Another reason why the Fed can let the CRE swoon rip.
By Wolf Richter for WOLF STREET.
The multifamily segment of Commercial Real Estate – apartments – is holding up better than office, retail (the Brick-and-Mortar Meltdown since 2017), and lodging, though it’s cracking too with some spectacular defaults over the past 12 months or so. Yet, US banks and thrifts and foreign banks hold only a small-ish portion.
Total mortgages backed by multifamily properties rose by 4.4% year-over-year in Q4, or by $88 billion, to $2.09 trillion, according to the Mortgage Bankers Association, based on its own data, and on data from the Federal Reserve, Trepp, and the FDIC.
Of those mortgages:
US government agencies, US Government Sponsored Enterprises (GSEs), state and local governments, and state and local government pension funds held 54.8%, or $1.09 trillion.
US banks and thrifts and foreign banks held 29.3%, or $612 billion.
Life insurers held 11.3%, or $235 billion.
Another 3.2%, or $67 billion, had been securitized into CMBS, CDOs, and ABS, and those securities were held by investors.
Other investors, including private pension funds and REITs, held 2%.
The blue line represents federal government backed entities – including MBS issued and guaranteed by those entities, Quite an interesting trend (chart via MBA):
The MBA excludes loans for acquisition, development and construction, and loans collateralized by owner-occupied commercial properties.
For about a year, we’ve been reporting on how non-bank entities, from CMBS holders to PE firms, were on the hook for office and other CRE mortgages, how the biggest losses have hit these investors, particularly the CMBS investors, and not banks. And among the banks that it did hit, there were a slew of foreign banks.
But with the multifamily segment of CRE, it’s mostly federal, state, and local government entities, including their pension funds that are on the hook – meaning the taxpayers are on the hook for 54.8% of all multifamily mortgages.
And the Fed couldn’t care less about taxpayers. The Fed is worried about the banks, not a few individual banks, but about contagion across the banking system triggering a banking panic. But with the 4,026 US banks with $23 trillion in total assets holding only $612 billion in multifamily mortgages – well, that’s less than 3% of their total assets. In other words, the banking system overall isn’t fundamentally threatened by bad multifamily loan.
Even if many of the banks’ $612 billion in multifamily loans default, they’re secured by multifamily buildings with some value, so the losses are going to be only fraction of the $612 billion, spread over 4,026 banks with $23 trillion in total assets.
As always, some smaller banks with concentrated exposure in some markets may eventually topple under defaulted multifamily loans. Fitch thinks 49 tiny banks are heavily exposed to troubled multifamily loans, and some of those banks make topple. In nearly every year, some banks toppled, and it’s just part of the risks in the banking system, and it’s the FDIC’s job to mop up those local messes at investors’ expense.
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When it comes to their kids, many of your employees may be willing to put their retirement on the line.
As HR pros focus on workforce planning, understanding the burden that college costs impose on most employees is a key component for successful financial wellness programs.
Paying for college is a daunting challenge, and even financially savvy parents can become overwhelmed and confused by the college financing process. That’s where employer-sponsored education efforts can help. Employers who understand the following common college financing traps can better plan programs to alleviate the stress of paying for college and improve financial wellness overall.
Trap One: Prioritizing Their Children’s Education Over Their Own Retirement
By now, it’s become a financial wellness mantra: Parents should prioritize their retirement savings before saving for or paying for a child’s college education. After all, the thinking goes, students can borrow for education costs, but parents can’t borrow money to pay for retirement. And if parents don’t properly prepare for retirement, their children may end up supporting them in their later years, jeopardizing their future finances.
But with ever-rising tuition costs and the increasing burden of student debt, it may be harder for your employees to follow that tried-and-true advice. The cost of college has more than doubled over the past four decades — and student loan borrowing has risen along with it. Americans collectively owe more than 1.7 trillion in student loan debt, according to the Federal Reserve .
Trying to ease the burden on their children, your employees may be raiding their future. Among people aged 25 to 80 who are saving for both retirement and future college expenses, 58% say they are delaying retirement, and 41% say they have withdrawn money from their own retirement funds to pay for a child’s (or other relative’s) tuition, according to a July 2023 survey by the Society of Actuaries .
When an employee delays retirement to catch up on missed retirement savings or pay off education loans, it can be costly to an organization. What’s more, if paying for college forces an employee to work longer than they want to, the result may be a less productive, less engaged worker.
Recommended: SoFi Survey: The Future of Financial Well-Being at Work
Trap Two: Mismanaging PLUS loans
Parent Loans for Undergraduate Students (PLUS loans) are underwritten by the federal government and allow families to borrow without the same credit checks and other limits imposed on other types of lending. Because these loans are in a parent’s name, your employees may naturally gravitate to them as a way to help their children avoid debt.
But there are drawbacks. Unlike federal student loans, there are no limits on the amount parents can borrow as long as it doesn’t exceed education costs. To qualify for a PLUS loan, parents need only pass a check for an “adverse event” such as a recent bankruptcy filing or foreclosure. There is no consideration of the borrower’s ability to repay the loan. Given the often astronomical costs of attending a four-year college, your employees may quickly find they have taken on more debt than they can comfortably handle.
In addition, PLUS loan interest rates, set by the government each year, are usually significantly higher than student-held federal loans (8.05% for 2023-2024 versus 5.50%) and sometimes higher than some private college loans.
If parents default or consolidate their PLUS loans, or if they receive a forbearance or a deferment, the interest that continues to accrue is capitalized. That means that principal and payments can become even more unaffordable for employees. In addition, if the loans go into default, the government can garnish wages, Social Security checks, and tax refunds.
Recommended: Preparing for College Resource Guide for Parents
Trap Three: Avoiding College Financing at All Costs
Another common mistake lurks on the opposite side of the spectrum. In an effort to avoid college debt of any kind, parents who have some, but not enough, college savings may decide to forego saving for retirement, dip into retirement savings, or use home equity to pay tuition bills as they come.
Withdrawing 401(k) savings can result in significant penalties, taxes, and, importantly, lost principal and earnings. Cash-out home refinancing can lead to higher and perhaps unaffordable mortgage payments. Even putting retirement savings on hold when the year’s tuition is due can translate into large gaps in savings goals, depending on the number and ages of children attending college.
These are all understandable mistakes. As we saw above, an overreliance on debt to pay college bills can seriously jeopardize financial well-being. But so, too, can dismissing the strategic use of financial aid and loans to finance college costs.
For instance, your employees may neglect filling out the Free Application for Federal Student Aid (FAFSA), figuring that they earn too much to qualify for federal financial aid. According to Sallie Mae’s How America Pays for College 2023 report, 71% of families filed the FAFSA for the 2022-2023 academic year, down from 86% in 2016-2017.
These parents may not realize that without the FAFSA, the student will not be awarded federal subsidized and unsubsidized loans, which can be attractive for their low rates and, in the case of subsidized loan, help from the government in paying interest.
More importantly, many schools require students to submit a FAFSA to be eligible for merit-based scholarships and grants, even though these funds are awarded according to the student’s academic record and other achievements, not financial need. Merit-based aid does not have to be repaid and is usually awarded to undergraduates for the full four years.
While too much debt is never smart, a prudent and affordable mix of well-structured student debt can help parents avoid sacrificing retirement savings, home equity, and other long-term savings to pay for college now.
Employer-sponsored college financing education and one-on-one college counseling can help ensure parents understand the complexities of financial aid and student borrowing so they can balance long-term and current financial needs and goals.
The Takeaway
Employers who help parents avoid these common college financing traps may help alleviate what is fast becoming one of the largest sources of financial stress in your workforce.
SoFi at Work can help with student loan repayment platforms, extensive education efforts, plus a lending suite of student, graduate student, MBA, and parent loans. For organizations that are looking to help their employees get ahead on their education financing goals, SoFi at Work also offers a 529 College Savings Program, which can be integrated into any payroll system.
Photo credit: iStock/Orbon Alija
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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The Federal Reserve’s recent data says the average credit card interest rate is 21.47%, which is a high number by most standards. If you never carry a balance or take out cash advances, it may not be a big deal for you, but if you do, it’s worth paying attention to the average credit interest rate. Doing so could help you anticipate and potentially budget for increased interest payments.
Here, you’ll learn more about credit card interest rates and how they can impact your financial life.
What Is the Average Credit Card Interest Rate?
The average interest rate for credit cards is 21.47%, as mentioned above, as of the start of 2024. Rates have been steadily increasing in recent years — in November 2021, the average rate for credit cards was 14.51%, and back in November 2017, for example, it was 13.16%.
Keep in mind, however, that the interest rate for your credit card could be higher or lower than this average depending on factors such as your credit profile, given how credit cards work. So what’s a good annual percentage rate (APR) for you may be different from what a good APR for a credit card is for someone else, as you’ll learn in more detail below.
Interest Rates by Credit Quality Types
Credit card interest rates, or the APR on a credit card, tend to vary depending on an applicant’s credit score. The average interest rate for credit cards tends to increase for those who have lower credit scores, according to the CFPB’s most recent Consumer Credit Card Market Report.
The report measures what’s called an effective interest rate — meaning, the total interest charged to a cardholder at the end of the billing cycle.
Credit Quality
Effective Interest Rate
Deep subprime (a score of 579 or lower)
23%
Subprime (a score of 580-619)
22%
Near prime (a score of 620-659)
20%
Prime (a score of 660-719)
18%
Prime plus (a score of 720-799)
15%
Super prime (800-850)
9%
What this table shows is that the lower your credit score, the more you will be paying in interest on balances you have on your credit cards (meaning, any amount that remains after you make your credit card minimum payment).
Keep in mind that these rates don’t include any fees that may also apply, such as those for balance transfers or late payments, which can further increase the cost of borrowing.
Recommended: Revolving Credit vs. Line of Credit, Explained
Interest Rates by Credit Card Types
Interest rates may vary depending on the type of credit card you carry. In general, platinum or premium credits have a higher APR — cards with higher interest rates tend to come with better features and benefits.
Type
APR Range
No annual fee credit card
20.64% – 27.65%
Cash back credit card
21.06% – 27.78%
Rewards credit card
20.91% – 28.15%
Prime Rate Trend
The prime rate is the interest rate that financial institutions use to set rates for various types of loans, such as credit cards. Most consumer products use the prime rate to determine whether to raise, decrease, or maintain the current interest rate. That’s why for credit cards, you’ll see the rates are variable, meaning they can change depending on the prime rate.
As of March 6, 2024, the prime rate is 8.50%. On March 17, 2022, the prime rate was 3.50%. This can be considered an example of how variable this rate can be.
Delinquency Rate Trend
Credit card delinquency rates apply to accounts that have outstanding payments or are at least 90 days late in making payments. These rates have fluctuated based on various economic conditions. In many cases, rates are higher in times of financial duress, such as during the financial crisis in 2009, when it was at 6.61%.
As economic conditions rebound or the economy builds itself up, delinquency rates tend to go down, as consumers can afford to make on-time payments. According to the Federal Reserve, the delinquency rate for the fourth quarter in 2023 was 3.20%, up from 2.34% a year earlier and 1.63% for the same time period in 2021. This may be due to the pandemic, when consumers were more wary of discretionary spending or from negotiating payment plans with creditors.
Credit Card Debt Trend
Credit card debt has risen from its previous levels of $926 billion in 2019 and $825 billion at the end of 2020. It has climbed to $1.129 trillion for the fourth quarter of 2023, a new high.
This shows an ongoing surge in credit card debt, and these statistics can make individual cardholders think twice about their own balance and how to lower it.
Recommended: How Does Credit Card Debt Forgiveness Work?
Types of Credit Card Interest Rates
Credit cards have more than one type of interest rate. The credit card interest rate that applies may differ depending on how you use your card.
Purchase APR
The purchase APR is the interest rate that’s applied to balances from purchases made anywhere that accepts credit card payments. For instance, if you purchase a pair of sneakers using your credit card, you’ll be charged the purchase APR if you carry a balance after the statement due date.
Balance Transfer APR
A balance transfer APR is the interest rate you’ll be charged if you move a balance from one credit card to another. Many issuers offer a low introductory balance transfer APR for a predetermined amount of time.
Penalty APR
A penalty APR can kick in if you’re late on your credit card payment. This rate is usually higher than the purchase APR and can be applied toward future purchases as long as your account remains delinquent. This is why it’s always critical to make your credit card payment, even if you’re in the midst of requesting a credit card chargeback, for instance.
Cash Advance APR
A cash advance has its own separate APR that gets triggered when you use your card at an ATM or bank to withdraw cash, or if you use a convenience check from the issuer. The APR tends to be higher than the purchase APR.
Introductory APR
An introductory APR is an APR that’s lower than the purchase APR and that applies for a set amount of time. Introductory APRs may apply to purchases, balance transfers, or both.
For instance, you may get a 0% introductory APR for purchases you make for the first 18 months of account opening. After that, your APR will revert to the standard APR. (Note that the end of the introductory APR is completely unrelated to your credit card expiration date.)
Factors That Affect Interest Rate
When you apply for a credit card, you may notice that your interest rate is different from what was advertised by the issuer. That’s because there are several factors that affect your interest rate, which can make it higher or lower than the average credit card interest rate.
Credit Score
Your credit score determines how risky of a borrower you are, so your interest rate could reflect your creditworthiness. Lenders tend to charge higher interest rates for those who have lower scores. Your credit score can also influence whether your credit limit is above or below the average credit card limit.
Credit Card Type
The type of credit card may affect how much you could pay in interest. Different types of credit cards include:
• Travel rewards credit cards
• Student credit cards
• Cash-back rewards credit cards
• Balance transfer cards
Most likely, the more features you get, the higher the interest rate could be. Student credit cards may have lower interest rates, but that may not always be the case. That’s why it’s best to check the APR range of credit cards you’re interested in before submitting an application.
The Takeaway
The current average credit card interest rate is 21.47%, according to data from the Federal Reserve. However, your rate could be higher or lower than the average APR for credit cards based on factors such as your creditworthiness and the type of card you’re applying for. Your best bet is to pay off your entire balance each month on your credit card so you don’t have to worry about how high the interest rate for a credit card may be. That way, you can focus on features you’re interested in.
With whichever credit card you may choose, it’s important to understand its features and rates and use it responsibly.
Whether you’re looking to build credit, apply for a new credit card, or save money with the cards you have, it’s important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What is the average credit card interest rate?
The average interest rate for credit cards is 21.47%, according to the latest data from the Federal Reserve for the fourth quarter of 2023.
How do you get a low credit card interest rate?
You may be able to get a low credit card interest rate by building your credit score, as this will encourage lenders to view you as less risky. Otherwise, you can also aim to get a credit card with a low introductory rate, though these offers are generally reserved for those with good credit. Even if the APR is temporary, it could be beneficial depending on your financial goals.
What is a bad APR rate?
A bad APR is generally one that is well above the average credit card interest rate. However, what’s a good or bad APR for you will depend on your credit score as well as what type of card you’re applying for.
Photo credit: iStock/MicroStockHub
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
LOS ANGELES — More homeowners eager to sell their home are lowering their initial asking price in a bid to entice prospective buyers as the spring homebuying season gets going.
Some 14.6% of U.S. homes listed for sale last month had their price lowered, according to Realtor.com. That’s up from 13.2% a year earlier, the first annual increase since May. In January, the percentage of homes on the market with price reductions was 14.7%.
The share of home listings that have had their price lowered is running slightly higher than the monthly average on data going back to January 2017.
That trend bodes well for prospective homebuyers navigating a housing market that remains unaffordable for many Americans. A chronically low supply of homes for sale has kept pushing home prices higher overall even as U.S. home sales slumped the past two years.
“Sellers are cutting prices, but it just means we’re seeing smaller price gains than we would otherwise have seen,” said Danielle Hale, chief economist at Realtor.com.
The pickup in the share of home listings with price cuts is a sign the housing market is shifting back toward a more balanced dynamic between buyers and sellers. Rock-bottom mortgage rates in the first two years of the pandemic armed homebuyers with more purchasing power, which fueled bidding wars, driving the median sale price for previously occupied U.S. homes 42% higher from 2019 through 2022.
“Essentially, the price reductions suggest far more normalcy in the housing market than we’ve seen over the last couple of years,” Hale said.
The share of properties that had their listing price lowered peaked in October 2018 at 21.7%. It got nearly as high as that — 21.5% — in October 2022.
Last year, the percentage of home listings that had their asking price lowered jumped to 18.9% in October, as the average rate on a 30-year mortgage surged to a 23-year high of 7.79%, according to Freddie Mac.
Mortgage rates eased in December amid expectations that inflation has cooled enough for the Federal Reserve begin cutting its key short term rate as soon as this spring. Those expectations were dampened following stronger-than-expected reports on inflation and the economy this year, which led to a rise in mortgage rates through most of February.
That’s put pressure on sellers to scale back their asking price to “meet buyers where they are,” Hale said.
That pressure could ease if, as many economists expect, mortgage rates decline this year.
Influential government-related mortgage investor Fannie Mae has announced that a long-planned goal to make validation of certain mortgage information available in one fell swoop is becoming a reality.
Fannie will allow 12-months of asset data to verify income and employment when it becomes available for opt-in use on March 29, and for 50% of those who piloted the automated process, it produced “some level of savings” in third-party report costs.
“With this new update in Desktop Underwriter, we are removing a hurdle from the loan application process and bringing greater speed, simplicity, and certainty to both lenders and borrowers,” Cyndi Danko, senior vice president and chief credit officer, said in a press release.
The move follows competitor Freddie Mac’s expanded use of bank account data. Freddie also allows asset information to be used to validate income, assets and employment checks for certain loans.
Verification of assets, income and employment have been attractive because Freddie and Fannie have offered upfront representation and warranty relief for it. Both also have used the bank data for cash-flow underwriting and rent payment validation.
What’s also significant is that with both competitors offering the process, it’s possible for lenders to potentially use digital bank data regardless of which of the two they turn to for loan sales. (While the two aren’t the only loan outlets in the U.S., they are major ones and often influential.)
“Now that you have parity between the two GSEs offerings, that’s what’s going to enable a broader lender engagement and utilization of this type of service,” said Brian Francis, who oversees the Accountchek digital bank verification product for Informative Research.
Variations in the two government-sponsored enterprises’ processes regarding the uptake of the consumer-permissioned option, how often it validates all the data points, and how lenders handle the workflow will affect the extent of efficiency available, Francis said.
Not every borrower will be verifiable through a single source as some may not have consistent deposit records reflecting employment income. Some other vendors charge mortgage firms separately for data needed at the lender level and Fannie’s 12-month report, according to Francis. Also, certain lenders handle the workflow around digital data verification in terms of pulling digital bank, payroll or tax information as needed more manually than others.
The success rate of single-source validation has long been an open question.
“You’re getting a recurring direct deposit in 70% of the bank accounts that are coming through our system,” Francis said, noting this may be roughly indicative of how often many people have employment income that’s verifiable in this way, most commonly those with traditional salaries.
Single-source validations may also cause a wrinkle depending on the extent to which employer names fail to match what’s on deposits in situations such as when the payments are made in the name of the benefits provider.
Both vendors and Fannie have been researching and developing ways to address situations like that since research into single source validations began in 2017, according to Francis.
“Those specific analyses are proprietary to Fannie. They’ve not shared them with us, but we’ve worked with them over the last seven years in helping them to understand the nuances,” he said. (Fannie had not immediately responded to a follow-up inquiry on this point at deadline.)
I didn’t know how to pronounce Les Miserables until 2017. Now I know all the songs. My wife bought us tickets to the show for my birthday this year. What a triumphant masterpiece! 99% of children dislike art museums, musicals, and reading the news. But many adults find beauty or intrigue in those same ideas.
A similar “boring-to-not-boring” transition happens in personal finance. The problem is that the fun doesn’t last. We had fun getting our personal finances under control. We got hooked on that fun. It lasted for months or even a few years. Money went from a scary unknown to an exciting area of optimization.
But then we got it all figured out and…well, the thrill is gone as B.B. King sang. And thus you find yourself here, on a .blog domain. Who uses .blog?!
Don’t despair. The lack of financial fun is a good thing. It’s a sign that your finances are in a great place.
But I still find fun financial things to think about and learn. There are a few traditionally “boring” topics that I find exciting. I’ll share them below, and maybe you’ll be intrigued too.
Get to Know Your Taxes
Can it get more boring than taxes?!
Actually, I like taxes. Over the past two years, I’ve realized that the tax code is half puzzle and half game, and I love puzzles and games.
The rules are well-defined (but there are a lot of them). I certainly do not know all the rules, but the more rules I learn, the better my “strategies” become.
The “pieces” interact in different (and sometimes surprising) ways. There are always multiple ways to “solve” a tax problem. Some solutions decrease this year’s taxes, and others decrease future taxes. Sometimes, we trade off lots of effort and paperwork to save a few bucks; is that a worthwhile trade?
If you’re a young W2 worker (like me), there’s not too much to know. Our tax scenario is fairly simple.
But if you’re a retiree earning Social Security income, making IRA withdrawals, realizing short and long-term capital gains, earning interest, dividends, and more, you’ve got an interesting puzzle before you! The interactions on a simple 1040 Federal Tax return can be quite complex and involve thousands of tax dollars per year.
If you’re a business owner or a real estate investor, the “puzzle” intensifies! This is why a good CPA accountant is worth their weight in gold.
To be clear, tax planning is not about cheating the tax system. When accountants tell me they’re “aggressive,” I take it as a euphemism for “I bend the tax code until it breaks.” That’s bad—and usually illegal. Avoid that. If you’re an honest accountant, please find a different word than “aggressive.”
But working with a tax professional who 1) knows the “rules” of the tax code and 2) enjoys optimally “solving the puzzle” you bring to them…well, odds are they can solve your puzzle much better than you can alone.
Pro tip: starting this year, review your 1040 Federal Tax Return (or your country’s equivalent)…try to go line-by-line, and if you don’t understand what a particular line item means, look it up.
Wait. For A Decade or Two.
The Best Interest is a big proponent of long-term investing, which, as you might have noticed, includes the verbiage “long-term.”
We’re not talking weeks or months. We measure in decades. We beat a slow-tempo’d drum of basic tenets, like “buy and hold” and “diversify” and “don’t look for needles, buy the whole haystack.“
BORING!
To spice things up, I like to remind myself (and you) of market history. One of my favorite cautionary tales is that returns are never promised, and we’ve suffered decades of zero returns.
In that article linked directly above, I put together this chart:
WOW! Multiple ~20 year periods of zero return?!
As I’ve realized in hindsight, there’s a problem with that chart. Everything is factually correct, but the chart presents data differently than most people think. I inflation-adjusted the data. In other words, the chart does not measure dollars and cents. It measures purchasing power.
There have been multi-decade periods when investors’ purchasing power was stagnant. Their accounts increased in value, but inflation ate the entirety of those gains.
Most of us, though, measure our accounts in dollars and cents. We understand the reality of inflation, constantly knawing at our purchasing power. But we don’t inflation-adjust our conception of the world. If $1.00 grows to $2.00, we see exactly that. We don’t say, “…but inflation was 14%, so really it’s like I only have $1.86.”
To fix this problem, I reconstructed the plot to show nominal dollars.
If you read my primer on accounting for inflation in retirement, the chart above lives in “the convenient world” while the chart below lives in “the true world.”
The lesson: it’s realistic for your diversified stock portfolio to go through a ~5+ year period of negative nominal returns. If you’re unlucky, it might stretch out to 10+ years!
Now that’s exciting (in the same way BASE jumping is exciting).
It’s a far stretch from the lazy shorthand of “the S&P returns 10% year!” that too many FinFluencers use. I’ve been guilty of that shorthand, and I understand its usage when calculating 30-year compound math.
I despise that shorthand, though, when I hear it used to explain expected stock market returns to a new investor. New investors need to know that stock investing is not a smooth ride. It’s not always up and to the right. It involves years – if not decades – of what feelslike wasted time.
5 years is a long time. 10 years, per math, is longer. Are you excited to stay the course that long through thick and thin?
Important note: this analysis looked at a lump sum investment. Dollar-cost averaging, though, smooths this ride out immensely!In fact, DCA actually takes advantage of bad times and volatility. I’m a huge fan of DCA’d monthly contributions through thick and thin.
Know Your Flow
Cashflow is the cinder block of personal finance.
It’s boring and basic and plain and every other synonym thereof.
But it’s also foundational.
You cannot build strong personal finances without healthy cash flow, and you won’t know if you have healthy cash flow unless you measure it.
Buy Protection
Speaking of BASE jumping…
The exciting part of extreme sports is “the jump” itself. But it’s someone’s job to consider the “boring” questions like,
“Is that parachute packed correctly?”
“Can that bungee cable support a 300-pound man?”
“If he doesn’t make it and lands in the pit of burning tires, what’s the rescue plan?”
Ok. That’s kind of funny. But on a more serious note, about the modern miracles of CPR and AED?
Christian Eriksen is a Danish soccer player, currently on the roster for Manchester United. On June 12, 2021, Eriksen had a cardiac arrest during a national team game against Finland. 50 years ago, he would be dead. But because the training staff is both CPR-trained and well-equipped with a automated external defibrillator (AED), Eriksen’s heart was shocked (one shock!) back to life. He’s still plays today.
A similar cardiac arrest happened to Damar Hamlin in a Buffalo Bills football game in January 2023. Again, an AED shocked his heart back to life. He’s alive and well and still playing football.
These might be 1-in-10000 events. Easy odds to ignore, right? But asking, “What happens if…” can lead you to some life-saving answers. A little preparation goes a long way.
The personal finance world skews less life-and-death than cardiac arrest, but some of the financial “Q&A” will point you toward:
A well-funded emergency fund.
Life insurance (term only!)
Home and auto insurance
Disability insurance
An umbrella insurance policy
If you’re unsure what kind of insurance you do (or don’t) need, ask yourself:
If something bad happened on [this axis], do I have the assets needed to pay for it?
If I died, would my family have the assets and cash flow to continue our desired lifestyle? If not, you need life insurance.
If I got disabled and couldn’t work…
If my house burned to the ground or got swept away in a hurricane…
If I got sued when the mailman trips on my sidewalk…
Etc. etc.
If you don’t have the assets to cover your liability, you need insurance.
You Made It. Go Live Life!
If everything in your finances feels boring, that’s a good thing. You’ve reached the top.
There are plenty of nuanced topics to nosedive into.
Or, you can just go live your life. Go check out a musical or a museum. Another story must begin!
Thank you for reading! If you enjoyed this article, join 8000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.
-Jesse
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
After you’ve been notified of a data breach, you should contact your bank and the three major credit bureaus as soon as possible.
When a data breach occurs, you should monitor all of your accounts for suspicious activity. Creating alerts for your banking accounts can help you react to suspicious transactions. A similar strategy is advised for your credit report; in certain cases, companies will have to provide credit monitoring services to their customers for up to 12 months.
Data breaches can lead to negative situations, such as identity theft and credit card fraud. Below, we’ll discuss what to do after a data breach occurs and explore options for reliable credit monitoring services.
Key takeaways:
A data breach occurs when cybercriminals illegally gain access to sensitive information.
In certain cases, companies will be ordered to provide credit monitoring services to their customers for up to 12 months.
The Equifax® data breach of 2017 compromised 148 million Americans and 15 million British citizens.
Table of contents:
What is a data breach?
A data breach occurs when cybercriminals and bad actors illegally access sensitive data. A data breach can happen to specific individuals and large organizations—such as the 2017 Equifax data breach, which impacted nearly 150 million Americans and 15 million British citizens.
If an organization is held accountable for a data breach by a court of law, compensation may be issued to victims. For example, the Equifax breach settlement was finalized in January 2022 and resulted in free credit monitoring services and up to $425 million of support to impacted individuals.
How do you check if your personal information was exposed?
The Data Breach Notification Act offers guidelines and regulations in the event of a data breach. Section 2 of this act states that businesses and federal agencies must tell affected individuals that their data has been leaked “without unreasonable delay.”
These specific guidelines are relevant after a data breach occurs. Here are several actionable steps if you want to take proactive measures to combat a data breach:
Intrusion detection system (IDS): This technology can monitor a network and determine if suspicious or malicious activity is underway.
Data leak checker websites: Websites like Have I Been Pwnd will help you check if one of your emails was part of a data breach.
Review your emails: If your spam and junk email boxes have an unusual amount of spam, your email could’ve been compromised.
What should you do after a data breach?
After you’ve received a notice that your data was compromised, it’s natural to feel overwhelmed or upset by this violation of your privacy. Nevertheless, taking action and making adjustments is the best way to minimize or prevent the worst outcomes.
Change your passwords
If you were part of a data breach, there’s a high likelihood that cybercriminals might possess your current login information. Changing your passwords can prevent bad actors from signing into your accounts.
Ideally, it’s best to use a complex password comprising upper and lowercase letters, special characters and numbers. The less this new password resembles your old one, the better. Furthermore, changing your password every few months is an excellent preventive measure.
Activate two-factor authentication (2FA)
Two-factor authentication (2FA) is an additional login step where users have to finish signing in on a trusted device, usually a smartphone. 2FA reduces the likelihood of a bad actor illegally accessing one of your accounts as the additional login measure (your phone) is on your person.
Look into credit monitoring services
For those wondering what credit monitoring is, the term refers to any service that watches your credit reports and alerts you about suspicious activity that doesn’t match your usual financial habits.
Credit monitoring services look for everything from fluctuations in your credit score to new accounts that have been opened in your name. Lex OnTrack is a monitoring service that tracks your credit history and helps protect your identity from fraud.
Freeze your credit with the three credit bureaus
Learning how to freeze your credit can help you stop cybercriminals from taking unauthorized actions with your credit. To fully freeze your credit, you’ll at least want to contact Equifax®, Experian® and TransUnion®—the three major credit bureaus.
Contact your bank
Speaking with your bank after you’ve been notified of a data breach is an effective way to protect your finances. You’ll have an opportunity to notify your financial institution of this unfortunate event, and you’ll also be able to review recent account activity.
If recent purchases were made on your account that don’t align with your habits, they could be tied to unlawful activity.
What states have data breach laws?
Every state in America has cybersecurity laws that protect civilians, organizations and federal agencies in the event of a data breach.The Data Breach Notification Act generally applies to all 50 states alongside territories and districts.
At the time of writing, California, Colorado, Connecticut, Utah and Virginia have unique data privacy laws that differ somewhat from their contemporaries. For instance, the California Consumer Privacy Act (CCPA) gives Californians the right to demand all information that a company and its third-party partners have on them.
3 reasons data breaches happen
Data breaches are incredibly alarming, and it’s tempting to search for an easy explanation as to why they happen. Though only a small number of them are successful, cyberattacks are quite common.
A study by the Clack School found that some computers may be attacked, on average, approximately 2,200 times each day. Some factors that raise the odds of a cyberattack succeeding are outlined below.
1. Malware attacks
Malware (or malicious software) can compromise security if someone downloads it onto their device. For example, a key logger is a type of malware that records every keystroke a user inputs. Such software could help cybercriminals steal admin credentials from an organization, then log in and access sensitive data.
2. Internal data leak
“What is a data leak?” is a fair question, as this term sounds similar to a data breach. However, a data leak occurs when an internal source releases private information to the general public. If someone working at an organization gives out confidential login details, a cybercriminal could capitalize on that and initiate a data breach.
3. Outdated software
Software updates bolster a network’s security and make it harder for hackers to slip past defenses. Repeated cyberattacks that are launched against systems with outdated software are more likely to be successful.
Monitor your credit with Lexington Law Firm
The sheer number of cyberattacks that occur each day can be alarming, but there are many ways to protect yourself from digital disturbances. A credit monitoring service is an excellent tool that works in the background and catches seemingly minute details.
Explore Lexington Law’s services, which include credit monitoring as well as assistance with challenging errors on credit reports, if any are found.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Moriah Beaver
Associate Attorney
Moriah is an attorney practicing in consumer advocacy at Lexington Law.
Before joining Lexington, she represented plaintiffs in personal injury litigation, dealing with claims arising from car accidents, slip and falls, and dog bites. Moriah studied English at Brigham Young University for her undergraduate degree and went on to graduate from Brigham Young University’s J. Reuben Clark Law School. She is from Hau’ula, Hawaii, but has been a resident of Utah for over 10 years now.
After I wrote a simple primer on Roth conversions a couple weeks ago, several readers reached out asking for more details. A few specific snippets of those questions include:
I see many articles like this about lowering your tax bracket when doing Roth conversions. But, what about the amount of money that can be made by not doing Roth conversions and letting the taxable [sic: qualified, or not taxable] money grow in an account like an IRA or 401K? Is that math too hard to explain?
Sure your RMDs will be higher and you will be taxed more, but how much more money will you make by letting that tax deferred money grow? You could assume a rate of return at 6% for the illustration.
Kelly M., Question 1
A wise man once said “never pay a tax before you have to.” Back around 2015 I had the owner of an income tax service try to convince me to convert all my traditional IRA money to Roth. He said tax rates were going to go up and he was converting all of his own personal traditional IRAs. Fast forward to 2017 and Congress actually ended up lowering tax rates. I wonder what he thought about his conversions after that.
Anonymous, Question 2
Even with my spouse still working, I don’t think we’ll hit the IRMAA limits while I do Roth conversions before I take Medicare. But, could Roth conversions now help me avoid the IRMAA thresholds when I’m taking RMDs in the future? Or, is it worth doing Roth conversions to avoid the IRMAA thresholds? I’d be interested in an article like that.
Anonymous, Question 3
To summarize those three questions:
Does the math of Roth conversions really work?
But since we don’t know future tax rates, how can we confidently convert assets today?
What about IRMAA (the income-related monthly adjustment amount), which is an additional Medicare surcharge on high-earners?
Let’s address these questions one at a time.
Does the Math of Roth Conversions Really Work?
Roth conversions involve many moving pieces, as you’ll see in this simple Roth conversion spreadsheet.
Reminder: you can make a copy of the spreadsheet via File >> Make a Copy
There are terrific financial planning software packages that take care of this math. I wanted to present 95% of the good stuff in a free format that you all can look at. Hence, Google Sheets.
Nuanced Tax Interactions
Especially important is the interaction between normal income (via Traditional account withdrawals), capital gains, and Social Security. These taxes interplay in nuanced ways. A simple example:
Let’s say a Single retiree’s annual income is:
$5000 in interest income
$5000 in long-term capital gains
$30,000 in Social Security benefits.
If you plug that into a 1040 tax return, you’ll find that:
None of that Social Security income is taxable.
All of the interest and capital gains are enveloped by the Standard deduction
Resulting in zero taxable income and a $0.00 Federal tax bill.
But if we copied Scenario A and added in $30,000 in Traditional IRA distributions, what happens? I think we all expect that the $30,000 distribution itself must have a taxable component, but you might not know that:
The IRA distribution affects Social Security taxability. Now, $22,350 of the Social Security income becomes taxable. That’s right. Simply by distributing IRA assets, you’ve now increased how much Social Security you pay taxes on.
The Standard deduction still helps, but there’s now a remainder of $48,500 in Federal taxable income.
Resulting in a $5584 Federal tax bill.
It’s not the end of the world. Taxes happen. They pay for our public shared interests.
But part of tax planning is understanding ahead of time what your future tax bills will look like. It’s important to understand how taxes interact. And this is just a simple example!
Measuring Roth Conversion Benefits
Going back to this spreadsheet, you’ll three tabs full of retirement withdrawal math. The Assumptions tab contains important information on our hypothetical retiree’s starting point (e.g. $2.9M in investable assets), their annual spending ($100K), their future assumed growth (5% per year, after adjusting for inflation), and other important numbers.
Note – this math takes place in “the convenient world” where inflation is removed from the math.
Then three tabs are presented with different Roth conversion scenarios, described below:
“Baseline Calculations“
This tab shows a retiree not focused on any conversions
They want to leave to their children both Roth assets (if possible) and taxable assets (on a stepped-up cost basis).
Therefore, they attempt to fund as much of their retirement using Traditional assets as possible
“No Trad Withdrawals”
This tab shows a “worst case” scenario, to help bookend the analysis. This retiree is not pulling any funds from their Traditional accounts (unless necessary). Thus, we’d expect them to have large RMDs and large RMD-related tax bills.
“Reasonable Conversions”
This tab shows a “reasonable” Roth conversion timeline, electing to convert $1.7 million throughout their retirement, while funding their lifestyle using a mix of Traditional, Roth, and taxable assets along the way.
By no means is this “optimized.” But it’s reasonable, and better than the first two scenarios, as we’ll see below.
Pros, Cons, and Results
The three scenarios end up similar in multiple ways.
Our retiree never has an issue funding their annual lifestyle. This is of utmost importance.
Our retiree reaches age 90 (“death”) with roughly $5M in each scenario.
But there are important differences (as we’d suspect).
The Baseline scenario ends with $5.00M. Of that, 27% is Traditional, 35% is Roth, and 34% is Taxable. They’ve paid an effective Federal tax rate of 20.7% throughout retirement.
The No Traditional Withdrawal scenario ends with $5.20M. Of that, 63% is Tradtional, 0% is Roth, 37% is Taxable. They’ve paid an effective Federal tax rate of 18.8% throughout retirement.
The Reasonable Conversions scenario ends with $5.17M. 18% is Traditional, 68% is Roth, and 14% is Taxable. They’ve paid an effective Federal tax rate of 13.9% throughout retirement.
The Same, But Different
These three scenarios share many similarities. All three result in successful retirements. But there are important differences.
Our Roth converter paid far fewer taxes and, ultimately, left a majority of their tax dollars to their heirs via Roth vehicles, and thus tax-free.
The No Trad Withdrawal retiree paid 28% effective tax rates in their final years (only going further up in the future) and left 63% of their assets in Traditional accounts with a large asterisk on them.***
***TAXES DUE IN THE FUTURE*** …unless you’re leaving the Traditional IRA assets to, for example, a non-profit charity. But if you’re leaving the Traditional IRA to your kids, they’ll owe taxes when they withdraw the funds.
Long story short: Roth conversions work to your benefit when executed intelligently.
Should You Worry About Leaving Behind Traditional Assets?!
I don’t want to freak you out. Your heirs will appreciate you leaving behind a 401(k) or Traditional IRA for them.
But it’s worth understanding that they’ll owe taxes on that money (usually). Let’s dive into an example with simple math: a $1 million Traditional IRA left to one person (e.g. your child).
That person will most likely set up an Inherited Traditional IRAand (via new-ish rules in the SECURE Act) will have to empty that account by the end of the 10th year after your death. The withdrawals can be raised and lowered during those 10 years. Much like with Roth conversions, it makes sense to take larger withdrawals during otherwise low-income years and vice versa.
But if the beneficiary is in the middle of their career, a series of 10 equal withdrawals makes sense. Some rough math suggests ~$135,000 per year is a reasonable withdrawal amount (based on account growth over the 10 years).
That withdrawal is taxed as income for the beneficiary. If they’re already earning $100,000 per year of normal income, then taxes will consume ~$41,000 of their annual $135,000 withdrawal. State taxes might take another bite.
Again – I don’t want anyone to cry over the prospect of inheriting $94,000 annually for 10 years. Where can I sign up?! But it’s also worth understanding that 30% of this inheritance is going to Federal taxes.
“Never Pay a Tax Before You Have To”
What about Question #2 from the beginning of the article? A reader wrote in and suggested one should “never pay a tax before you have to.”
While pithy, it’s false.
If you can reasonably front-load low tax rates to prevent later high tax rates, the math supports you. What we’ve covered so far today is clear evidence of that.
Now, in the reader’s defense: I’d rather delay taxes if thedollar amounts are exactly the same. That’s one argument behind the tax-loss harvesting craze: I’d rather pay $100 in taxes in the future than $100 in taxes today.
But Roth conversions work differently. Done well, Roth conversions allow you to pay a 22% tax on $50,000 today to prevent a 37% tax on $100,000 in the future. It’s apples-and-oranges compared to the tax-loss example.
And perhaps the bigger lesson: there are few universal rules in personal finance. The pithy rule that works in one scenario (“never pay a tax before you have to”) might fail miserably in another scenario. Let the math guide you.
What About IRMAA?
Irma used to only be a name you’d give to the great-grandmother character in your 11th-grade B-minus fiction story.
No longer! Today, IRMAA has been given new life (which, I bet, was covered by Medicare!)
IRMAA (Income-Related Monthly Adjustment Amount) is a Medicare premium surcharge imposed on higher-income beneficiaries in addition to their standard Medicare Part B and Part D premiums. The amount of IRMAA is determined based on an individual’s modified adjusted gross income (MAGI) and can result in higher healthcare costs for those with higher incomes.
In plain English: high-earners pay more for Medicare.
Question #3 today asked if Roth conversions can be used to avoid IRMAA premiums. The answer is: yes.
But first, how painful are these IRMAA surcharges in the first place?!
Important note: you’ll see below that the 2023 IRMAA brackets are based on 2021 modified adjusted gross income (MAGI). That same 2-year delay holds for future years. Your 2024 Roth conversions (or lack thereof) will be important in determining IRMAA in 2026
If a married couple’s MAGI in 2021 was $225,000, they’d end up paying $231 per month (or, more accurately, $462 per month for the couple) as opposed to $330 for the couple if they earned less than $194,000. That’s a difference of $132 per month or $1584 for the year.
I’m of two minds here. Because:
Yes, I believe in frugality. A penny saved is a penny earned. Why pay $1584 extra if you don’t have to?
But if you’re earning $200,000in retirement, do you also need to stress over a $1500 annual line item?
Personally, I’ll be stoked if my retirement MAGI is $200,000. It’ll be a sign that my financial life turned out unbelievably well. I won’t mind the IRMAA.
The people most likely to suffer IRMAA are also best positioned to deal with it.
Will IRMAA Get You?
The 2-year delay in IRMAA math means you might get IRMAA’d early on in retirement.
Imagine retiring at the end of 2023. The peak of your career! You and your spouse earned a combined $300,000 and now you’re settling down to mind your knitting. Like all U.S. citizens, you sign up for Medicare just before you turn 65.
Come 2025, Uncle Sam and Aunt IRMAA are going to look back at your 2023 income and surcharge you.
But the good news, most likely, is that your 2024 income is quite low in comparison and IRMAA will drop off in 2026.
Can Roth Conversions Help?
Remember: RMDs are forced and count as income, and that has the potential of “forcing” IRMAA on retirees as they age.
So to answer our terrific reader question: yes, Roth conversions can help here. You can use Roth conversions to shift the realization of income from high years to low years, preventing or mitigating IRMAA in the process.
But once more, make sure the juice is worth the squeeze.
If a 75-year-old has a $200,000 RMD that kills them on IRMAA, ask yourself: where does a $200,000 RMD come from? Answer: it’s coming from an IRA of over $5 million. Should someone with $5 million be losing sleep over IRMAA? I don’t think so.
That’s A Lot of Numbers…
A long and math-heavy article. I hope this helped you out! We covered:
Roth conversions can be objectively helpful, decreasing taxes in retirement and shifting large portions of portfolios from Traditional accounts (with potential taxes for heirs) into Roth accounts (no taxes for heirs)
Taxes in retirement are nuanced and interconnected. In today’s example, realizing extra income (via IRA distributions) also triggered extra Social Security taxes.
It’s not bad to leave behind Traditional assets to heirs. They’re getting a wonderful gift from you. But there will be taxes, which should be planned for.
There are many scenarios where it makes sense to pay taxes before you “have” to.
IRMAA is a negative reality for many retirees, but the people most likely to suffer IRMAA are also best positioned to deal with it.
Roth conversions can be used to mitigate IRMAA over the long run.
As always, thanks for reading!
Thank you for reading! If you enjoyed this article, join 8000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.
-Jesse
Want to learn more about The Best Interest’s back story? Read here.
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With the market for existing homes struggling amid a lack of inventory, New Home Sales continue doing the heavy lifting for the housing market. Rather, New Home Sales are doing more to show a stronger relative performance to the pre-pandemic years. The market for existing homes is still far bigger, even at its weakest levels.
But existing home sales data is so “last week.” Today’s release is specific to new homes, so let’s zoom in. When we do, we can see new home sales remaining in the 2017-2019 range for nearly two years now.
In other words, new residential sales continue chugging along without much fanfare since the initial supply glut and demand surge that followed covid-related lockdowns.
There was quite a bit of variation depending on geography, which is often a result of ebbs and flows of weather events at this time of year. Here’s how the chips fell in January by region:
The Western region saw a huge 38.7% increase, moving from the lowest levels in 10 months to the highest levels in more than a year
The Northeast saw and even larger 72% increase, but that’s not saying as much given the vastly smaller unit count in that region
The Midwest ticked up 7.7% month over month but remained well under July’s peak
The South decreased by 15.6% to the lowest levels in more than a year, but only slightly below November
I have partnered with WizeFi on this WizeFi Review. All opinions are 100% my own. I am excited to tell you about a new money tool that I recently started using. Are you looking for a money management tool that will help you budget, save hundreds of dollars each month, and accelerate your path to…
I have partnered with WizeFi on this WizeFi Review. All opinions are 100% my own.
I am excited to tell you about a new money tool that I recently started using.
Are you looking for a money management tool that will help you budget, save hundreds of dollars each month, and accelerate your path to financial independence?
If so, then I recommend checking out WizeFi. This money management software can be used from your phone or computer, and will give you all the tools that you need to take control of your finances.
Understanding money can be tricky, especially when you’re working towards long-term financial freedom. WizeFi helps you optimize your money to reduce waste and put your money where it’s most effective at accelerating financial freedom. It’s made for people who are serious about financial freedom.
Please click here to try out WizeFi for free for 30 days.
WizeFi right now is hosting a free 30-Day Financial Independence Challenge so that you can have a clear plan for reaching financial independence and retirement. You can sign up for WizeFi and the free 30-Day FI Challenge by clicking here.
WizeFi Review
Below is my WizeFi review. I will be talking about why it was started, the different ways this tool can help you, the cost, and answer some common questions.
What is WizeFi?
WizeFi is a helpful money tool for your computer or phone that helps you reach financial freedom. It’s like having your own money coach, helping you to make better decisions with your finances.
Here’s what WizeFi does:
WizeFi helps you manage and eliminate debt, quickly! WizeFi will sort your debt in an efficient pay-off order to save you money and pay off your debt quickly. Plus, the 30-day challenge will give you tips to accelerate your debt freedom journey.
WizeFi tells you your financial independence date. Learn where you’re headed now if you change nothing with your finances, and then learn what you can do to reach retirement sooner.
WizeFi finds hidden spending habits that might be getting in the way of your financial goals. For example, it will help you find out about everyday habits that you didn’t know could postpone your retirement by 5 years.
WizeFi makes plans just for you, not using generic templates that fit everyone.
WizeFi helps you make smart choices by providing the ability to create “what if” scenarios, which it calls “drafts” to test financial choices before you actually make them. This can help avoid costly mistakes like major purchases that could delay your financial freedom date by years. Or, discover opportunities for applying bonus money (like tax returns) where they can have the biggest impact on your financial goals.
WizeFi keeps an eye on your progress and motivates you by showing visible results. For example, understanding how little changes can change your future net worth.
WizeFi makes money less confusing and boosts confidence, reducing the stress about finances.
WizeFi helps you learn money skills, making you less reliant on others and more confident in managing your own finances.
As soon as you start using WizeFi, you’ll notice it’s not just about tracking expenses. The software is built around the concept of empowering you to develop money habits that could potentially halve the time it takes to reach your financial goals, such as early retirement or financial independence.
I’ve signed up for WizeFi, and I really like how easy the platform is to use. There are no ads and they aren’t trying to sell anything else that is extra, so you don’t have anything else cluttering this tool when you are trying to use it. It is straight to the point.
Why WizeFi was started
WizeFi was started in 2017 by Sean Allen, a financial expert and 30-year veteran of the financial industry. He was noticing that clients were failing with their finances, even though they were making enough money for early retirement.
He learned that there were two main causes of this:
A lack of money skills and
Not understanding the future impact of current choices (such as spending).
He then realized that there was a need for a change in the way that people approach money management so that they can pay off their debt and reach financial independence.
To find a solution to these challenges, he created WizeFi, starting as a program and later becoming an app. It focuses on making the most of every dollar you earn. WizeFi is all about helping you manage and eliminate debts and expenses that don’t benefit you financially.
The app aims to reach millions with its easy (yet effective) approach, speeding up the path to financial independence and giving people the ability to create a lasting system for building wealth.
How WizeFi Is Helpful
If you’re finding it hard to figure out why your money goals feel distant, WizeFi is the tool that can show you the patterns and choices that might be causing the challenge. Instead of being confused by a bunch of numbers, you’ll be able to see exactly where your money goes each month.
WizeFi helps you create a budget that fits your personal financial situation, and your financial plan is customized to you, making it more likely that you’ll stick to it and see real results.
Here are some ways that WizeFi can help you:
Discover your financial independence date. Learn where you’re headed now if you change nothing with your finances, and then learn what you can do to accelerate your FI date.
Find leaks in your spending habits: WizeFi will show you your spending all month long and compare it to your planned spending. This can be very eye-opening and help you discover spending habits you can change
Develop wealth-building habits: Speaking of habits, WizeFi is all about helping you develop money skills that lead to healthy financial habits. For example, when you subscribe, WizeFi starts you off with a 30-day challenge that can help replace bad habits with good habits. Try it for yourself.
WizeFi helps with three main money skills: Money Organizing, Money Planning, and Money Monitoring.
Money Organizing
WizeFi will sync with your financial accounts and organize your money into categories, and then it will provide a guideline spending amount for each category. See how your spending compares to the guideline.
Money Planning
WizeFi goes beyond just organizing your money; it also gives you a guideline so that you can know how to best use your money. It makes a personalized plan that matches your specific goals and financial situation, encouraging a proactive approach to your financial future.
WizeFi includes a process where you can go through each area of your finances and you can see how cutting back on certain expenses can increase money to be used towards accelerating your financial independence.
So, I could see how cutting back on dining out would give me more “financial independence dollars (FID) which WizeFi will then show me the best place to put those dollars in the 4-step plan. I can use WizeFi to plan the perfect budget that frees up FI-dollars.
Then, I can use WizeFi to determine the best use of those dollars—pay off debt, add to 401(k), or pay off a mortgage early – no more guessing. WizeFi will reveal which choices accelerate financial freedom and which delay it.
Money Monitoring
WizeFi allows you to monitor your money, such as your budget, spending, income, debt payoff progress, and net worth. Knowing these numbers and being able to monitor them can help motivate you to make changes for the better.
Money monitoring is known to help people think differently about their money. It keeps people constantly aware of where their money is going compared to where it should be going.
WizeFi provides monthly reporting to monitor your financial trends like is your net worth growing and your debt shrinking, and is your budget balanced like you want it to be.
WizeFi also provides real-time monitoring with progress meters so you can watch your money every day to make sure you stay on track. Both of these are key to empowering you to be a great manager of your money without having to become a financial analyst. WizeFI keeps it simple.
How To Get Started With WizeFi
WizeFi allows you to better manage your finances from both a computer/laptop and from your phone. They also have a 30-day email challenge that teaches you how to save money, make money, and develop money skills.
As you check out what WizeFi can do, you’ll see it provides various tools to improve how you handle money. With easy-to-use features and a clear plan, WizeFi is designed to guide you toward financial freedom in a better and more effective way.
Here’s how you can get started:
Sign up for the 30-day free trial of WizeFi and get enrolled in the 30-day challenge
Enter your goals, such as your emergency fund target, general savings target, and your desired monthly income at retirement.
Enter your salary (net monthly income after taxes), any side hustle income, investing income, and more.
Enter and connect your financial accounts, such as bank, car loan, mortgage, retirement accounts, and more.
After you enter the information above, you will see your financial freedom projections. This will show you the exact date that WizeFi thinks you will be able to retire if you continue the way that you are with your financial situation. You will also see WizeFi’s built-in wealth potential guideline and the exact date you will be debt-free.
WizeFi 30-Day Financial Independence Challenge
As you noticed above, I think the best way to get started with WizeFi is to sign up and take their 30-Day Financial Independence Challenge.
WizeFi just launched this challenge and it’s a free, daily guide filled with steps to help you grow your money smarts and sprint toward financial independence faster than you might think possible. You’ll receive an email every day with new actions to take that can refine your spending and saving habits.
Here are a few highlights of the challenge:
Reduce expenses – You’ll see how small changes in daily spending can create big savings over time. You’ll actually learn 200 different strategies to stop wasting money!
Debt mastery – Get tips on handling debts that stand in your way.
Build wealth – Learn about strategies that can increase your income.
On Day 1, you start crafting your very own FI plan. This sets the foundation. By Day 2, you’re diving into ways to spend less on food, and by Day 3, it’s all about saving on transportation. Throughout the challenge, you’ll learn to cut costs across many different spending categories without sacrificing the fun in your life.
Day 9 shows you powerful wealth-building strategies. As you approach Day 17, you’ll see the five stages of financial independence.
Jumping into Day 20, get creative with 50 side hustle ideas to boost your income. Later on, Day 26 focuses on investing tactics designed to speed you along to FI.
This is a free challenge that is sent straight to your email. I am signed up for this challenge and it is full of actionable tips that are actually helpful (and not just fluff or generic tips).
You can sign up for the free 30-Day FI Challenge by clicking here.
WizeFi Cost
So, after reading all of the above, you’re probably wondering “How much does WizeFi cost?”
Free trial
You get to use WizeFi risk-free for the first 30 days. During this period, you have complete access to all features, and you can cancel anytime if you decide it’s not for you.
Monthly cost
The service is available for $8.99 per month. This subscription is designed to pay off by helping you potentially grow your net worth by tens of thousands (or even hundreds of thousands of dollars) and put you on a faster track to financial independence.
Why isn’t there a free plan?
WizeFi is dedicated to providing a complete set of money tools and tailored advice for your financial growth. Unlike some free tools that might restrict your potential, your paid subscription makes sure that the services are high-quality.
Plus, WizeFi stays focused on your financial well-being, avoiding promotions of external products that might conflict with your financial goals. This is something that I really like about WizeFi – they aren’t trying to sell you anything else – you are getting a helpful money tool without any ads.
WizeFi Security – Is WizeFi Safe?
When thinking about using WizeFi for managing your finances, security is important.
WizeFi makes sure that your information is safe with protective measures similar to those used by banks.
In a digital world where safety is important, you can relax knowing that WizeFi doesn’t keep your account numbers or personal details within their app. What you see are the important elements—your budget and balances. It’s like having a clear view of your financial landscape without any doors open to the private account information you don’t want to share, like account numbers or other personal information, making the platform safer for you.
Think of WizeFi as a one-way mirror. You have the full picture of your finances at a glance, yet there’s no path for anyone to reach in and move things around.
Frequently Asked Questions
When thinking about using a financial planning tool like WizeFi, you probably have questions about what it offers and whether it’s the right fit for you. Here are some of the common questions answered to help you decide.
Can I try out WizeFi for free?
Yes, you can start with WizeFi for free. They have a 30-day trial period for you to explore the full range of features before you commit to a subscription.
Please click here to try out WizeFi for free for 30 days.
How can WizeFi help me reach early retirement sooner?
WizeFi is designed to guide you in creating a personalized financial plan. By helping you customize the right budget plan, and track your spending against that plan, you’ll easily identify unnecessary expenses you can cut, which can help you better manage debt and increase your savings rate, which can help you reach your financial goals faster.
Is WizeFi worth using?
Yes, WizeFi is worth it if you’re serious about taking control of your finances and reaching financial independence or early retirement.
Does WizeFi have an affiliate program?
Yes, WizeFi has an affiliate program where you can earn 20% of the monthly subscription (so 20% of $8.99). Their hope is that people will use WizeFi for a month and dial in their own personal finances (craft a new plan that makes them feel empowered to manage their money for financial freedom). Then, they’ll share what they’ve learned with their audience.
WizeFi Review – Summary
I hope you enjoyed my WizeFi review.
If you are committed to improving your personal finances and want to reach early retirement or financial independence, I think that WizeFi is great to sign up for.
WizeFi stands out from other money tools because they focus on developing money skills, and not just giving you information, because the WizeFi team knows that money skills can make a difference for a lifetime. Plus, there are no ads and they don’t sell your information.
Their goal is to empower a person to master their money, speed up financial independence, and live their best, most meaningful life.
If that is you, then this is the money tool that I recommend checking out.
Please click here to try out WizeFi for free for 30 days.