenders. Percent offers a unique vantage point into this market, allowing investors to diversify their portfolios beyond typical stocks and bonds.
The allure of Percent lies in its ability to offer shorter terms and higher yields, combined with investments that are largely uncorrelated with public markets. This makes it an attractive proposition for those looking to step away from the volatility of traditional markets.
How it Works: Upon joining Percent, investors are presented with a plethora of private credit opportunities. After selecting an investment, funds are pooled with other investors and lent out to companies seeking credit. As these companies repay their loans, investors earn interest, providing a steady income stream.
Pros:
Access to the burgeoning private credit market.
Potential for higher yields.
Cons:
Requires understanding of private credit dynamics.
Less liquidity compared to public markets.
4. Masterworks
Minimum Investment: $10,000
Best for: Novice Investors
Masterworks paints a vivid picture of art investment, blending the worlds of finance and fine art. Traditionally, investing in art was a luxury reserved for the elite. However, Masterworks has democratized this, allowing individuals to buy shares in artworks from world-renowned artists.
The platform’s strength lies in its expertise. From authentication to storage, every facet of art investment is handled meticulously. This ensures that investors can appreciate both the beauty of their investments and the potential financial returns.
How it Works: After registering on Masterworks, investors can browse a curated selection of artworks. They can then purchase shares, representing a fraction of the artwork’s value. Masterworks takes care of storage, insurance, and eventual sale. When the artwork is sold, investors share the profits based on their ownership.
Pros:
Opportunity to diversify with fine art.
Managed by art experts.
Cons:
Art market can be unpredictable.
Long-term investment horizon.
5. Yieldstreet
Minimum Investment: $15,000
Best for: Advanced Investors
Yieldstreet stands at the intersection of innovation and alternative investments. It offers a smorgasbord of unique investment opportunities, ranging from art to marine finance. For those looking to venture beyond the beaten path of traditional stocks and bonds, Yieldstreet presents a tantalizing array of options.
The platform’s allure lies in its curated selection of alternative investments, each vetted by experts. This ensures that while investors are treading unconventional grounds, they’re not stepping into the unknown blindly.
How it Works: Investors begin by browsing through the diverse investment opportunities on Yieldstreet. After selecting their preferred asset class, their funds are pooled with other investors and allocated to the chosen venture. Returns are generated based on the performance of these assets, be it through interest, dividends, or asset appreciation.
Pros:
Wide range of alternative investments.
Potential for high returns.
Cons:
Some niches may be too specialized.
Requires a deep understanding of chosen investments.
6. AcreTrader
Minimum Investment: $10,000
Best for: Newbie Investors
AcreTrader, as its name suggests, brings the vast expanses of farmland to the investment table. It offers a unique opportunity to invest in agricultural land, combining the stability of real estate with the evergreen nature of agriculture. With the global population on the rise, the value of fertile land is only set to increase.
The platform meticulously vets each piece of land, ensuring only the most promising plots are available for investment. This rigorous process ensures that investors are planting their funds in fertile ground, poised for growth.
How it Works: Investors peruse available farmland listings on AcreTrader. After selecting a plot, they can invest, effectively owning a portion of that land. AcreTrader manages all aspects, from liaising with farmers to ensuring optimal land use. Investors earn from the appreciation of land value and potential rental income.
Pros:
Stable, tangible asset.
Potential for steady returns.
Cons:
Returns may be slower compared to other platforms.
Limited to U.S. farmland.
7. EquityMultiple
Minimum Investment: $5,000
Best for: Experienced Investors
Summary: EquityMultiple is a testament to the power of collective investment in the real estate sector. By leveraging the principles of crowdfunding, it offers a platform where multiple investors can pool their resources to finance high-quality real estate projects. This collaborative approach allows for diversification and access to projects that might be out of reach for individual investors.
The platform’s strength lies in its curated selection of real estate opportunities, ranging from commercial spaces to residential properties. With a team of seasoned real estate professionals at the helm, EquityMultiple ensures that each project is vetted for maximum potential and minimal risk.
How it Works: Upon joining, investors can explore a variety of real estate projects. After committing to a project, their funds are pooled with other investors to finance the venture. Returns are generated through rental incomes, property appreciation, or the successful completion of development projects.
Pros:
Diverse real estate opportunities.
Managed by real estate professionals.
Cons:
Market risks associated with real estate.
Longer investment horizons.
8. CrowdStreet
Minimum Investment: $25,000
Best for: Advanced Investors
CrowdStreet stands as a pillar in the commercial real estate investment domain. With its vast experience and industry connections, it offers a platform where investors can tap into prime real estate projects across the nation. From bustling urban centers to tranquil suburban locales, CrowdStreet provides a diverse range of investment opportunities.
The platform’s expertise ensures that each project is meticulously vetted, offering a blend of potential returns and stability. For investors looking to delve into commercial real estate without the hassles of property management, CrowdStreet is an ideal choice.
How it Works: After registration, investors can browse a myriad of commercial real estate offerings. Upon investing in a project, CrowdStreet manages the investment, providing regular updates and ensuring optimal project execution. Investors earn returns based on the project’s performance, be it through rentals, sales, or project completions.
Pros:
Access to prime commercial properties.
Established platform with a proven track record.
Cons:
High minimum investment.
Market dependency for returns.
9. Mainvest
Minimum Investment: $100
Best for: Newbie Investors
Mainvest offers a refreshing twist in the investment landscape, focusing on the heart and soul of the American economy: local businesses. From quaint cafes to innovative startups, Mainvest provides a platform where investors can support and benefit from the growth of small businesses in their communities.
The platform’s community-centric approach ensures that investments are not just about returns but also about fostering local economies. For those looking to make a difference while earning, Mainvest presents a unique opportunity.
How it Works: Investors can explore various local businesses seeking capital on Mainvest. By investing, they essentially buy a revenue-sharing note, earning a percentage of the business’s gross revenue until a predetermined return is achieved.
Pros:
Support and invest in local businesses.
Low minimum investment.
Cons:
Risks associated with small business investments.
Returns might be slower compared to other platforms.
10. Vinovest
Minimum Investment: $1,000
Best for: Novice Investors
Vinovest uncorks the world of wine investment, offering a blend of luxury, history, and financial growth. Fine wines have been a symbol of opulence for centuries, and Vinovest provides a platform where this luxury becomes an accessible investment.
With a team of wine experts guiding the way, the platform ensures that each wine is not just a drink but an investment poised for appreciation. From sourcing to storage, Vinovest handles every facet, ensuring the wine’s value grows over time.
How it Works: After signing up, investors set their preferences and investment amount. Vinovest then curates a wine portfolio based on these preferences, handling sourcing, authentication, and storage. As the wine appreciates, so does the investor’s portfolio.
Pros:
Unique investment opportunity in fine wines.
Managed by wine connoisseurs.
Cons:
Long-term holding for optimal returns.
Market influenced by external factors like climate.
11. Arrived Homes
Minimum Investment: $100
Best for: Novice Investors
Arrived Homes offers a fresh perspective on real estate investment, focusing on the charm of single-family homes. While skyscrapers and commercial complexes often dominate real estate discussions, single-family homes offer stability, consistent returns, and a touch of nostalgia.
The platform’s strength lies in its focus. By concentrating on single-family homes, it offers investors a chance to tap into a stable real estate segment, benefiting from both rental income and property appreciation.
How it Works: Investors browse available properties on Arrived Homes. After selecting a property, they can invest in shares, representing a portion of the home’s value. As the property is rented out, investors earn a share of the rental income. Additionally, any appreciation in property value benefits the investors.
Pros:
Low minimum investment.
Quarterly dividends.
Cons:
New platform with a shorter track record.
Limited to single-family homes.
12. RealtyMogul
Minimum Investment: $5,000
Best for: Novice to Experienced Investors
RealtyMogul stands tall in the commercial real estate investment landscape. It offers a platform where diversification meets opportunity, presenting a range of commercial properties for investment. From bustling office spaces to serene residential complexes, RealtyMogul provides a plethora of options for investors to expand their portfolios.
The platform’s prowess lies in its dual approach. Investors can either dive into non-traded REITs or make direct investments in specific properties. This flexibility ensures that both novice and experienced investors find opportunities that align with their investment goals.
How it Works: Upon joining RealtyMogul, investors can choose between REITs or direct property investments. Their funds are then channeled into these real estate ventures. Returns are generated through rental incomes, property sales, or successful project completions.
Pros:
Wide range of commercial properties.
Both REITs and direct investments available.
Cons:
Market risks inherent to real estate.
Higher minimums for direct investments.
The Future of Accredited Investing
The world of accredited investing is dynamic and ever-evolving. Emerging trends suggest a shift towards democratizing investment opportunities, with regulatory bodies considering more inclusive criteria for accredited investor status. This shift aims to balance the need for investor protection with the recognition that financial acumen can come from experience and education, not just wealth.
Furthermore, technological advancements are playing a pivotal role. The rise of blockchain and tokenized assets, for instance, is creating new avenues for investment and might reshape the landscape of opportunities available to accredited investors.
xAs the line between traditional and alternative investments blurs, the future promises a more integrated, inclusive, and innovative environment for accredited investors.
The Bottom Line – Top Investments for Accredited Investors
Understanding the role and opportunities of accredited investors is crucial in the modern financial landscape. While the distinction offers privileged access to unique investment opportunities, it also comes with increased risks and responsibilities.
As the world of investing continues to evolve, potential accredited investors are encouraged to stay informed, conduct thorough research, and seek professional advice. The realm of accredited investing, with its blend of challenges and opportunities, promises exciting prospects for those ready to navigate its complexities.
FAQs – Investment Options for Accredited Investors
Why is there a distinction between accredited and non-accredited investors?
The distinction is primarily for investor protection. Accredited investors are deemed financially savvy or stable enough to handle the risks associated with unregistered securities, which might be riskier and less transparent.
What investment opportunities open up for accredited investors?
Accredited investors gain access to a broader range of investment opportunities, including hedge funds, private equity, venture capital, certain private placements, and more.
Are investments for accredited investors riskier?
While not inherently riskier, these investments often come with less regulatory oversight and transparency, which can increase potential risks. It’s essential to conduct thorough due diligence before investing.
Do accredited investors have any advantages in the public stock market?
While the primary benefits of being an accredited investor pertain to private investment opportunities, the financial acumen and resources associated with accredited investors can also be advantageous in public markets, especially when considering more complex investment strategies.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
Quality Verified
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Why You Can Trust GoodFinancialCents®
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Passive income refers to earnings derived from an enterprise in which a person is not actively involved on a daily basis.
Unlike active income, where earnings are directly linked to the amount of work performed, passive income flows whether you are working, sleeping, or vacationing.
As Robert Kiyosaki (2017) explains in his best-selling book “Rich Dad Poor Dad,” passive income can be a way to achieve greater financial independence.
Unlike the typical income that requires constant work, passive income typically flows with less hands-on involvement. However, this doesn’t mean no work is involved; it’s often the initial setup that demands considerable time, effort, or capital.
If you’re looking for more passive income ideas, click below:
Purpose and Importance
The purpose of passive income is broad, spanning from financial cushioning to the possibility of early retirement. By generating continuous revenue without daily effort, it offers a means to enhance one’s lifestyle, build financial security, or pursue other interests and hobbies.
The significance of passive income goes beyond mere monetary gain, as it also provides a pathway to greater control over one’s time, a diversified income stream, and potential long-term growth.
EXPERT TIP:
Consider starting small and gradually building your passive income portfolio.
By investing in a diverse array of income-generating opportunities tailored to your risk tolerance and financial goals, you can create a resilient and sustainable revenue stream.
As emphasized by many financial experts, including those mentioned in “The Intelligent Investor” by Benjamin Graham (2003), careful planning and consistent monitoring of your passive income sources can lead to greater financial freedom and control over your time.
This step-by-step approach allows you to learn and adapt, maximizing the potential benefits of passive income without overextending your resources.
How Passive Income Works
Table of Contents
Sources of Passive Income
Passive income can stem from various sources, such as rental properties, investments in stocks or bonds, a wide of array of apps, and royalties from intellectual properties like books or patents. Each source has its unique characteristics, risks, rewards, and requirements.
While some sources, like savings accounts interest, are readily accessible, others may need significant financial investment or specialized knowledge, like creating a successful blog that earns ad revenue.
Source of Passive Income
Characteristics
Risks
Requirements
Rental Properties
Steady Income, Property Growth
Market Fluctuations
Initial Investment, Maintenance
Dividend Stocks
Potential Growth, Regular Dividends
Market Volatility
Investment Capital
Peer-to-Peer Lending
Interest Earnings
Default Risk
Platform Registration
Royalties
Income From Intellectual Property
Contractual Risks
Creative Skills, Legal Agreements
Automation and Minimal Active Involvement
Passive income often involves an automated process where money is earned with minimal active involvement. This includes setting up businesses that run themselves or investing in dividend-paying stocks that provide regular income.
Though these may require substantial initial setup, the ongoing maintenance is often minimal. But it’s worth noting that these ventures must be monitored and sometimes adjusted to ensure continued success.
Tax Considerations
Tax implications for passive income differ from those of active income. Passive income may qualify for different tax rates or deductions, depending on jurisdiction and the type of income. For instance, rental income may be subject to specific property tax rules.
Understanding these rules or consulting a tax professional is vital to maximizing after-tax returns and compliance with tax laws. You can read more about here about how passive income is taxed.
Active vs Passive Income
Understanding the difference between active and passive income is essential for anyone looking to diversify their income streams and work towards financial stability or even independence.
What is Active Income?
Active income refers to earnings that require consistent and direct effort. This includes wages from a job, salaries, hourly payments, commissions, and tips. Essentially, active income requires trading time for money.
This type of income is what most people rely on to pay bills, purchase necessities, and maintain their current lifestyle. The major limitation of active income is its direct correlation to time; you can only work a certain number of hours in a day, thus capping your earning potential.
Passive Income Contrasted to Active Income
Contrastingly, passive income is earned with little to no daily effort to maintain, after the initial setup or investment. It includes revenue from rental properties, dividends, royalties, or even a business that doesn’t require daily involvement.
Passive income provides a means to break free from the time-for-money trade and opens doors to greater financial growth and freedom.
Comparison and Significance
The main distinction between active and passive income lies in the involvement and time required to generate revenue. While active income necessitates ongoing work, passive income aims to create sustainable income streams that flow regardless of daily activities.
Active income offers stability but often lacks scalability. Passive income, though requiring initial effort and possibly capital, offers the potential for long-term growth and diversification.
By combining both active and passive income streams, individuals can create a more resilient and flexible financial portfolio, allowing for the pursuit of broader life goals and interests, such as early retirement, travel, or investment in hobbies and personal development. The insights from Kiyosaki (2017) in “Rich Dad Poor Dad” emphasize this balanced approach to building wealth and achieving financial freedom.
The inclusion of both active and passive income in one’s financial strategy offers a multifaceted approach to wealth building. It’s an essential concept for anyone aiming to enhance financial security, diversify income, or explore new financial opportunities.
Feature
Active Income
Passive Income
Effort Required
Daily, consistent effort needed
Little to no daily effort after initial setup
Time Dependency
Directly tied to hours worked
Not tied to hours; can earn 24/7
Income Type
Wages, salaries, commissions, tips
Rental properties, dividends, royalties
Scalability
Limited by time and energy
Potential for growth without proportional time input
Financial Growth Potential
Often stable but limited in growth
Potential for long-term growth and diversification
Risks & Challenges
Job loss, income stability
Market risk, initial investment required
Benefits/Advantages/Pros of Passive Income
Financial Independence
Financial independence means having enough income to cover living expenses without needing to actively work. Passive income is often vital in this quest, allowing people to live comfortably without a regular paycheck. It offers an escape from the traditional work routine, opening doors to new opportunities, hobbies, or even early retirement.
“If you don’t find a way to make money while you sleep, you will work until you die.”
Warren Buffett
Flexibility and Freedom
The freedom granted by passive income extends to various life aspects. Whether it’s spending more time with family, traveling, or engaging in hobbies, the financial flexibility offered by passive income can significantly enhance life quality. It also provides an opportunity for strategic investments, exploring new ventures without the financial strain that might come without this income cushion.
Diversification of Income Streams
Having multiple income streams reduces the risk of financial hardship if one source diminishes or fails. By diversifying across various passive income avenues, financial stability is often enhanced.
Whether it’s investment in different market sectors, rental properties across various locations, or a mix of bonds and stocks, diversification is a fundamental risk management strategy in financial planning.
Potential Long-Term Growth
Some passive income sources offer potential for substantial long-term growth. Investments like stocks may appreciate over time, generating not only regular income but also an increase in underlying asset value. This growth potential can substantially contribute to financial goals, whether saving for children’s education, building retirement funds, or other long-term planning.
Benefit
Description or Example
Financial Independence
Reduced Dependence on Active Employment; Flexibility in Lifestyle Choices
Income Diversification
Spreading Income Sources; Reducing Financial Risk
Potential Long-Term Growth
Opportunity for Compounding Returns Over Time
Drawbacks/Disadvantages/Challenges/Limitations/Cons of Passive Income
Potential Risk and Volatility
The potential risks and volatility in passive income sources must not be overlooked. Market fluctuations can significantly impact investment returns, while real estate investments can be influenced by economic conditions and property market dynamics. Careful risk assessment and strategic planning are vital to mitigate these risks and ensure consistent income streams.
High Initial Investments or Skills Required
Some passive income streams necessitate significant initial investments or specific skills. Purchasing real estate, developing software, or creating a successful YouTube channel, for example, may require substantial money, time, and expertise.
These barriers must be considered and planned for, as they can deter or delay the successful implementation of a passive income strategy.
Regulatory and Compliance Challenges
Different passive income streams come with varying regulatory and legal considerations. Landlords must adhere to housing regulations, while stock investments may involve understanding complex financial laws. Failing to comply with these regulations can lead to legal troubles or financial losses. Professional guidance may often be required to navigate these complexities.
Maintenance Requirements
While often touted as ‘set and forget,’ passive income streams usually require ongoing attention. Whether it’s maintaining a rental property, adjusting an investment portfolio, or updating a mobile app, these tasks, though generally minor, are essential.
This continuous oversight ensures that passive income sources remain lucrative and aligned with financial goals.
Drawback
Description or Example
Potential Risk and Volatility
Subject to Market or Economic Changes
High Initial Investments
May Require Significant Capital or Effort to Start
Regulatory Challenges
Must Comply With Various Laws and Regulations
Maintenance Requirements
Ongoing Management or Oversight May Be Necessary
Building a Passive Income Portfolio
Choosing the Right Passive Income Streams
Identifying the right mix of passive income sources is a tailored process that considers individual risk tolerance, financial goals, and personal preferences. Whether it’s the stability of government bonds or the potential high returns of startup investments, these choices should reflect the individual’s unique circumstances. Proper research, planning, and professional advice can ensure a balanced portfolio that serves both current needs and future aspirations.
In Vanguard’s Four principles for successful investing they stress:
The best way to work toward an investment goal is to start by defining it clearly, take a level-headed look at the means of getting there, and then create a detailed, specific plan. Being realistic is essential to this process: Investors need to recognize their constraints and understand the level of risk they are able to accept.
Vanguard
Strategies and Planning
Creating a successful passive income portfolio isn’t just about choosing the right investments; it requires a well-thought-out strategy and continuous planning. Factors to consider include risk diversification, liquidity needs, time horizons, and long-term goals. Regularly reassessing and adjusting this strategy ensures that it stays aligned with evolving needs and market conditions, safeguarding the financial future.
Monitoring and Adjustments
Regular monitoring and necessary adjustments are key to maintaining a robust passive income portfolio. The landscape can change due to market conditions, new laws, or personal circumstances. Regular assessments and prompt adjustments ensure that the strategy remains relevant, meeting its objectives while maximizing potential returns.
The exploration of passive income is not a simple undertaking but rather a multifaceted approach to building a sustainable financial future. The understanding of various sources, the recognition of benefits, and the consideration of potential drawbacks are essential components in the effective management of passive income streams.
From aspiring to retire early to simply wanting a more flexible lifestyle, passive income provides opportunities and challenges worthy of thoughtful exploration and careful planning.
The Bottom Line – Passive Income Explained
Passive income might seem like a complex idea, but it’s really about making your money work for you instead of the other way around. From investments to side businesses, there are ways to create a steady stream of cash that doesn’t tie you down to a 9-to-5 grind. Mixing active income from your regular job with passive income can lead to a more relaxed and secure financial life.
It’s not a get-rich-quick scheme, but with some thought, effort, and patience, passive income can be a valuable part of your financial picture. Whether you’re aiming for early retirement or just some extra spending money, understanding passive income is a good first step.
FAQs – What is Passive Income?
What is Passive Income, and How Does It Differ from Active Income?
Passive income is earnings derived from investments, properties, or business ventures where a person is not actively involved daily. Unlike active income, where constant work is required, passive income generally flows with minimal ongoing effort, often after an initial setup phase.
Can Anyone Create a Source of Passive Income, or Does It Require Special Skills?
While some sources of passive income might require substantial initial investments or specialized skills, there are various opportunities available for different skill levels and financial capabilities. Proper research, planning, and sometimes professional guidance can help in successfully establishing a passive income source.
What Are Some Common Sources of Passive Income?
Common sources of passive income include rental properties, dividend-paying stocks, bonds, royalties from intellectual properties, and interest from savings accounts. The choice of sources often depends on individual risk tolerance, financial goals, and personal preferences.
Is Passive Income Taxed Differently Than Other Types of Income?
Yes, passive income may be subject to different tax rules depending on jurisdiction and the specific type of income. It’s advisable to consult with a tax professional to understand the applicable tax laws and ensure compliance.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
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These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Imagine this: You’ve just received an incredible job offer with a pay rate of $35 per hour. Sounds amazing, doesn’t it? But then, a question pops into your mind: what does that amount to in a year?
Suddenly, you find yourself entering a world where numbers come alive, swirling and dancing to the beat of hourly wages and annual salaries.
In this article, we will unravel the mystery behind the figure of $35. We will follow its path as it multiplies into a weekly wage, expands into a monthly income, and ultimately transforms into an impressive annual salary.
This is not just a mundane mathematical exercise; it is a profound exploration of the true value of your earnings.
Whether you’re a job seeker evaluating offers, or an employee negotiating a raise, rest assured that there is something here for you. So sit back, relax, and allow us to guide you through the journey of understanding how much you can make in a year when paid $35 an hour.
FACT: The average hourly earnings of all employees in the United States is $33.58 as of July.
This figure is up from $32.18 one year ago, marking a 4.35% increase.
So it means you’re already ahead of the game if you’ve been offered $35 per hour!
$35 an Hour Is How Much a Year?
Table of Contents
We’ve calculated the yearly income based on a $35 per hour wage, considering a normal 40-hour workweek.
Here’s the step-by-step breakdown:
Start with a typical workweek of 40 hours and a standard year comprising 52 weeks.
Calculate the total number of working hours in a year by multiplying the weekly hours (40) by the weeks in a year (52), which equals 2,080 hours.
Determine the gross annual income by multiplying the hourly rate ($35) by the total annual working hours (2,080), resulting in $72,800.
Expert Tip:
Remember, this is your gross income, not net income. It doesn’t include deductions like taxes, insurance, 401K contributions, etc.
However, it does give you an estimate of potential earnings for someone earning $35 per hour.
For comparison, a gross annual salary of $72,800 is considered middle-class income, as it surpasses the $50,000 threshold.
How About If You’re Working Part-Time?
The calculation changes slightly for part-time workers.
Let’s say you work 20 hours per week instead of the standard 40:
Begin with your weekly hours (20) and multiply this by the number of weeks in a year (52), which gives you a total of 1,040 working hours in a year.
Next, calculate your gross annual salary by multiplying the hourly rate ($35) by the total annual working hours (1,040), equating to $36,400.
What Does $35 an Hour Translate to in Terms of Paycheck?
Monthly Paycheck
If your hourly rate is $35, your gross monthly salary should average approximately $6,066.60. This figure is derived by dividing the annual salary of $72,800 by 12 months. However, it’s important to note that this amount may vary due to factors such as the number of days in each month and the schedule of your paydays.
Salary Increase Insight: Should your hourly wage increase from $25 to $35, you could anticipate an average monthly increase of approximately $1,733. This represents a significant enhancement to your income.
Weekly Paycheck
For those interested in a weekly perspective, the weekly salary is calculated by dividing the annual salary of $72,800 by 52 weeks, resulting in approximately $1,400. This is the gross amount before any taxes and deductions are applied.
Bi-Weekly Paycheck
If you receive your salary bi-weekly, you will typically receive two monthly paychecks. To calculate your gross bi-weekly salary, divide the annual income of $72,800 by 26 pay periods.
With an hourly rate of $35, your bi-weekly paycheck would be around $2,800, prior to any taxes and deductions.
Daily Paycheck
Your daily earnings are contingent upon the number of hours you work each day. For example, if you work an 8-hour shift, your daily earnings would be $280 (calculated at $35 per hour).
Remember:
These figures represent gross income before taxes and deductions.
Your net take-home pay will be less, but understanding these calculations can provide valuable insight into how your hourly wage impacts your paycheck across different pay periods.
This information can serve as a useful tool for financial planning and budgeting.
How Does $35 an Hour Compare?
A wage of $35 per hour might seem like a substantial amount, and that’s because it is when compared to the national averages. If you’re working full-time at 40 hours per week, this hourly wage translates to an annual income of around $72,800. This figure significantly overshadows the median salary in the U.S., which stands at $68,703 per year.
Comparatively, the national average hourly wage in the USA is about $33.74, which puts $35 an hour above average. In biweekly terms, a $35 hourly wage would translate to approximately $2,800 before taxes.
Getting a job with a $35 per hour wage gives job hunters an edge over those starting their search. With this pay rate, candidates can expect attractive offers and valuable career guidance.
Is $35 an Ideal Hourly Wage?
That’s a question that tickles the mind, doesn’t it? Your location and lifestyle are the key ingredients in the secret recipe that determines the true worth of that paycheck. But let’s dig deeper and crunch some numbers with the federal poverty level in mind.
For all you fabulous singles out there without dependents, crossing the yearly income of the $13,590 mark would officially elevate you above the poverty line. On the flip side, if you have a family of four, then the target magic number becomes $27,740.
Now, earning $35 an hour should surely land you in a comfy spot, don’t you agree? Of course, we’re not talking about a life of luxury here, folks!
We’re talking about a modest existence. Just sprinkle some budgeting magic, stay on top of those finances, and voila! You’ll be pleasantly surprised how far $35 an hour can whisk you away.
However, we must emphasize the importance of financial savvy and clever choices to maintain a comfortable lifestyle with a $35 hourly rate. By juggling your expenses skillfully and making wise financial decisions, this income level can splendidly cater to your individual needs and your lovely family’s necessities.
Paid Time Off for Hourly Employees Earning $35 per Hour
Let’s never downplay the marvelous benefits of paid time off (PTO), particularly for those earning by the hour. PTO allows you to achieve a harmonious equilibrium between your professional commitments and personal life, all while ensuring your income remains steady.
Imagine this: a typical work week of 40 hours, stretched out over an entire year. Now, allow me to guide you through a pair of hypothetical situations that underscore the financial advantages of paid time off.
Scenario 1: Paid Vacation
Are you part of the fortunate group that enjoys a fortnight of paid leave each year? If so, give yourself a well-deserved round of applause! You maintain a steady annual income of $72,800, matching stride for stride with those enviable salaried colleagues of yours.
Scenario 2: No Paid Vacation
Regrettably, not every hourly worker is blessed with the luxury of paid vacation. In such instances, it’s vital to forecast a slight decrease in your annual earnings due to unexpected events or even some much-needed time off.
Imagine you take a two-week break without any pay; this leaves you with 50 weeks (or 2,000 hours) of work in a year, translating to an income of $70,000. So, while your day-to-day earnings might average around a cool two hundred dollars, remember to budget for those days when work takes a backseat. After all, everyone deserves a break.
How Much Is $35 An Hour After Taxes?
Have you ever wondered how taxes can impact your hourly wage? We’re here to guide you through it. Everyone’s tax situation is unique, but for the sake of clarity, let’s dive into this exploration with a few general assumptions:
Federal tax rate: 12%
Social Security and Medicare (FICA) rate: 7.65%
State tax rate: 4%
Gross Annual salary: $72,800
Now, let’s break down your potential tax deductions based on these assumptions.
Federal Taxes:
$8,736
Social Security and Medicare:
$5,569
State Taxes:
$2,912
Net Annual Salary:
$55,583
Assuming you work 2,080 hours per year, we estimate your Net Hourly Wage to be: $26.7
So, if your gross hourly wage is $35, after taxes, you’ll take home around $26.7 per hour. That’s a difference of $8.2.
Remember, these calculations are just an estimate. Your actual tax rate and deductions may vary.
Did you know some states in the US don’t impose state taxes on salary income? If you live in one of these states, you’ll still need to pay federal tax and FICA, but imagine the potential savings! Here are those tax-free states:
Alaska
Florida
Tennessee
Nevada
South Dakota
Texas
Washington
Wyoming
New Hampshire
Are you curious about what your net monthly income would look like if you lived in one of these states and earned $35 per hour? Let’s do the math together!
In a tax-free state, your estimated tax deductions would look something like this:
Federal Taxes:
$8,736
Social Security and Medicare:
$5,569
Net Yearly Salary
$58,495
And your Net Monthly Salary? A cool $4,874
Isn’t it exciting to see how your financial landscape could change with just a little tax knowledge?
Tips for Budgeting With a 35/Hour Salary to Maximize Savings
Cutting Corners Without Cutting Joy
Budgeting doesn’t have to mean sacrificing all the fun. It’s all about finding creative ways to save. Opt for potluck dinners instead of eating out, embrace second-hand shopping, or pick up a fun, free hobby.
You can still enjoy life while being financially responsible. Here’s how:
Embrace DIY: Do-it-yourself projects are not only fun but also cost-effective. For example, using a Cricut machine, you can create personalized greeting cards, home decor, and even clothing items. This can save you money and add a personal touch to your belongings. A Reddit user shared their experience with a Cricut Joy machine, indicating that it can make small cuts in corners, providing a unique touch to their DIY projects.
Learn to Cook: Eating out can be expensive. Learning to cook not only saves you money but also allows you to control what goes into your meals. It can be a fun and rewarding experience.
Second-hand Shopping: Thrift stores and online marketplaces offer a treasure trove of gently used items at a fraction of their original cost. It’s an eco-friendly option that’s kind to your wallet too.
Free Entertainment: Look for free activities in your community. Many cities offer free concerts, art exhibitions, and festivals. You can also opt for nature-based activities like hiking, picnicking, or beach days.
Trade and Barter: Swap items or services with friends or join a local barter group. This is a great way to get what you need without spending money.
Remember, the goal is to find a balance between saving money and enjoying life. It’s about making smart choices that align with your financial goals and lifestyle preferences.
The Magic of Automated Savings
Setting up automated savings is like having a financial fairy godmother. This ensures a portion of your paycheck goes directly into your savings account. Before you know it, your savings will start to accumulate without you lifting a finger.
The 50/30/20 Rule: A Tried and Tested Approach
The 50/30/20 rule is a classic in the realm of personal finance. This strategy involves allocating 50% of your income to necessities, 30% to wants, and the remaining 20% to savings and debt repayment.
Let’s crunch some numbers. Based on a $72,800 annual income, here’s how the 50/30/20 rule would play out:
Necessities ($36,400): This includes rent or mortgage payments, utilities, groceries, health insurance, and car payments.
Wants ($21,840): Think dining out, vacations, shopping sprees, and other non-essential expenses.
Savings and Debt Repayment ($14,560): This category is all about the future you. Whether it’s paying down debt, saving for retirement, or building an emergency fund.
Adjust Your Budget Over Time
Budgeting isn’t a set-it-and-forget-it process. As your income, lifestyle, and goals change, so too should your budget. Regularly review and adjust your budget to ensure it’s still serving your needs and helping you reach your financial goals.
For instance, if you have a goal of buying a house in the next year, then you may prioritize increasing your savings rate to give yourself an edge.
On the other hand, if you recently changed jobs and now make more money, you can increase your spending on wants without compromising your savings goals.
It’s all about finding that sweet spot that works best for you.
Emergency Fund
An emergency fund is a crucial part of any budget. Aim to save enough to cover three to six months of living expenses. This fund acts as a safety net for unexpected costs like medical emergencies or sudden job loss.
Tracking Your Spending Habits
Knowledge is power when it comes to budgeting. By keeping a close eye on your spending habits, you can identify areas where you might be overspending. There are numerous apps available that can help you track your spending and provide insights into your financial habits.
Here’s a quick look at some popular budgeting apps:
Mint: Offers comprehensive budget tracking, bill management, and personalized savings tips.
YNAB: Connects to your bank account to provide detailed spending insights.
PocketGuard: Automatically categorizes your expenses so you can easily track where your money is going.
Other popular options include Acorns and Digit. The key is to find what works best for you and your budgeting needs.
Invest in Your Future
As part of your 20% savings, consider investing in a retirement plan, such as a 401(k) or an IRA. This not only provides a nest egg for your future but can also offer tax advantages. If your employer offers a 401(k) match, be sure to take full advantage, as it’s essentially free money.
EXPERT TIP:
If you need more help managing your money, consult with a financial advisor.
They can provide professional guidance and tailored advice to help you reach your personal finance goals.
Conquer the Debt Monster
Taking on debt is a crucial part of nailing budgeting on a $35-per-hour salary. Be in control by tackling high-interest debt, like those pesky credit card balances, as a priority. Your debt-to-income ratio fluctuates with your salary, so staying up-to-date is key.
Types of Jobs That Pay 35/Hour Salary
If you are looking for jobs that pay $30/hour, job search and career advice websites can be helpful. Some job titles that typically offer this salary range are:
These careers can potentially pay you a salary of $35 per hour or more. By putting in hard work and commitment, it’s achievable to reach that aim.
Side Hustles To Supplement Your $35 Income
In today’s world, having a side hustle has become an increasingly popular way to supplement income. For those earning $35 per hour, these additional income streams can help reach financial goals faster and provide a safety net for unexpected expenses.
Here are some of the most effective and lucrative side hustles you can consider:
Freelancing
As highlighted by Forbes, freelancing tops the list of easy side hustle ideas. If you have a skill that’s in demand, such as graphic design, copywriting, or programming, you can offer your services on a freelance basis.
Delivery Services
Entrepreneur suggests delivering for PostMates as another great option for earning extra income. Similar to working for Uber and Lyft, this type of gig offers flexibility and the potential for tip income.
Ride Sharing
The Savvy Couple mentions ride-sharing as one of the best side hustle ideas. When the kids are at school, and you’re home with some spare time, driving for a service like Uber or Lyft can be a profitable way to make use of that free time.
E-Commerce
Investopedia ranks e-commerce as one of the most profitable side hustles. Platforms such as Amazon, Shopify, and Etsy provide an easy way to set up a virtual store and start selling products online.
As there are so many side hustles available, it’s important to find the one that best suits your lifestyle and goals. Consider which will work best for you and your budgeting needs.
Final Thoughts on a $35/Hour Salary
When budgeting on a $35 per-hour salary, it’s important to remain mindful of your own needs and goals. Everyone’s financial situation is unique, so find what works best for you and adjust as required.
With the right mindset and dedication, it’s achievable to create a sustainable budget that sets you up for financial success. So take charge and make your budget work for you. With focus, determination, and a bit of creativity, you can reach any financial goal.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
what is COBRA insurance exactly? It is a law that was put into place with the Consolidated Omnibus Budget Reconciliation Act (COBRA). The Act, first enacted in 1985 and revised in 1999, was put in place to protect you and your family if you lose your employer-sponsored health benefits.
More specifically, to help those suffering from job loss during the 2008 recession, Congress passed a 65% subsidy for laid-off workers in 2009 under former President Barack Obama. This way, workers could receive assistance paying COBRA insurance premiums for 15 months while looking for work.
The final three months were paid by the laid-off employee. This subsidy expired on June 1, 2010, though, meaning that those laid off since the end of May 2010 do not have this subsidy. COBRA insurance is still available to those who want access to an employer health plan, but the subsidy is gone, after being extended more than once.
Hence, when I changed jobs, COBRA was there to take of care of me and family in case of a medical emergency.
If you qualify for COBRA coverage, then you have the option of continuing your employer-sponsored health plan for a limited period of time. COBRA requires that three requirements be met before you can qualify for COBRA coverage:
Your employer is obligated to provide COBRA coverage;
You are a Qualified Beneficiary; and
Qualifying Event has occurred
Under COBRA, you may be responsible for paying up to 102% of the health insurance premium on your own. There is an important item to be aware of here. If your former employer paid a substantial portion of your health insurance coverage, you are now responsible for the whole premium payment now.
However, you may find that your premium goes higher without your employer picking up part of the tab.
In my case, that was more than double than what I had been accustomed to paying. Basically, the better your insurance coverage was, the more that you will probably have to pay under COBRA. This can make COBRA unaffordable to those whose incomes have been diminished by a job loss.
What Are the Employer Requirements Under COBRA
Employers are only obligated to offer COBRA coverage if:
they offer an employer-sponsored health insurance plan; and
they have at least 20 employees
If you are a Federal employee, you do not qualify for COBRA Insurance. You will need to contact your human resources department to see about continuing your health insurance coverage.
COBRA Qualified Beneficiaries
If you didn’t take part in your employer’s insurance plan, you will not qualify for coverage.
COBRA coverage may be offered to employees, an employee’s spouse, or an employee’s dependents. In certain cases, this includes a retired employee, and the retired employee’s spouse and dependents. If you are expecting a child or adopt a child during the period in which you are receiving coverage through COBRA, then that child will also qualify as a beneficiary.
You can choose to accept coverage under COBRA just for yourself or for your family. You can also choose to fore-go COBRA for yourself and just cover your spouse or dependent children.
Qualifying Events for COBRA
For the Employee
If you leave your job voluntarily; this includes retirement
If your work hours are reduced so that you are no longer eligible for health benefits under your employer’s policy
If you lose your job for any reason other than gross misconduct
The Employee’s Spouse
If the employee’s work hours are reduced
If the employee leaves the job for any reason other than gross misconduct
If the employee becomes entitled to Medicare
Divorce or legal separation
Death of the employee
Any Dependent Children
If the employee’s work hours are reduced
If the employee leaves the job for any reason other than gross misconduct
If the child loses dependent child status under the employer-sponsored health plan’s rules
If the employee becomes entitled to Medicare
Divorce or legal separation
Death of the employee
Non-Qualifying Events
Please note that the Qualifying Events for COBRA are events that affect your employment status only. For example, if your employer decided to change the type of insurance coverage they provide, that will not trigger a qualifying event. Consequently, you will not qualify for COBRA Coverage.
COBRA Coverage
Your health insurance coverage under COBRA must be identical to the coverage your employer offers its current employees. Generally, this means that you should get the same coverage after the Qualifying Event as you did before. I know in my case, I did qualify for the same type of coverage, so there was no worry if something went wrong.
If your employer reduces coverage to its current employees or cancels its employer-sponsored health insurance benefits altogether, then your coverage will be affected. You will be entitled only to the same benefits as current employees have. This means that if your employer cancels its sponsored plan, then you will no longer be entitled to COBRA.
Providing Notice – The Plan Provider’s Responsibilities
When you become a participant in your employer’s sponsored health insurance plan, the plan administrator must provide you with an “Initial Notice” that outlines your rights under COBRA.
When a Qualifying Event occurs, your employer must provide you with “Specific Notice” that you are qualified to elect continuing coverage under COBRA. Typically, you will get this notice in the mail. Be on the lookout for this. My notice came about a month after I had separated from my employer.
Providing Notice – Your Responsibilities
You are responsible for notifying your plan administrator after certain Qualifying Events occur. These Qualifying Events are divorce, legal separation, or loss of “Dependent Child” status. The length of time you have to report these Qualifying Events depends on your plan’s rules. Many plans require notice to be made within 60 days of the Qualifying Event.
Selecting COBRA
By law, when a Qualifying Event occurs, your employer must provide you with notice that COBRA is available. You may be informed in person, or you may receive this notice in the mail. Once you receive notice, you have 60 days to choose COBRA continuation coverage. If you select COBRA, then your coverage will be retroactive to the day you lost your health insurance benefits due to the Qualifying Event.
If you initially reject COBRA continuation coverage, you still have a chance to change your mind. As long as you are within the 60-day window, you can inform your employer that you do want COBRA continuation coverage. Your coverage will begin from the day you inform your employer.
COBRA Term
COBRA coverage continues for 18 months. If you initially elect COBRA, then your coverage will begin on the first day that you would have lost your health insurance benefits due to the Qualifying Event. If you initially rejected COBRA but changed your mind within the 60-day window, then your coverage will begin on the day you notified your employer.
The COBRA term can be shortened if:
You do not pay your premiums on a timely basis
Your employer ceases to maintain any group health plan
You obtain coverage with another employer
A beneficiary becomes entitled to Medicare benefits
The COBRA term can be extended if you become disabled within the first 60 days of COBRA continuation coverage. To qualify for this extension, you must submit a ruling from the Social Security Administration that says you have become disabled. If you qualify, then you and your family may extend your COBRA coverage for an additional 11 months, but you may be required to pay up to 150% of the premium cost for those additional 11 months.
A spouse or dependent may extend the COBRA continuation period to a maximum of 18 months under certain circumstances. These circumstances include divorce or separation from the covered employee, the death of the employee, a child’s loss of dependent status or if the employee becomes eligible for Medicare within the continuation period.
Filing a Claim for Health Benefits Under COBRA
Health insurance plans are required to explain how to obtain benefits and must include written procedures for processing claims. Claims procedures must be described in the Summary Plan Description.
You should submit a claim for benefits in accordance with your plan’s rules for filing claims. If the claim is denied, you must be given notice of the denial in writing generally within 90 days after the claim is filed. The notice should state the reasons for the denial, any additional information needed to support the claim, and procedures for appealing the denial.
You will have at least 60 days to appeal a denial and you must receive a decision on the appeal generally within 60 days after that.
Contact the plan administrator for more information on filing a claim for benefits. Complete plan rules are available from your employer or your insurance company. There can be charges up to 25 cents a page for copies of plan rules.
COBRA Time Line
The first 44 days—Employers that do not self-administer their health insurance coverage (typically small employers) have 30 days to notify the third-party administrator of the plan of the worker’s COBRA rights after the worker leaves his or her job. The third-party administrator then has 14 additional days to notify the worker of his or her COBRA rights. Employers that self-administer their own group health plans (typically large firms) have 44 days to notify workers of their COBRA rights.
The next 60 days—After receiving notification of his or her rights (as described above), a worker has 60 days to accept or decline COBRA coverage.
The final 45 days—Premium payments for periods before the election of coverage cannot be required before 45 days after a worker elects to accept coverage. But if a worker decides not to pay at the time the premium is finally due, nothing is lost except the coverage. Thus, a worker who is entitled to COBRA coverage can wait—sometimes for as many as 149 days—to see if taking coverage is in his or her best interest. The 149-day period could be shortened if employers or third-party administrators provide notifications in less than the maximum time allowed within the 44-day period described above. For example, if employers or third-party administrators provided a very quick notification, a worker could have slightly more than 105 days to act.
The Bottom Line
If you can’t afford COBRA insurance, consider your other options. There are web sites and insurance brokers that can help you compare health plans, and it’s possible to find an individual or family plan that costs less than COBRA — and isn’t tied to your job.
If you had a high deductible plan at your employer, and have been taking advantage of a Health Savings Account, you can tap into this to help pay for costs. You can also check your savings accounts to see how much you have for medical expenses.
Paying for health care is always an expensive proposition, and with no more COBRA subsidies, and an extension unlikely, it is up to you to see what you can do until you find another job with health benefits.
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About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
Written By:
Updated: September 1, 2022
1 Min Read
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GoodFinancialCents® has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.
Quality Verified
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Why You Can Trust GoodFinancialCents®
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
With all the recent talk about health care policy reform, it’s no surprise that many Americans feel the strain that their health insurance premiums put on their wallets. Many families struggle month to month trying to cover the costs of skyrocketing health insurance that many choose to roll the dice and have no insurance coverage. Studies show that approximately 18 percent of the U.S. population (over 46 million Americans) under the age of 65, simply have no coverage at all. If you are one with no coverage or are looking for a way to find a cheaper health insurance solution, here are three ways to lower your health insurance premiums.
1. Raise Your Deductible
One quick and easy way to lower your health insurance premium is to raise your deductible. One study showed that by raising the deductible from $2500 to $5000, the premium decreased by 25% ( 35-40% in some areas in the country). You don’t necessarily have to double your deductible to see a significant change.
Even lower increases can make a significant difference. If you raise to $1150 or $2300 for a family policy, you can open a Health Savings Account (HSA) which lets you contribute tax-deductible money and you can use tax-free money for medical expenses in any year. This can help you stretch your money that much further.
Let’s look at an example of increasing your deductible. For a family of 3 living in a major metropolitan area:
Deductible
Premium
Annual Cost
$500
$484/mo
$5,808
$5000
$247/mo
$2,964
Obviously, you can see the instant savings. By opting for a higher deductible, that’s an annual savings of $2,844 per year. But what happens if you have to go to the hospital, does the high deductible plans really work? If you look at the overall picture and you and your family are generally in good health, the HDHP plan could make sense. Keep in mind that many of these policies will allow you to have 1 to 2 preventative visits a year. Be sure to check with your health plan provider to make sure.
Using my own family as an example, we currently pay $244 per month for a high deductible plan that covers the three of us and we each have a $1500 deductible. Compare that to a $300 deductible and our monthly premium would jump 56% to $382 per month. Wow! Annually, we save about $1,656 by using this method which we contribute to a HSA.
2. Shop Health Insurance Coverage Rates
When looking for cheaper health insurance options, be sure to check several providers to make sure you’re getting the best deal that fits your family’s needs. Ehealthinsurance.com is one of the top leaders of online health insurance issuers. They were one of the first company’s to sell health insurance policies online.
EHealthInsurance has developed partnerships with more than 180 health insurance companies, including the big boys of Aetna, Blue Cross and Humana, Blue Shield, AARP, Coventry Health, and Kaiser Permanente. Here’s some info from their website:
eHealth, Inc. is the parent company of eHealthInsurance Services Inc., the one of the best online source of health insurance for individuals, families and small businesses. eHealthInsurance presents complex health insurance information in an objective, user-friendly format, enabling the research, analysis, comparison and purchase of health insurance products that best meet consumers’ needs.
Licensed to market and sell health insurance in all 50 states and the District of Columbia, eHealthInsurance has developed partnerships with more than 180 health insurance companies, offering more than 10,000 health insurance products online.
The company’s technology platform is able to communicate electronically with insurance carrier partners, which enables a simpler, more streamlined health insurance application process. This technical connection with the back-office processes of health insurance companies can facilitate rapid approval of applications and real-time communication between carrier and consumer throughout the process.
3. Have Separate Coverage For the Family
During open enrollment this fall you may notice a few changes in your health care coverage as it pertains to the rest of your family. One trend that is expected is to see a decrease in the subsidy that is allowed to pay for the family’s coverage in employer health plans. With the sudden spike in cost, it could make sense to keep only yourself on your policy and your employer and put your spouse and kids on their own policy.
I have many married friends that are both employed and have adopted this strategy. I wish I had some more specific numbers to share on their money saving tips, but it obviously made sense because they are doing it.
When you open enrollment period rolls around, don’t take it for granted. This may be an easy opportunity to save your family thousands of dollars in insurance premiums for the year.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
Written By:
Edited By:
Kevin Mercadante
Kevin Mercadante
Kevin Mercadante has been writing about personal finance since 2010,
covering investing, retirement, taxes, credit cards, real estate, mortgages
and insurance.
His…
Read More
Updated: April 17, 2023
3 Min Read
Advertising Disclosure
Advertising Disclosure
GoodFinancialCents® has an advertising relationship with the companies included on this page. All of our content is based on objective analysis, and the opinions are our own. For more information, please check out our full disclaimer and complete list of partners.
Quality Verified
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Why You Can Trust GoodFinancialCents®
GoodFinancialCents® partners with outside experts to ensure we are providing accurate financial content.
These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.
Recently, a younger business owner client of mine was inquiring about purchasing a term life insurance policy.
A term life policy makes total sense for his situation, but what he also wanted to give it a twist. In addition to a 30-year term life policy, he wanted to add what’s called a return of premium rider.
For those that are not familiar, the return of premium rider allows the policyholder to get a full refund of all the premiums paid at the end of the contract.
At first, it sounds like a pretty good deal. The most common complaint that consumers have with life insurance is that if you don’t die, all the money goes directly to the life insurance company. If this is the case, then purchasing the return of premium rider seems totally worth it.
Cost of Return of Premium Rider
At first glance, the return of premium rider seems like a no-brainer. One piece of information that you need to know is that the rider comes with a price. The ROP rider on average will run 20%-40% higher than purchase a policy without it. In addition, you have to keep the policy for the entire contract period to get a full refund of your premium. So then the question remains, does it make sense to pay more for the rider since you know you’re getting all your premiums back? Let’s take a closer look….
ROP Rider vs. Regular Term Insurance
To illustrate the cost difference between purchasing regular term insurance vs. one with the ROP ride, here are some life insurance quotes that I ran. In our scenario, I am using a 30-year-old male, assuming he is in excellent health. We are going to get a quote on a 30-year term life policy with a $1,000,000 face value. Without the ROP rider, the annual premium will cost approximately, $720 per year for a total of $21,6000 premiums paid over the 30 year period. By adding the ROP rider, the premium jumps to $1,180 per year, for a total outlay of $35,400. That’s a total difference of $13,800 premiums paid ($460 per year) or a 63.88% increase.
Invest the Difference
Since I’m a firm believer of long term investing, my initial argument would say, go without the ROP rider and invest the difference. Let’s see how my theory holds up. If we take the difference of $460 per year and invest it and average 6% over the 30 year period, it looks something like this:
By averaging 6% return, you will have accumulated $36,366 over the 30 year period. Subtract the $21,600 you paid in premiums over that period and your net amount is $14,766. As you can see in this example, purchasing the ROP rider seems to make sense. Hmmm…..Gets you thinking, right? Now let’s see if we average 8% return:
If we are able to average 8% return over that same period, we accumulate a total of $52,110 and after subtracting the premiums were left with $30,500. Compare that to the $35,400 we would get back with the ROP rider, and we’re still in the red. If we can average closer to 10% return, then we have a greater chance for the normal policy to be more economically viable.
One major thing to consider is that the money returned to you with the ROP is not inflated for inflation. As you can imagine, $35,400 today will not get you as far 30 years from now.
Few More Considerations
I have to admit that the outcome of the scenarios I ran were different than what I predicted. What we have to keep in mind is that when I analyzed the cost differential, we are relying on a few big assumptions:
That the person can afford to pay the higher premium.
The person will keep the policy for the entire 30 year period.
The cost of insurance won’t decrease.
This and other variables would have a dramatic impact on the long term results of this scenario.
When Does Purchasing ROP Rider Make Sense?
Typically, you wouldn’t purchase ROP on such a long term policy. Where it is more common is term polices 10 to 15 year in length. You usually see this being used in buy/sell agreements between business partners where each partner buys insurance on the other’s life. With such a shorter time horizon, the ROP makes more economic sense.
Disclaimer: I have purchased 3 term life policies and never have opted for the return of premium rider.
What about you? Have you purchased a term life policy with a ROP rider?
For more information, check out other types of life insurance.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.