8 Risky Jobs That Pay Big Bucks

Often with dangerous jobs, the pay doesn’t come close to compensating for the risk. In fact, plenty of perilous jobs pay paltry sums compared to other options. Take fishermen and loggers. They can expect median salaries of under $35,000 a year, $23,000 less than the mean for all workers. Yet the fatality rate for fishermen is nearly 39 times the rate for all occupations, the highest of any profession, in fact. Loggers, at nearly 28 times the overall fatality rate, rank second.

The COVID-19 pandemic shook up the risk scenario in the workplace. Overall, workplace injuries and illnesses were down 5.7% in 2020, compared to the previous year. But a closer look at the numbers reveals that while injuries dropped significantly, illnesses went way up. 

The pandemic also made a new group of low-paying jobs among the riskiest in the nation. Nursing assistants had the highest number of days of any profession away from work in 2020, the most recent year available, according to the Bureau of Labor Statistics. They had 1,024 days away from work per 10,000 workers in 2020, an increase of 14 times the rate in 2019. Yet nursing assistants make a mean wage of just over $30,000.

Going back the last few years before the pandemic, there were generally between 10,000 and 11,000 respiratory illnesses among U.S. workers each year. In 2020, however, there were nearly 429,000. Conversely, the days away from work decreased slightly for heavy and tractor-trailer truck drivers, whose mean wage was just over $50,000, between 2019 and 2020.

As perilous as work has become for many during the pandemic, fewer people were injured on the job in 2020 than in any year since 2013, according to the most recent data from the Bureau of Labor Statistics. Still, those data showed an American worker died every 111 minutes from a job-related injury. The most common cause of death on the job was transportation-related incidents, which resulted in 1,778 deaths that year, more than 37% of all work-related deaths.

Not surprisingly, workers in jobs that involved transportation and moving material accounted for the biggest proportion of occupational deaths at a total of 2,258, accounting for more than 47% of the total work-related deaths in the U.S.

We believe that if you’re going to take a risky job, you should at least get compensated handsomely for it. So we crunched the numbers on injuries, fatalities and salaries to identify eight occupations offering paychecks that make up for the elevated risks by paying more than the national median of about $58,000. Top earners in many of these fields can enjoy six-figure salaries, in some cases even without college degrees. Plus, many of them won’t be replaced by technology, which spells job security. 

Take a look at these risky jobs that pay well.

Data sources: All data provided by the U.S. Bureau of Labor Statistics, unless otherwise noted. Most statistics from 2020, unless otherwise indicated. That year, the fatality rate for all occupations was 3.4 deaths per 100,000 workers.. “Top pay” represents the annual salary of a worker in the 90th percentile of an occupation, unless otherwise noted. We used the most updated data provided by BLS. In some instances, that was as far back as 2019 or older. Also, in some instances, the bureau provided median salary information, while for other occupations, it provided average salary information.

1 of 8

Airline Pilot

Photo of a man in an airplane cockpitPhoto of a man in an airplane cockpit
  • Number of workers: 42,770
  • Rate of injuries/illnesses: 34.3 (3.4 for all workers). 
  • This represents a decrease of the 2019 rate of 61.8 per 100,000 FTEs
  • Median annual salary: $115,080
  • Top pay: $197,400*
  • Annual fatalities: 4

Flying may be safer than driving, with crashes exceedingly rare, but pilots still manage to get hurt. The most common injury to pilots is back strain, no doubt exacerbated by countless hours spent in flight decks. Still, the pay might well make the risks worthwhile. Annual median wages for airline pilots, copilots and flight engineers are the highest of all our risky jobs.

You can save yourself the cost of college by heading straight to flight school, though most airlines prefer to hire degree-holders. You’ll need the edge. Competition for openings can be fierce, given industry consolidation and the job market’s overall weakness. You’ll also have to clock the flight hours necessary to even apply for an airline job. The Federal Aviation Administration requires applicants for pilot and first officer positions to have a minimum of 1,500 hours of total flight time.

But if you rack up enough experience and airborne hours, annual pay with the major airlines can soar to $200,000 or more, according to AirlinePilotCentral.com. Similarly plump salaries can be had if you land an offer from one of the flying freight giants. FedEx and UPS pay their captains at least $212,000 and $233,000 a year, respectively, starting in just their second years. Bonus: no whiny passengers.

*According to Airline Pilot Central, United offers its 12th year captains of Boeing 777 planes the highest minimum annual salary of all the legacy airlines.

2 of 8

Private Detective

Photo of a man in sunglasses behind the wheel of a car holding a cameraPhoto of a man in sunglasses behind the wheel of a car holding a camera
  • Number of workers:  33,700
  • Rate of injuries/illnesses: 122.6 per 10,000 workers
  • Median workdays missed due to injury/illness: 43
  • Mean annual salary: $60,970
  • Top pay: $98,070
  • Annual fatalities: 1

Digging up information can be pretty strenuous work. Gumshoes sustain most of their injuries in car accidents and physical altercations. But even those tallies are relatively low, so the above-average pay for private eyes may be worth the slightly elevated risk.

Most detective work does not have an education requirement, but the ability to learn on the job is a must, and previous related work experience is a plus. You’ll also need a license in most states; requirements vary. And if you specialize in certain fields, say insurance fraud or computer forensics, a related bachelor’s degree might be necessary for some corporate investigators.

That expertise can not only help you solve whodunits but also push up your pay. Investigative agencies, both large and small, are by far the biggest employers of detectives. Distant runner-ups are law firms and state and local governments.

3 of 8

Registered Nurse

photo of a nurse and a patientphoto of a nurse and a patient
  • Number of workers: 3 million
  • Rate of injuries/illnesses: 1023.8 per 10,000 workers
  • Median workdays missed due to injury/illness: 8
  • Median annual salary: $75,330
  • Top pay: $103,000
  • Annual fatalities: 12

Registered nurses were among those most affected by COVID; they endured a whopping 78,740 injuries and illnesses in 2020, an increase of more than 290% over 2019 when there were 20,150 injuries and illnesses among registered nurses, according to the Bureau of Labor Statistics. In 2020, the number of cases in which registered nurses had days away from work increased by 58,590 cases (290.8 percent) to 78,740 cases, according to the Bureau of Labor Statistics.

The states with the largest increase in cases among nurses who had days away from work were Michigan, where cases rose more than 1,000% and Iowa, which had an increase of more than 900%. .

Typical wages about 88% above the national median might help compensate for  the pain. California registered nurses earn a particularly comfortable wage, into six figures in nine West Coast metro areas.

You need a bachelor’s or associate’s degree in nursing or a diploma from an accredited nursing program in order to become an RN. If you extend your education to a master’s degree, you can earn even more; median annual pay for nurse practitioners is nearly $90,000, and top earners make $120,500 a year.

According to Indeed.com, the average base salary for a registered nurse is nearly $89,000 as of May 2022. That ranges from $80,266 for nurses with less than a year of experience to $104,907 for those with more than 10 years of experience. New York is the highest paying city where registered nurses earn an average of nearly $103,000 a year. But Iindeed says just 62% of registered nurses in the U.S. think their salaries are enough for the cost of living in their area.

4 of 8

Professional Athlete

Photo of a baseball, football and basketball playerPhoto of a baseball, football and basketball player
  • Number of workers: 16,700
  • Rate of injuries/illnesses: 1,542.1 per 10,000 workers
  • Median workdays missed due to injury/illness: 10
  • Median annual salary: $77,300
  • Top pay: $107.5 million
  • Annual fatalities: 10

When your job is to exercise and physically compete on a regular basis, your body is bound to get a little run down. More than half of the injuries reported by athletes are sprains, strains and tears. But what’s becoming a little worse for wear when you get to play the game you love for a living?

The above-average pay doesn’t hurt, either. It would behoove players to save that extra income. Athletic careers offer little stability and are often short-lived. According to Indeed.com, the average professional athlete base salary as of April 20222 was $115,429, including $222,275 for the NFL. The highest paying city for professional athletes was New York, where the average salary is $133,762.

According to the job website Ladders, the top-paid American athlete is Dallas Cowboys quarterback Dak Prescott who earns a jaw-dropping $107.5 million a year.

But just 45% of professional athletes in the U.S. report being satisfied that their salaries are enough for the cost of living in their area.

5 of 8

Police Officer

Photo of a torso of a police officer holding a firearmPhoto of a torso of a police officer holding a firearm
  • Number of workers: 665,000
  • Rate of injuries/illnesses: 121.7 per 10,000 workers
  • Median workdays missed due to injury/illness: 15
  • Median annual salary: $64,610
  • Top pay: $102,530
  • Annual fatalities: 105 

Police work is truly risky business. Exhibit A: The number of work-related deaths for cops is the greatest of all the occupations on this list. Still, the fatality rate is just 18.6 per 100,000 workers, about on par with taxi drivers.

If you don’t mind mixing it up with the occasional physical altercation or high-speed chase, paychecks 59% higher than the national median may be worth sustaining some sprains, strains and tears (the most common injuries for police officers). You can enter the police academy after graduating from high school or getting your GED, though many agencies require some college coursework or a college degree. But you have to be at least 21 years old to become an officer (younger recruits can be cadets and do clerical work until they’re of age). A college degree can help fatten your paycheck, however. A B.A. in criminal justice can push salaries into six figures, according to Payscale.

Indeed.com reports the average base salary for a U.S. police officer is $55,390. This ranges from $46,900 for officers with less than a year of experience to $76,650 for those with more than ten years of experience. The highest paying city is San Jose, California, where officers make an average of $131,000. According to Indeed, 53% of police officers report being satisfied that their salaries are enough for the cost of living in their area. 

Note that while the Bureau of Labor Statistics data for wages for police officers refer to 2021, the most currently available injury and illness information dates to 2018.

6 of 8

Railroad Conductor/Yardmaster

Photo of a trainPhoto of a train
  • Number of workers: 48,030 
  • Rate of injuries/illnesses: 180 per 10,000 workers
  • Median workdays missed due to injury/illness: 22
  • Median annual salary: $63,960
  • Top pay: $82,460
  • Annual fatalities: 11 in 2019

Train-track tragedies are as uncommon as they are heartbreaking. Overall, railroad safety has improved dramatically over the past decade. Heading the crews of freight and passenger trains and rail yards, railroad conductors and yardmasters have the highest rates of injury of all rail transportation workers, but they have the potential to score the biggest paychecks, too. You need just a high school diploma or the equivalent to get started, and you have to be certified by the Federal Railroad Administration to become a conductor. Most employers require one to three months of on-the-job training. Amtrak and some freight companies offer their own training programs, while smaller railroads may send you to a central facility or community college to prep you for the job.

7 of 8

Mining Machine Operator

Photo of a construction vehicle in a minePhoto of a construction vehicle in a mine
  • Number of workers: 14,740
  • Rate of injuries/illnesses: 248.0 per 10,000 workers
  • Median workdays missed due to injury/illness: 23 for surface mining, 46 for underground and 60 for continuous Median annual salary: $60,300
  • Top pay: $78,060
  • Annual fatalities: 5 for surface mining, 7 for underground

Not surprisingly, pumping the Earth for its resources can really suck the life out of you. Extraction workers, a broad category of workers who mine and drill for oil, gas, coal and the like, recorded a total of 92 deaths and 3,990 injuries in 2011. And while some extraction jobs offer scant compensation for such risks, pay for certain mining machine operators is more tempting.

Education requirements are minimal to get started (some jobs don’t even require a high school diploma). But if you go into mining with a college degree, you stand to earn a fatter paycheck and added safety as a mining engineer. Indeed says mining engineers, who inspect mining areas and design underground systems of entries, exits and tunnels, make an average national salary of more than $97,000 as of April 2022. Their job is also dangerous as they are often close to heavy machinery and are exposed to air pollution and in danger of being hurt in a cave-in.

8 of 8

Electrician

Photo of a hand and a screwdriver working on wiresPhoto of a hand and a screwdriver working on wires
  • Number of workers: 729,600 in 2020
  • Rate of injuries/illnesses: 122.2 per 10,000 workers
  • Median workdays missed due to injury/illness: 15
  • Median annual salary: $60,040
  • Top pay: $82,930
  • Annual fatalities: 68 in 2019

With high demand to plug in our various devices at home and work, electricians are practically guaranteed prosperous careers. 

But this profession comes with its stumbling blocks — literally. Electricians’ injuries are most often caused by falls. That’s not surprising, considering they often spend lots of time at construction sites and on ladders. If you watch your step, you typically stand to enjoy paychecks 43% higher than the national median.

You can start your career as an electrician with a high school diploma (or the equivalent) and a paid four-year apprenticeship, which you can find through the U.S. Department of Labor. But having a Bachelor’s degree can help boost your income; according to Payscale, a college-educated electrician can earn up to about $93,000 a year. Most states also require you to be licensed.

According to Indeed.com, the average base salary for an electrician is about $56,800 as of May 2022.

Source: kiplinger.com

What Is Inflation (Definition) – Causes & Effects of Rate on Prices & Interest

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People have always grumbled that a dollar doesn’t go as far as it used to. But these days, that complaint is truer than ever. No matter where you go — the gas station, the grocery store, the movies — prices are higher than they were just a month or two ago.

What we’re seeing is the return of a familiar economic foe: inflation. Many Americans alive today have never seen price increases like these before. For the past three decades, inflation has never been above 4% per year. But as of March 2022, it’s at 8.5%, a level not seen since 1981.

Modest inflation, like what we had up through 2020, is normal and even healthy for an economy. But the rate of inflation we’re seeing now is neither normal nor healthy. It does more than just raise the cost of living. It can have a serious impact on the economy as a whole. 

Recent inflation-related news:


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  • In March 2022, the U.S. inflation rate hit a 40-year high of 8.5%. 
  • Prices for gasoline have increased nearly 50% over the past year.
  • Retail giant Amazon has added a 5% fuel and inflation surcharge for sellers.
  • The Federal Reserve is planning a series of interest rate hikes to cool the overheated economy.

What Is Inflation?

Inflation is more than just rising prices. Prices of specific things we buy, from a gallon of milk to a year of college tuition, rise and fall all the time. These price increases affect individual consumers’ lives, but they don’t have a big impact on the entire economy.

Inflation is a general increase in the prices of goods and services across the board. It drives up prices for everything you buy, from a haircut to a gallon of gas. Or, to put it another way, the purchasing power of every dollar in your pocket declines.

Most of the time, inflation doesn’t disrupt people’s lives too much, because prices rise for labor as well. If your household spending increases by 5% but your paycheck increases by 5% at the same time, you’re no worse off than before.

But when prices rise sharply, wages can’t always keep up. That makes it harder for consumers to make ends meet. It also drives them to change their spending behaviors in ways that often make the problem worse.


Causes of Inflation

Inflation depends on the twin forces of supply and demand. Supply is the amount of a particular good or service that’s available. Demand is the amount of that particular good or service that people want to buy. More demand drives prices up, while more supply drives them down. 

To see why, suppose you have 10 loaves of bread to sell. You have 10 buyers who want bread and are willing to pay $1 per loaf. So you can sell all 10 loaves at $1 each.

But if 10 more buyers suddenly enter the market, they will have to compete for your bread. To make sure they get some, they might be willing to pay as much as $2 per loaf. The higher demand has pushed the price up.

By contrast, if another seller shows up with 10 loaves of bread, the two of you will be competing for buyers. To sell your bread, you might have to lower the price to as little as $0.50 per loaf. The higher supply has pushed prices down.

Inflation results from demand outstripping supply. Economists often describe this as “too much money chasing too few goods.” There are several ways this kind of imbalance can happen.

Cost-Push Inflation

Cost-push inflation happens when it costs more to produce goods. To go back to the bread example, cost-push inflation might happen because a wheat shortage makes flour more expensive. It costs you more to make each loaf of bread, so you can’t afford to bake as much.

As a result, you bring only five loaves to the market. But there are still 10 customers who want to buy bread, so they must pay more to get their share. The higher cost of production drives down the supply and thus drives up the price.

In the real world, cost-push inflation can result from higher costs for anything that goes into making a product. This includes:

  • Raw Materials. The wheat that went into your bread is an example. Higher-cost wheat means higher-cost flour, which means higher-cost bread.
  • Transportation. In today’s global economy, materials and finished goods move around a lot. Transporting products requires fuel, which usually comes from oil. So whenever oil prices go up, the price of other goods rises as well. 
  • Labor. Another factor in production cost is labor. When schools closed during the COVID-19 pandemic, many parents had to stop working to care for their children. That created a worker shortage that drove prices up.

Demand-Pull Inflation

The opposite of cost-push inflation is demand-pull inflation. It occurs when consumers want to buy more than the market can supply, driving prices up.

Typically, demand-pull inflation results from economic growth. Rising wages and lower levels of unemployment put more money in people’s pockets, and people who have more money want to spend more. If the booming economy hasn’t produced enough goods and services to match this new demand, prices rise.

Other causes of demand-pull inflation include: 

  • Increased Money Supply. Another way people can end up with more money in their pockets is because the government has put more money in circulation. Governments often do this to stimulate a weak economy or to pay off past debts. But as the money supply increases, the purchasing power of each dollar shrinks. 
  • Rapid Population Growth. When the population grows rapidly, the demand for goods and services grows also. If the economy doesn’t produce more to compensate, prices rise. In Europe during the 1500s and 1600s, prices soared as the population grew so fast that agriculture couldn’t keep up with the new demand.
  • Panic Buying. Early in the COVID pandemic, consumers started buying extra groceries to fill their pantries in preparation for a lockdown. This led to shortages of many staple products, like milk and toilet paper. As a result, prices for those goods went up.
  • Pent-Up Demand. This occurs when people return to spending after a period of going without. This often happens in the wake of a recession. It also occurred as pandemic restrictions eased and people returned to enjoying movies, travel, and restaurant meals.

Built-In Inflation

When consumers expect prices to be higher in the future, they often respond by spending more now. If the purchasing power of their savings is only going to fall, it makes more sense to take that money out of the bank and use it on a major purchase, like a new car or a large appliance.

In this way, expectations of high inflation can themselves lead to inflation. This type of inflation is called built-in inflation because it builds on itself. 

When workers expect the cost of living to rise, they demand higher wages. But then they have more to spend, so they spend more, driving prices up. This, in turn, reinforces the belief that  prices will keep rising, leading to still higher wage demands. This cycle of rising wages and prices is called a wage-price spiral.


Effects of Inflation

Inflation does more than just drive up the cost of living. It changes the economy in a variety of ways — some harmful, others helpful. The effects of inflation include:

  • Higher Wages. As prices rise with inflation, wages typically rise as well. This can create a wage-price spiral that drives inflation still higher.
  • Higher Interest Rates. When the dollar is declining in value, banks often respond by raising interest rates on loans. The Federal Reserve also typically raises interest rates to cool the economy and rein in inflation, as discussed below.
  • Cheaper Debt. Inflation is good for debtors because they can pay off their debts with cheaper dollars. This is most useful for loans with a fixed interest rate, such as fixed-rate mortgages and student loans.
  • More Consumption. Inflation encourages consumers to spend money because they know it will be worth less later. All this spending keeps the economy humming, but it can also drive prices even higher.
  • Lower Savings Rates. Just as inflation encourages spending, it discourages saving. Higher interest rates can counter this effect, but they often don’t rise enough to make a difference.
  • Less Valuable Benefits. High inflation is worse for people on a fixed income. They face higher prices without higher wages to make up for them. Benefits such as Social Security change each year to adjust for inflation, but higher benefits next year don’t help when prices are rising right now.
  • More Valuable Tangible Assets. Inflation reduces the purchasing power of the dollars you have in the bank. Tangible assets like real estate, however, gain in dollar value as prices rise.

Measuring Inflation

The most common measure of inflation is the Consumer Price Index, or CPI. The Bureau of Labor Statistics (BLS) determines the CPI based on the cost of an imaginary basket of goods and services. BLS workers painstakingly check prices on all these items each month and record how each price changes.

To calculate the annual rate of inflation, the BLS looks at how much all prices in its basket have changed since a year earlier. Then it “weights” the value of each item based on how much of it people buy. The weighted average of all items becomes the CPI.

The BLS then uses the CPI to calculate the annual rate of inflation. It divides this month’s CPI by the CPI from a year ago, then multiplies the result by 100. This shows how the purchasing power of a dollar has changed over the last year. The result is reported monthly.

Other measures of inflation include:

  • Personal Consumption Expenditures Price Index (PCE). This inflation measure is published by the Bureau of Economic Analysis. Like the CPI, it’s a measure of consumer costs, but it’s adjusted to account for changes in the products people buy. The Federal Reserve uses the PCE to guide its monetary policy, as discussed below. 
  • Producer Price Index (PPI). The PPI measures inflation from the seller’s perspective, not the buyer’s. It’s calculated by dividing the price sellers currently get for a basket of goods and services by its price in a base year, then multiplying the result by 100.

Historical Examples of Inflation

A little bit of inflation is normal. But sometimes inflation spirals out of control, with prices rising more than 50% per month. This is called hyperinflation, and it can be devastating for an economy.

Hyperinflation has occurred at various times and places throughout history. During the U.S. Civil War, both sides experienced soaring inflation. Other examples include Germany in the 1920s, Greece and Hungary after World War II, Yugoslavia and Peru in the 1990s, and Venezuela today. In most cases, the main cause was the government printing money to pay for debt. 

The last time the U.S. had prolonged, high rates of inflation was in the 1970s and early 1980s. The inflation rate was nowhere near hyperinflation levels, but it spiked above 10% twice. Eventually, the Fed hiked interest rates to double-digit levels to get it under control.

Although high inflation can be destructive, zero inflation isn’t a good thing, either. At that point, an economy is at risk of the opposite problem, deflation. 

When prices and wages fall across the board, consumers spend less. Sales of products and services fall, so companies cut back staff or go out of business. As a result, jobs are lost and spending drops still more, worsening the problem. The Great Depression was an example.


The Federal Reserve, or Fed, is the U.S. central bank — or more accurately, banks. It’s a group of 12 banks spread across the country under the control of a central board of governors. Its job is to keep the economy on track, reining in inflation while trying to avoid recessions. 

The Fed maintains this balance through monetary policy, or controlling the availability of money.

Its main tool for doing this is interest rates. When the economy is weak, the Fed lowers the federal funds rate. This makes it easier for people to borrow and spend. 

When the problem is inflation, it does the opposite, raising interest rates. This makes it more costly to borrow and more worthwhile to save. As a result, consumers spend less, slowing down the wage-price spiral.

The Fed has other tools for fighting inflation as well. One option is to change reserve requirements for banks, requiring them to hold more cash. That gives them less to lend out, which in turn reduces the amount consumers and businesses have to spend.

Finally, the Fed can reduce the money supply directly. The main way it does this is to increase the interest rate paid on government bonds. That encourages more people to buy bonds, which temporarily takes their money out of circulation and puts it in the hands of the government.


Inflation Frequently Asked Questions (FAQs)

If you keep seeing stories about inflation in the news, you may have some other questions about how it works. For instance, you may wonder:

What Is Hyperinflation?

Hyperinflation is more than just high inflation. It’s a wage-price spiral gone mad, sending prices soaring out of control. As noted above, the usual definition of hyperinflation is an inflation rate of at least 50% per month — more than 12,000% per year. However, some economists use the term to refer to an inflation rate of 1,000% or more per year.

What Is Disinflation?

Disinflation is a fall in the rate of inflation. This is what the Federal Reserve and other central banks try to achieve through their monetary policy, such as raising interest rates.

Disinflation is not the same as deflation, or falling prices. During a period of disinflation, prices are continuing to rise, but the rate at which they rise is slowing down.

What Is Transitory Inflation?

When the first signs of a post-COVID-19 inflation spike appeared, Federal Reserve chair Jerome Powell described it as “transitory.” By this, he meant that the rise in prices would be short-lived and would not do permanent damage to the economy. 

However, in November 2021, Powell declared it was “time to retire that word.” Based on the growth in prices, he had concluded that inflation was more of a long-term trend. The Federal Reserve responded by planning to fight inflation harder, buying more bonds and plotting out a series of interest rate hikes.

What Is Core Inflation?

Measuring inflation can be tricky because prices for some products fluctuate more than others. Food and energy prices, in particular, can shift a lot from month to month. Including these products in the CPI can lead to sharp, but temporary, spikes or dips in the inflation rate.

To adjust for this, the CPI and PCE have a separate “core” version that doesn’t include food or energy prices. This core inflation measure is more useful for predicting long-term trends. The  main versions of the CPI and PCE, known as the “headline” versions, give a more accurate picture of how prices are changing right now.

What Is the Consumer Price Index (CPI)?

As noted above, the Consumer Price Index, or CPI, is the main measure of inflation in the United States. The BLS calculates it based on how much prices have risen for an imaginary basket of goods and services that many Americans buy.


Final Word

A little inflation in an economy is normal. It can even be a good thing, because it’s a sign that consumers are spending and businesses are earning. The Fed generally considers an annual inflation rate of 2% to be healthy.

However, higher inflation can cause serious problems for an economy. It’s bad for savers whose nest eggs, including retirement savings, shrink in value. It’s even worse for seniors and others on fixed incomes whose purchasing power has fallen. And it often requires strong measures from the central bank to correct it — measures that risk driving the economy into a recession.

If you’re concerned about the effects of inflation, there are several ways to protect yourself. You can adjust your household budget, putting more dollars into the categories where prices are rising fastest. You can stock up on household basics now, before the purchasing power of your dollars falls too much. 

Finally, you can choose investments that do well during periods of inflation. Stock-based mutual funds and real estate investment trusts are both good choices. Just be careful with inflation hedges like gold and cryptocurrency, which carry risks of their own.

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GME is so 2021. Fine art is forever. And its 5-year returns are a heck of a lot better than this week’s meme stock. Invest in something real. Invest with Masterworks.

Amy Livingston is a freelance writer who can actually answer yes to the question, “And from that you make a living?” She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

Source: moneycrashers.com

What Does ‘Cost of Living’ Really Mean and Why Does it Vary By State?

Save more, spend smarter, and make your money go further

During the COVID-19 pandemic, many people started working remotely for the first time. Many people are starting to return to office jobs, but others are continuing to work remotely. Without being tied down to a physical office location, we are seeing people move to different locations across the country. If you’ve lived most of your life in one location, you might be surprised to find that costs vary in different states and municipalities.

What is Cost of Living?

Cost of living is defined as the total amount of money that is needed to live in a particular area. One way that cost of living can be measured as either a raw monthly or annual amount. Another way that you will often see cost of living measured is as a cost of living index. The Council for Community and Economic Research (CCER) has compiled, published and studied cost of living information at the local level since 1968. 

Typically a cost of living index takes the average cost of living across the whole nation and sets that as a baseline of 100. Then states or metropolitan areas where the cost of living is higher than the national average have numbers greater than 100, and those with a lower cost of living have an index of less than 100. This allows you to easily compare the cost of living in different locales. If you live in an area with a cost of living index of 109, then you know that your cost of living is roughly 9% higher than the national average.

What Makes Up the Cost of Living Formula?

There are a variety of different companies and organizations that calculate the cost of living in different locations, and each one uses a slightly different cost of living formula. As one example, the U.S. Bureau of Labor Statistics publishes the Consumer Price Index (CPI). The CPI is used by the government to determine things like the cost-of-living adjustment for Social Security.

BLS calculates CPI indexes for the following categories in addition to an overall index:

  • Food (both at home and away from home)
  • Energy (gasoline, fuel oil, electricity and natural gas)
  • New and Used vehicles
  • Apparel
  • Medical Care
  • Shelter / Housing
  • Transportation services

Prices for each of these areas varies from month to month and in each different state and community.

Why Does Cost of Living Vary By State?

If you’ve ever traveled to or lived in different parts of the United States, you may have noticed that prices often change as you go to different areas. There are a variety of different reasons why cost of living varies by state and even within a given state. One major reason for differences in cost of living is how rural or urban an area is. Generally speaking, cities and urban areas have a higher cost of living than rural areas.

Cost of living of specific commodities can vary with other factors as well. How close a state or metropolitan area is to various natural resources can also play a factor. If you live in an area with access to oil or natural gas, it stands to reason that your energy costs might be lower than other areas. Similarly, being closer to farms and other food production can keep an area’s food costs lower. State and local tax policies also contribute to the overall cost of living.

Which States Have the Lowest Cost of Living?

The cost of living by state varies depending on the year and also on the methodology used to calculate the cost of living. According to the 2020 fourth-quarter Cost of Living Index report from CCER, the ten states with the lowest cost of living are:

  1. Mississippi
  2. Kansas
  3. Oklahoma
  4. Alabama
  5. Arkansas
  6. Georgia
  7. Tennessee
  8. Missouri
  9. Michigan
  10. Indiana

Keep in mind that these are just average costs of living for an entire state and the cost of living will vary greatly within a state. Cost of living in rural Albany, Georgia will be much less than living in metro Atlanta. Another thing to consider is that your income may be lower in areas with a lower cost of living, though that may not be as much of a factor if you have a remote job.

The Bottom Line

A state or metropolitan area’s cost of living is defined as the cost it takes to live in that particular location. A cost of living index is a way to normalize and compare the cost of living between different areas. A cost of living index of 100 represents the national average. Higher numbers are more expensive and lower numbers are less expensive. There are several companies and organizations that calculate cost of living indexes, and each use slightly different formulas and prices. Moving from a high cost of living area to one with a lower cost of living is a smart way to make your money go further without increasing your income.

Save more, spend smarter, and make your money go further

Dan Miller

Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families to travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids. More from Dan Miller

Source: mint.intuit.com

Conventional Mortgage Loan – What It Is & Different Types for Your Home

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Dig Deeper

Additional Resources

The mortgage industry is rife with jargon and acronyms, from LTV to DTI ratios. One term you’ll hear sooner or later is “conventional mortgage loan.”

It sounds boring, but it couldn’t be more important. Unless you’re a veteran, live in a rural area, or have poor credit, there’s a good chance you’ll need to apply for a conventional mortgage loan when buying your next house.

Which means you should know how conventional mortgages differ from other loan types.


What Is a Conventional Mortgage Loan?

A conventional loan is any mortgage loan not issued or guaranteed by the Federal Housing Administration (FHA), Department of Veterans’ Affairs (VA), or U.S. Department of Agriculture (USDA). 


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Most conventional loans are backed by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). These government-sponsored enterprises guarantee the loans against default, which lowers the cost for borrowers by lowering the risk for lenders.

As a general rule, stronger borrowers tend to use these private conventional loans rather than FHA loans. The exception concerns well-qualified borrowers who qualify for subsidized VA or USDA loans due to prior military service or rural location.


How a Conventional Mortgage Loan Works

In a typical conventional loan scenario, you call up your local bank or credit union to take out a mortgage. After asking you some basic questions, the loan officer proposes a few different loan programs that fit your credit history, income, loan amount, and other borrowing needs. 

These loan programs come from Fannie Mae or Freddie Mac. Each has specific underwriting requirements.

After choosing a loan option, you provide the lender with a filing cabinet’s worth of documents. Your file gets passed from the loan officer to a loan processor and then on to an underwriter who reviews the file. 

After many additional requests for information and documents, the underwriter signs off on the file and clears it to close. You then spend hours signing a mountain of paperwork at closing. When you’re finished, you own a new home and a massive hand cramp.  

But just because the quasi-governmental entities Fannie Mae and Freddie Mac back the loans doesn’t mean they issue them. Private lenders issue conventional loans, and usually sell them on the secondary market right after the loan closes. So even though you borrowed your loan from Friendly Neighborhood Bank, it immediately transfers to a giant corporation like Wells Fargo or Chase. You pay them for the next 15 to 30 years, not your neighborhood bank. 

Most banks aren’t in the business of holding loans long-term because they don’t have the money to do so. They just want to earn the points and fees they charge for originating loans — then sell them off, rinse, and repeat. 

That’s why lenders all follow the same loan programs from Fannie and Freddie: so they can sell predictable, guaranteed loans on the secondary market. 


Conventional Loan Requirements

Conventional loans come in many loan programs, and each has its own specific requirements.

Still, all loan programs measure those requirements with a handful of the same criteria. You should understand these concepts before shopping around for a mortgage loan. 

Credit Score

Each loan program comes with a minimum credit score. Generally speaking, you need a credit score of at least 620 to qualify for a conventional loan. But even if your score exceeds the loan program minimum, weaker credit scores mean more scrutiny from underwriters and greater odds that they decline your loan. 

Mortgage lenders use the middle of the scores from the three main credit bureaus. The higher your credit score, the more — and better — loan programs you qualify for. That means lower interest rates, fees, down payments, and loan requirements. 

So as you save up a down payment and prepare to take out a mortgage, work on improving your credit rating too.  

Down Payment

If you have excellent credit, you can qualify for a conventional loan with a down payment as low as 3% of the purchase price. If you have weaker credit, or you’re buying a second home or investment property, plan on putting down 20% or more when buying a home.

In lender lingo, bankers talk about loan-to-value ratios (LTV) when describing loans and down payments. That’s the percentage of the property’s value that the lender approves you to borrow.

Each loan program comes with its own maximum LTV. For example, Fannie Mae’s HomeReady program offers up to 97% LTV for qualified borrowers. The remaining 3% comes from your down payment. 

Debt-to-Income Ratio (DTI)

Your income also determines how much you can borrow. 

Lenders allow you to borrow up to a maximum debt-to-income ratio: the percentage of your income that goes toward your mortgage payment and other debts. Specifically, they calculate two different DTI ratios: a front-end ratio and a back-end ratio.

The front-end ratio only features your housing-related costs. These include the principal and interest payment for your mortgage, property taxes, homeowners insurance, and condo- or homeowners association fees if applicable. To calculate the ratio, you take the sum of those housing expenses and divide them over your gross income. Conventional loans typically allow a maximum front-end ratio of 28%. 

Your back-end ratio includes not just your housing costs, but also all your other debt obligations. That includes car payments, student loans, credit card minimum payments, and any other debts you owe each month. Conventional loans typically allow a back-end ratio up to 36%. 

For example, if you earn $5,000 per month before taxes, expect your lender to cap your monthly payment at $1,400, including all housing expenses. Your monthly payment plus all your other debt payments couldn’t exceed $1,800. 

The lender then works backward from that value to determine the maximum loan amount you can borrow, based on the interest rate you qualify for. 

Loan Limits

In 2022, “conforming” loans allow up to $647,200 for single-family homes in most of the U.S. However, Fannie Mae and Freddie Mac allow up to $970,800 in areas with a high cost of living. 

Properties with two to four units come with higher conforming loan limits:

Units Standard Limit Limit in High CoL Areas
1 $647,200 $970,800
2 $828,700 $1,243,050
3 $1,001,650 $1,502,475
4 $1,244,850 $1,867,275

You can still borrow conventional mortgages above those amounts, but they count as “jumbo” loans — more on the distinction between conforming and non-conforming loans shortly.

Private Mortgage Insurance (PMI)

If you borrow more than 80% LTV, you have to pay extra each month for private mortgage insurance (PMI).

Private mortgage insurance covers the lender, not you. It protects them against losses due to you defaulting on your loan. For example, if you default on your payments and the lender forecloses, leaving them with a loss of $50,000, they file a PMI claim and the insurance company pays them to cover most or all of that loss. 

The good news is that you can apply to remove PMI from your monthly payment when you pay down your loan balance below 80% of the value of your home. 


Types of Conventional Loans

While there are many conventional loan programs, there are several broad categories that conventional loans fall into.

Conforming Loan

Conforming loans fit into Fannie Mae or Freddie Mac loan programs, and also fall within their loan limits outlined above.

All conforming loans are conventional loans. But conventional loans also include jumbo loans, which exceed the conforming loan size limits. 

Non-Conforming Loan

Not all conventional loans “conform” to Fannie or Freddie loan programs. The most common type of non-conforming — but still conventional — loan is jumbo loans.

Jumbo loans typically come with stricter requirements, especially for credit scores. They sometimes also charge higher interest rates. But lenders still buy and sell them on the secondary market.

Some banks do issue other types of conventional loans that don’t conform to Fannie or Freddie programs. In most cases, they keep these loans on their own books as portfolio loans, rather than selling them. 

That makes these loans unique to each bank, rather than conforming to a nationwide loan program. For example, the bank might offer its own “renovation-perm” loan for fixer-uppers. This type of loan allows for a draw schedule during an initial renovation period, then switches over to a longer-term “permanent” mortgage.

Fixed-Rate Loan

The name speaks for itself: loans with fixed interest rates are called fixed-rate mortgages.

Rather than fluctuating over time, the interest rate remains constant for the entire life of the loan. That leaves your monthly payments consistent for the whole loan term, not including any changes in property taxes or insurance premiums.

Adjustable-Rate Mortgages (ARMs)

As an alternative to fixed-interest loans, you can instead take out an adjustable-rate mortgage. After a tempting introductory period with a fixed low interest rate, the interest rate adjusts periodically based on some benchmark rate, such as the Fed funds rate.

When your adjustable rate goes up, you become an easy target for lenders to approach you later with offers to refinance your mortgage. When you refinance, you pay a second round of closing fees. Plus, because of the way mortgage loans are structured, you’ll pay a disproportionate amount of your loan’s total interest during the first few years after refinancing.


Pros & Cons of Conventional Home Loans

Like everything else in life, conventional loans have advantages and disadvantages. They offer lots of choice and relatively low interest, among other upsides, but can be less flexible in some important ways.

Pros of Conventional Home Loans

As you explore your options for taking out a mortgage loan, consider the following benefits to conventional loans.

  • Low Interest. Borrowers with strong credit can usually find the best deal among conventional loans.
  • Removable PMI. You can apply to remove PMI from your monthly mortgage payments as soon as you pay down your principal balance below 80% of your home’s value. In fact, it disappears automatically when you reach 78% of your original home valuation.
  • No Loan Limits. Higher-income borrowers can borrow money to buy expensive homes that exceed the limits on government-backed mortgages.
  • Second Homes & Investment Properties Allowed. You can borrow a conventional loan to buy a second home or an investment property. Those types of properties aren’t eligible for the FHA, VA, or USDA loan programs.
  • No Program-Specific Fees. Some government-backed loan programs charge fees, such as FHA’s up-front mortgage insurance premium fee.
  • More Loan Choices. Government-backed loan programs tend to be more restrictive. Conventional loans allow plenty of options among loan programs, at least for qualified borrowers with high credit scores.

Cons of Conventional Home Loans

Make sure you also understand the downsides of conventional loans however, before committing to one for the next few decades.

  • Less Flexibility on Credit. Conventional mortgages represent private markets at work, with no direct government subsidies. That makes them a great choice for people who qualify for loans on their own merits but infeasible for borrowers with bad credit. 
  • Less Flexibility on DTI. Likewise, conventional loans come with lower DTI limits than government loan programs. 
  • Less Flexibility on Bankruptcies & Foreclosures. Conventional lenders prohibit bankruptcies and foreclosures within a certain number of years. Government loan programs may allow them sooner. 

Conventional Mortgage vs. Government Loans

Government agency loans include FHA loans, VA loans, and USDA loans. All of these loans are taxpayer-subsidized and serve specific groups of people. 

If you fall into one of those groups, you should consider government-backed loans instead of conventional mortgages.

Conventional Loan vs. VA Loan

One of the perks of serving in the armed forces is that you qualify for a subsidized VA loan. If you qualify for a VA loan, it usually makes sense to take it. 

In particular, VA loans offer a famous 0% down payment option. They also come with no PMI, no prepayment penalty, and relatively lenient underwriting. Read more about the pros and cons of VA loans if you qualify for one. 

Conventional Loan vs. FHA Loan

The Federal Housing Administration created FHA loans to help lower-income, lower-credit Americans achieve homeownership. 

Most notably, FHA loans come with a generous 96.5% LTV for borrowers with credit scores as low as 580. That’s a 3.5% down payment. Even borrowers with credit scores between 500 to 579 qualify for just 10% down. 

However, even with taxpayer subsidies, FHA loans come with some downsides. The underwriting is stringent, and you can’t remove the mortgage insurance premium from your monthly payments, even after paying your loan balance below 80% of your home value.

Consider the pros and cons of FHA loans carefully before proceeding, but know that if you don’t qualify for conventional loans, you might not have any other borrowing options. 

Conventional Loan vs. USDA Loan

As you might have guessed, USDA loans are designed for rural communities. 

Like VA loans, USDA loans have a famous 0% down payment option. They also allow plenty of wiggle room for imperfect credit scores, and even borrowers with scores under 580 sometimes qualify. 

But they also come with geographical restrictions. You can only take out USDA loans in specific areas, generally far from big cities. Read up on USDA loans for more details.


Conventional Mortgage Loan FAQs

Mortgage loans are complex, and carry the weight of hundreds of thousands of dollars in getting your decision right. The most common questions about conventional loans include the following topics.

What Are the Interest Rates for Conventional Loan?

Interest rates change day to day based on both benchmark interest rates like the LIBOR and Fed funds rate. They can also change based on market conditions. 

Market fluctuations aside, your own qualifications also impact your quoted interest rate. If your credit score is 800, you pay far less in interest than an otherwise similar borrower with a credit score of 650. Your job stability and assets also impact your quoted rate. 

Finally, you can often secure a lower interest rate by negotiating. Shop around, find the best offers, and play lenders against one another to lock in the best rate.

What Documents Do You Need for a Conventional Loan?

At a minimum, you’ll need the following documents for a conventional loan:

  • Identification. This includes government-issued photo ID and possibly your Social Security card.
  • Proof of Income. For W2 employees, this typically means two months’ pay stubs and two years’ tax returns. Self-employed borrowers must submit detailed documentation from their business to prove their income. 
  • Proof of Assets. This includes your bank statements, brokerage account statements, retirement account statements, real estate ownership documents, and other documentation supporting your net worth.
  • Proof of Debt Balances. You may also need to provide statements from other creditors, such as credit cards or student loans.

This is just the start. Expect your underwriter to ask you for additional documentation before you close. 

What Credit Score Do You Need for a Conventional Loan?

At a bare minimum, you should have a credit score over 620. But expect more scrutiny if your score falls under 700 or if you have a previous bankruptcy or foreclosure on your record.

Improve your credit score as much as possible before applying for a mortgage loan.

How Much Is a Conventional Loan Down Payment?

Your down payment depends on the loan program. In turn, your options for loan programs depend on your credit history, income, and other factors such as the desired loan balance.

Expect to put down a minimum of 3%. More likely, you’ll need to put down 10 to 20%, and perhaps more still.

What Types of Property Can You Buy With a Conventional Loan?

You can use conventional loans to finance properties with up to four units. That includes not just primary residences but also second homes and investment properties. 

Do You Need an Appraisal for a Conventional Loan?

Yes, all conventional loans require an appraisal. The lender will order the appraisal report from an appraiser they know and trust, and the appraisal usually requires payment up front from you. 


Final Word

The higher your credit score, the more options you’ll have when you shop around for mortgages. 

If you qualify for a VA loan or USDA loan, they may offer a lower interest rate or fees. But when the choice comes down to FHA loans or conventional loans, you’ll likely find a better deal among the latter — if you qualify for them. 

Finally, price out both interest rates and closing costs when shopping around for the best mortgage. Don’t be afraid to negotiate on both. 

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GME is so 2021. Fine art is forever. And its 5-year returns are a heck of a lot better than this week’s meme stock. Invest in something real. Invest with Masterworks.

G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.

Source: moneycrashers.com

25 Must-Follow Tips When Moving To a Different State

This moving checklist will make crossing state lines a breeze.

Moving is always annoying but much easier when you’re moving just a few blocks away. But moving out of state? That’s a whole different ballgame. There are many details and things to check off your list before hopping on a plane to your new city.

It can get overwhelming quickly, from professional movers and having a job lined up to making new friends and leaving family members behind.

These 25 must-follow tips for moving out of state will help with the heavy lifting that comes with moving out of state.

What to consider before moving to another state?

Moving out of state is scary, but if you’re armed with a good checklist, everything can seem a little more approachable. Sure, there are a lot of details to take care of before moving, but the most important thing you should focus on is finding the right city for you.

1. Finding your next city

Make a shortlist of your dream cities and book a long weekend at each, if possible. Forgo a hotel room in favor of living like a local and research neighborhoods before you go. Book an Airbnb listing in the one that fits your lifestyle the most.

Gather intel from friends, make a list of your favorite things to do (think movie theaters, preferred stores, etc.) and check your social network to see if you know anyone in the area. Do groceries and take public transportation to get a true feel of your potential everyday life.

2. Visit a few places before deciding on your new state

Go to several cities.

Go to several cities.

After a few visits to your top 3 cities out of state, think about what’s important to you. Do you want to ditch your car in favor of public transportation? How’s the dining scene in these cities? Is the job market in your career path of choice thriving there? How are the local schools? Are you moving alone, or are you moving in with your partner? Can you afford to live in this prospective city with your current salary?

This is when pro/con lists come in handy. Be sure to sit down and think it through before deciding on your new state.

3. Compare the cost of living before moving out of state

When picking a new city to live in, you have to consider more than moving expenses. Whether you’re relocating for a new job or moving while keeping your current one, you need to consider the new cost of living expenses. Is rent more expensive in the new city? Do you have nature or a local park nearby? What about groceries and transportation?

The cost of living in Washington, D.C., versus Charlotte, NC, is very different, for example. In Florida, the state has no income tax. Make sure that wherever you’re relocating to, you compare both your budget and current salary to the new city’s cost of living differences so you can adjust accordingly and save money where you can.

4. Set a moving budget

So, you’ve picked your new city. Now, it’s time to start thinking about your moving budget. You’ll need to decide whether you’ll hire professional movers and a long-distance moving company to handle your move. Or, if you’ll just get your friends to help you load a moving truck, and you’ll unload it on your own once you arrive at your new address.

You’ll also need to consider deposits for your new apartment, plane tickets, security deposits for utility companies, any new food and house items you’ll need and possibly a storage unit if you have to stay in temporary housing for a bit.

A spreadsheet outlining every money detail will help keep you within budget.

5. Find an apartment in your new city

apartment hunting

apartment hunting

Pick your dream neighborhood and start researching apartments. It’s always good to secure housing before moving out of state. Hunting long-distance for an apartment is challenging, so seeing it in person or sending a friend will make the easiest move.

Read reviews, set up tours for various apartments and always confirm that an apartment is legitimate before wiring any money. Ask for move-in specials and current amenities like an in-unit washer and dryer or stainless appliances.

Bring a blank check and any required documents for the application so you can apply on the spot if you love it. This may include:

  • State-ID or driver’s license
  • Proof of income (latest paystub)
  • At least one reference from a previous landlord
  • Employment details
  • Co-signer information, if needed
  • Unfrozen credit for the landlord to run it for application

Check with your job to see if they reimburse employees for relocation expenses or have any moving services available. Also, check your lease terms and let your landlord know with enough time that you’re leaving your current apartment soon. Make sure to schedule a walkthrough date to get your security deposit back.

6. Update your work about your move

In this pandemic era, working remotely is the new normal. If your job allows you to work remotely and you’re staying, for now, update HR with your new address. This will help your company remain updated with payroll and update your healthcare information.

Follow up with them to make sure they have all they need before your move date. Inquire if, due to your relocation, you now have access to any remote working stipend.

7. Find a new job, if needed

Maybe you’re ready for a whole new life? A new state, new job. Start applying to new jobs as soon as you can since landlords in a new city may require a certain income before renting you a place.

Head to job boards online for opportunities in your chosen city and start sharing that you’re looking for a new opportunity with your network. If you can, schedule upcoming job interviews via Zoom or by phone before you move.

8. Go over your belongings and make donation piles

Don

Don

Things are getting real, and it’s time to see how much stuff you really have. You can start calculating how many boxes you need or if you’re hiring movers or just a moving truck.

Go over your furniture, clothes and even kitchen utensils and start donating and selling piles. Start listing items on social media and put every cent you make toward moving costs.

Leave only what you need in the last 30 days, including medical records and important documents like birth certificates and what’s making a move out of state in the apartment. Everything else needs to go to make sure that you only pay the moving company precisely for what you want to keep.

9. Pick a move-in date and start packing

The moving out of state timeline starts getting faster once you pick an apartment and your job situation is all settled. Check your lease and choose a move date. Pick up boxes, packing tape and bubble wrap, and start streamlining all your belongings.

Spend your weekends patching up holes in your current apartment, repainting any walls, confirming your move-in date with your new landlord and picking up your keys.

10. Book the moving company

After purging your belongings, you’ll have a better idea of the number of boxes and furniture you need to hire movers for. Research moving companies that specialize in out-of-state moves. This is an excellent time to ask for recommendations on social media for moving companies.

Get a few quotes to compare them, confirm that there are no add-ons or surprise charges with the quote, how they go about hiring professionals and vetting them and, of course, read reviews.

Once you pick a reputable moving company, confirm the delivery address of your new house, ask about day-of protocol so you’re ready for the movers and ask for an estimate of when they will deliver your belongings. Some moving companies allow you to track your belongings for peace of mind.

11. Schedule a going away party

Send an invite to all of your friends and family before you move out of state. If you can, ask a close friend to take on planning details for the party so you can focus on your long-distance move. Book a venue or go down to your favorite restaurant (that you will miss very much!) and have a casual night with everyone you know.

12. Make travel arrangements

Decide if you

Decide if you

Now that you have a date for moving out of state, you have to decide how to get there. If you hire movers, you have the choice of hopping on a plane or driving there.

This is the time to book your plane ticket if that’s the best choice. Make sure that you plan which bags you’re taking with you and that they all meet the weight requirements. Have a small pet? Don’t forget to buy them a ticket, too.

If you’re driving, make sure to budget for gas and have your route planned out. Making long-distance moves via car is more exhausting, but you do get to bring a few more of your things with you, see new things on the way and go at your own pace. Be sure to pack a first aid kit for the road, just in case.

This is a good option if you have temporary housing and will have stuff in a storage unit for a while at first.

13. Arrange cleaners at your old place

Schedule cleaners for the day after the movers come by and double-check that you covered every nail hole, there are no stains on the carpet and you packed up all of your things.

Once the cleaners leave the place sparkling clean, let your landlord know the apartment is ready for a walkthrough. Return the keys and finalize how you’ll receive your security deposit before you head out of state.

14. Clean and sell your car

If you don

If you don

If you chose a place with stellar public transportation, you’re probably thinking of leaving your car behind. You don’t have to sell it until a week before you move to make sure that you get all of your errands done.

Start the process early by looking at online vendors like Carmax, Carvana and Blue Book to see how much you’ll get for your car. Get it clean and in tip-top shape, so it sells for the maximum amount possible. Schedule a pick-up at your apartment for convenience and sell it to the best offer.

15. Time to move

Almost there! You’ve prepared, and the moment is here. It’s time to move. You’re more prepared than most for your move out of state. You’ve said your goodbyes, you’re checked into your flight and the movers have your couch.

16. Update your pet’s microchip and registration

Before getting too settled into your new place, update your pet’s microchip and registration in the new state. If they were to go missing, they would have an old address and make it hard to find you. Check if this new place has additional requirements beyond rabies shot and registration with the county.

It’s also an excellent time to find a 24-hour vet that’s close by for any emergencies while you unpack in the short term.

17. Get a new driver’s license and registration

Keep all documents up to date.

Keep all documents up to date.

Most states have a 30-day grace period for new residents to update their driver’s license and vehicle registration. Along with your pet’s registration, add this one to the top of your to-do list once you land in your new apartment. Visit the local DMV to get a new license and registration for your car.

Check if you need specific documents like a birth certificate or social security card. If you can’t find either (and who can blame you mid-move), you can go to the local social security administration branch and ask for a new one.

18. Register to vote in your new state

Don’t forget about doing your part for your country. Switch your voter registration as soon as you have your new address to allow time to update. Check where your voting precinct is, so you’re ready for election day. You can easily switch your voter registration online or at your local library.

Start reading about issues in your new state and get familiar with your representatives. Now that you have a new home, you have new things to fight for and worry about, no matter your political leaning.

19. Connect your utilities

Once you sign your lease, cancel your utilities at your current place and start calling local utility companies to create accounts for electricity, gas and internet access in your new apartment. Depending on your internet provider, you can just transfer service.

Get ready to set up an account and pay deposit fees. You should start this process at least two weeks before your move since utility companies often move slowly.

Check with your landlord to see if your lease includes any utilities, like water or trash.

20. Reach out to friends for local connections

Making new friends is hard! But if you reach out to your network and social media to share your news about moving out of state, be sure to ask if they can connect you with any pals in your new state, either via email or group text.

Schedule friend dates for your first month after your move to get to know your new neighborhood.

21. Change your mailing address

Mail slot

Mail slot

About a week before you move out of state, begin forwarding your mail with the U.S. Postal Service. Get ahead of any lost mail by changing your address in your streaming accounts, Amazon.com account and any magazine subscriptions you already get.

You don’t want to have a random package go to your old apartment because you didn’t forward mail after moving out of state.

22. Transfer your gym membership

If you’re lucky, your gym will have various locations around the country, and you can just transfer your membership. Let your gym, meal planning service and anything else within your routine know that you’re moving out of state. Make sure to cancel and get confirmation of any services that don’t transfer to your new place.

23. Find new doctors in your area

Don’t let your moving out of state keep you from your medical and dental routine. Ask colleagues in your new place if they have any recommendations for dentists, general practitioners and any other doctor you may need.

Your health insurance may also have a helpful directory of in-network providers so you can start finding your favorites.

24. Update the bank of your new location

It’s important to update your financial institutions that you’re moving out of state and are now residents of your new state. This isn’t just your primary bank. You need to update every financial institution, including your financial advisor, accountant, any investments and those that hold any retirement accounts.

25. Get settled in your new state

Settle in with new friends.

Settle in with new friends.

There’s no greater feeling than the one of relief when you have unpacked every box in your new apartment. Start a good routine for the first month of exploring a new restaurant, coffee shop or neighborhood near you. Getting to know your new town and making friend dates will help you feel settled in no time.

Ready to move to another state?

The moving process is stressful, with unexpected expenses, finding the right moving company and launching yourself into a new life. This moving out of state checklist will make your relocation a lot easier.

The weeks ahead will be uncomfortable as you settle into your new job and new neighborhood after the long-distance move. But slowly, you’ll meet new friends and find yourself as a regular in the corner coffee shop.

Source: rent.com

What is the FIRE Movement + How to Make It A Reality

Save more, spend smarter, and make your money go further

In a world with stagnating wages and an increasing cost of living, many people are looking for a way out of the rat race. That’s why radical investment strategies and risky business ventures are so popular.

Believe it or not, there actually is a reliable way to achieve financial independence – but it’s far from a “get-rich-quick” scheme. Financial Independence, Retire Early (FIRE) is an increasingly popular strategy to break free from the daily grind and build your ideal future. Here’s what you need to know about how it works.

What is the FIRE Movement?

The FIRE movement encourages consumers to save and invest aggressively while they’re young in order to retire decades earlier than normal. There is no specific FIRE timeline; that depends on your particular goals and financial situation. Many people who work toward FIRE try to retire in their 30s and 40s.

The FIRE movement isn’t always about retiring early, however. Some people may reach their FIRE goal and keep working, because they enjoy what they do or because they’re not sure about the next steps to take. For them, FIRE provides the peace of mind that comes with not relying entirely on your job to make ends meet.

Some people choose to work toward FIRE so they can take a sabbatical, switch careers or become digital nomads. Others want to reach FIRE so every extra penny they earn can become a legacy they leave behind.

Types of FIRE

There is no one way to reach FIRE. In fact, there are many schools of thought. Here are the most common types of FIRE and how they stack up:

Fat FIRE 

People who don’t want to worry about budget limitations when they retire may opt for Fat FIRE, where your investments greatly exceed your annual cost of living. Fat FIRE may be appropriate for those who don’t believe in penny pinching and want to enjoy the luxuries that life has to offer. 

Barista FI

Because health insurance is one of the biggest expenses for those without access to an employer plan, some FIRE devotees will retire from their regular job and work at a company that provides health insurance to part-time employees – like Starbucks. This is known as Barista FI.

Coast FI 

Coast FI is a financial independence movement where the goal is to have enough invested that you can afford to stop making retirement contributions. Once you reach Coast FI, you can either keep making contributions in order to retire early or focus your resources on other goals like starting a business, contributing to a child’s college education, traveling abroad and more.

Slow FI

The Slow FI movement believes in reaching financial independence, but not at the crushing pace of traditional FIRE. Slow FI is a more conservative path, avoiding the huge sacrifices that come with traditional FIRE strategies. 

How to Retire Early

Lower your expenses

If you’re trying to retire early, one of the most important things to do is lower your expenses. This will free up more money to invest and save. Track your expenses with a budget and find a balance between saving for FIRE and continuing to enjoy your life.

Increase your income

While lowering your expenses is key to achieving FIRE, increasing your income is another crucial aspect. There’s a limit to how much you can save by being frugal, but there’s no limit to how much you can earn.

Increasing your income can include asking for a raise, switching industries, starting a side hustle and more. 

Understand your numbers

One of the main reasons that people fail to meet their FIRE goals is that they don’t properly identify how much they’re saving, how much they’re spending and how much they’ll need to retire early. 

Start by tracking your expenses to get an average of how much you typically spend a month. It’s important to be realistic – not optimistic – when you calculate your average expenses. To get a baseline estimate of how much you need to save, use one of the many FIRE calculators. 

You’ll have to input how much you spend annually, how much you save annually, when you hope to retire and how much you currently have saved. The calculator should show if you’re on track to meet your goals or way off course.

Talk to a financial planner 

Deciding to retire early is one of the biggest financial decisions you can make. And before you take that leap, you should talk to a third party to ensure you’ve thought of everything.

A financial planner can point out potential problems with your plan, like whether you can afford huge health insurance premiums or annual property tax increases. They can also recommend the best types of investment accounts to open and how to lower your tax liability.

Create automatic savings

Saving money is hard, but saving money to retire early is even harder. You can make it easier on yourself by automating your savings.

If you have a 401(k), you can increase your contributions by talking to your HR or payroll department. The money will automatically come out of your paycheck. If you receive a raise, then your 401(k) contributions will also automatically increase. 

If you invest in an IRA, then you’ll have to set up automatic contributions through the investment company. Determine how much you can afford to save automatically every month. 

Find inspiration 

When working toward FIRE, it can be hard to find like-minded people around you. That’s why it helps to get inspiration from outside sources like FIRE blogs, podcasts and forums. Some popular resources include the Choose FI Podcast, the Mad Fientist blog and the 1500 Days to Freedom blog.

Some of these communities even have local meetups, where you can spend time with real people who share your financial priorities and dreams for the future.

Save more, spend smarter, and make your money go further

Zina Kumok

Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Conscious Coins. More from Zina Kumok

Sources

Financial Independence, Retire Early (FIRE) is a popular strategy to build your ideal future. Here’s what you need to know.

Source: mint.intuit.com

The Best College Towns in California

From ocean-side towns to urban and metro cities, California has hundreds of college towns for students and residents alike to select from and call home. Check out our report card to learn what California college towns have to offer.

California is home to more than 700 public and private universities and community colleges. That means the Golden State has a variety of great California college towns.

So, what are some of the best college towns in California and what makes them so desirable? We’ve done our homework and put together a report card of the best California college towns to live in. Extra credit — people other than students can live in these areas, too!

10 best California college towns

Whether you’re a freshman just starting school or looking to relocate with your family, these college towns in California offer something for just about everyone.

1. Los Angeles

UCLA in los angeles

UCLA in los angeles

You may not immediately think of Los Angeles as a college town, but the city is home to 63 colleges. Some of the most well-known schools include the University of California, Los Angeles (UCLA), the University of Southern California (USC) and Loyola Marymount College. These are just some of the great schools with diverse student populations.

In addition to having several colleges to choose from, there’s so much life in the city of L.A. What’s not to love about living in Los Angeles? You’ll have access to world-class entertainment, countless restaurants and bars, great shopping and hundreds of outdoor parks. L.A. is the center of entertainment so you might even spot a celebrity walking the sunny streets of L.A.

People love L.A. for the year-round, mild climate. There are great hiking trails — like Runyon Canyon Loop or Griffith Park Trails — and outdoor parks to enjoy. Also, you’re also close to beaches like Santa Monica or Long Beach.

Los Angeles is a city that gives you a little bit of everything. You have access to one of the largest cities in the world so you can get your fix of city life while also escaping to the beach or trails. There are many neighborhoods and apartments in Los Angeles, so college students and other renters have plenty of options when looking for their next home.

Renters can expect to pay between $2,700 and $3,600 for a one or two-bedroom apartment.

2. Palo Alto

palo alto, a california college town

palo alto, a california college town

While not technically an Ivy League school, Stanford University is a prestigious, private school that’s comparable to an Ivy League. Located near the city of Palo Alto, Stanford itself is actually the town in Santa Clara county. Home to roughly 16,000 students, Stanford is one of California’s best college towns. Living here, you’ll enjoy mild weather and have access to a variety of great outdoor activities. This entire area is known as the “birthplace of Silicon Valley,” so you’ll be surrounded by tech and innovation.

When you’re living in Palo Alto, you’ll want to check out some of the sights like Hoover Tower or Cantor Arts Center. You can also enjoy the Palo Alto Baylands Natural Preserve. Once you’ve settled into Palo Alto and hit the major spots, ease into hikes, explore the neighborhoods and walk around Stanford Campus on your evening walks. You’ll be a local in no time.

The neighborhoods are beautiful and the climate is great but the rent is steep. Students and renters living near Stanford in Palo Alto will enjoy a great college town but should know that rent here is much higher compared to other cities in California. For instance, rent ranges between $3,700 and $4,300 depending on the size of the apartment. However, if you’re the next Steve Jobs and are ready to change the world with your tech start-up, this is the college town to live in.

3. Riverside

riverside, a california college town

riverside, a california college town

Riverside is home to UC – Riverside, a college that’s part of the 10 University of California schools. With roughly 21,500 students attending each year, this is a great school for students in the Palm Desert area of California. Riverside is one of the best college towns in California for its diverse student population, dedicated researchers and abundance of activities for students and their families.

People like living in the city of Riverside as it’s a vibrant community with mountains, deserts and coastal areas close by. It’s less expensive compared to other Southern California cities, yet you get the perks of California with the rolling hills and close access to beaches in this city.

Riverside is home to the citrus industry, so if you like navel oranges, you’re in luck. If that’s not your thing, don’t worry. Riverside is a sprawling urban area within 60 miles of L.A. Students and residents alike will enjoy the lower cost of living in this city while still having access to everything that makes sunny California great.

The cost of rent averages $1,800 for a one-bedroom apartment and approximately $2,000 for a two-bedroom apartment.

4. Berkeley

berkeley, california

berkeley, california

The college town of Berkeley seems to have it all — a diverse population, great bars and restaurants, a thriving nightlife, great schools from Kindergarten on up, dedicated students and a variety of housing options. Renters are within close proximity to the University of California, Berkeley campus, which is a public land grant university.

People like Cal Berkeley for the diverse higher education programs offered. From liberal arts education to STEM-based degrees, the school offers it all. Renters in Berkeley will love this college town that has a healthy blend of student-related activities near campus and a thriving city apart from the college itself.

Ranked one of the healthiest cities in the nation, Berkeley has great food, fun shops and restaurants and a vibrant live music scene. There are plenty of bike-friendly trails so you can cycle yourself from place to place. It’s a liberal, easy-going area that residents love to call home.

Rent ranges anywhere from $1,850 to $5,100 but rent has decreased by 22 percent overall year-over-year in this college town.

5. Orange

orange california

orange california

Chapman University is in the city of Orange, California. This is a small, private school in a college town located only 15 miles from the beach. The school itself has approximately 10,000 students enrolled but the city of Orange has 139,000 residents. If you live in this California college town, you’ll live near a school dedicated to liberal arts (they’re famous for their film school!) while also getting to enjoy a bigger city atmosphere.

Ninety-two percent of students live on campus during their first year, so as a student, you’re sure to make friends with your dorm buddies. However, if you move off campus you’ll have plenty of rental options and will love living in this vibrant Southern California beach city.

Whether or not you’re a student, residents alike can meander through Hart’s Park or catch a ball game at Angels Stadium. All public schools are highly rated, so it’s a great city for families to settle down. You’ll have access to great parks and the neighborhoods are family-friendly. A lot of young families and professionals settle down here as there are good job prospects, relatively affordable cost of living and easy access to fun things to do.

Rent averages $2,100 to $2,400 for studios, one-bedrooms or two-bedroom apartments.

6. Malibu

malibu, california

malibu, california

Pepperdine is a very small, private university with 9,000 students enrolled annually. Malibu itself is fairly small when compared to other California towns, with 13,000 residents. Pepperdine is a great college town because of the proximity to amenities in Malibu and the tight-knit community on campus. The Pepperdine student community is strong and students can live on or near campus and participate in a variety of student-led activities.

Outside of the campus itself, the city of Malibu is a glamorous Southern California city known for its beaches, amazing climate and frequent celebrity sightings. If you’re a renter looking for a mix of student life nearby and picturesque California glam, Malibu is the college town for you.

Keep in mind that Malibu is as expensive as it is glamorous. Rent is between $4,900 and $5,500 a month. While you’ll pay a pretty penny to live here, residents all love it. There are ample beaches to enjoy, safe neighborhoods with low crime rates and an amazing school system.

7. San Francisco

san francisco, ca

san francisco, ca

The University of San Fransisco is one of the colleges located in this famous tech city. Students and renters will enjoy calling San Francisco their college town while having access to campus life, too. San Fran is known for its liberal and diverse population and the university prides itself on its commitment to inclusiveness, equality and social justice.

Other benefits of living in this college town are your access to the San Francisco Bay, Golden Gate Bridge and the amazing downtown scene. You’ll enjoy cooler weather and more foggy days but also have sunny days to enjoy the outdoors. This big college town offers everything from outdoor adventures to downtown life.

San Fran residents love this area. You have a metro downtown with amazing restaurants and shops. There’s access to world-class destinations like the Golden Gate Bridge. You can enjoy an afternoon at Golden Gate Park and then head to the city for dinner that night.

San Fransisco is one of the most expensive cities in the world, though, so keep that in mind before deciding to settle in this California college town. You should plan to budget anywhere from $3,400 to $4,500 to live in the Bay Area.

8. Santa Barbara

santa barbara, a college town in california

santa barbara, a college town in california

Located on the coast, UC Santa Barbara is a college town in — drumroll please — Santa Barbara, CA! The school itself has nearly 24,000 students enrolled each year, making it a large public school in the state. It’s one of the top-rated universities in the country and has produced several Nobel Prize winners.

Not only is it a great college, but the city of Santa Barbara is also top-notch. Renters will enjoy amazing beaches, breathtaking cliff-side views, endless trails and walking paths and good weather almost all year long.

People living in Santa Barbara talk about the sense of community they feel living here. You’ll enjoy a close-knit community in one of the most gorgeous beach-side cities in California. Rent ranges from $2,400 to $3,200 in Santa Barbara.

9. San Diego

san diego, california

san diego, california

San Diego State University is a public university located in San Diego. The school population is large with more than 35,000 students. Living in this college town near campus, you’ll be surrounded by students who are eager to learn and cheer on the basketball team, the Aztecs. Another college located in this city is the University of San Diego.

Living in San Diego comes with perks, too. You’ll be located near the beach and can visit the famous San Diego Zoo. If that’s not your thing, you can enjoy great seafood, try a new coffee shop or go whale watching, hiking or biking. Renters can expect to pay between $2,300 and $3,400 in rent, but prices may vary for on-campus housing. San Diego is one of the best places to live in California.

10. Claremont

homes in claremont, california

homes in claremont, california

Claremont is a great California college town and is home to Pomona College, a small, liberal arts college. With a small student body of 2,000 students, residents of Claremont can live close to the college campus without having the overwhelming number of students that other state schools have.

Living in Claremont you’ll have a suburban feel and are friendly with your neighbors, but L.A. is only 35 miles away so you have quick access to a big city, too. Claremont is great for parks, fine arts and food. Rent ranges from $1,600 to $1,900 for one and two-bedroom apartments.

Living near a college town

Like all things, living near a college town has its pros and cons. Pros include lots of housing options, a younger population of eager students, several restaurants and bars and a thriving nightlife. Depending on your perspective, cons can include too many young students and party-goers and potentially worn-down housing from college students residing in them.

However, we can all agree that living in California near a college town, you’ll enjoy the perks of California weather, good food, friendly people and a variety of housing options that fit your needs and budget.

Source: rent.com

Gross Domestic Product (GDP) – What Is This Economic Indicator?

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Additional Resources

Gross domestic product (GDP) is one of the most commonly used measures of economic production in the world. Despite its popularity, many people don’t know exactly what GDP is, how to calculate it, or how it affects you.

Put simply, GDP is the total value of everything produced by an economy, typically a country, over a period, typically one year. This allows economists to compare the size of different economies. In general, the higher a country’s GDP, the stronger its economy.

GDP can be important for everyday people for a number of reasons.


What Is Gross Domestic Product (GDP)?

GDP is a measure of the total market value of everything an economy produces. That includes both physical goods as well as intellectual property and services produced by an economy. GDP is typically measured over the course of a quarter or year and based on political borders, such as for countries or states.


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You can think of GDP as being like a report card or scoreboard for the health of an economy. If a country’s GDP is rising, it means its economy is becoming more productive. If GDP is shrinking, its economy is becoming less productive. You can compare the size of two countries’ GDP to compare the output of their economies.

There are multiple ways to calculate GDP but they all aim to produce a similar result: a measure of the size of an economy.


Factors That Affect GDP

Because GDP measures the size of a country’s economy, it is influenced by numerous economic factors.

GDP is the sum of the market value of everything an economy produces. The more valuable goods and services an economy produces, the higher its GDP will be. Keep in mind, GDP is a measure of the current value of goods and services. If inflation causes prices to rise, a country’s GDP will also rise because goods are more expensive.

The primary way economists determine the value of goods produced by an economy is to add all government spending, personal consumption, private investing, and net exports. 

The more the government spends, the more private businesses and people invest, and the more consumers spend, the higher a country’s GDP will be. Exporting more than it imports will also increase a country’s GDP, whereas importing more than it exports will reduce its GDP.


Types of Gross Domestic Product

GDP is used in multiple different contexts. Economists have designed different types of GDP to help them measure different aspects of the economy.

Nominal GDP

Nominal GDP is one of the most common measures of gross domestic product. It is the value of all goods and services an economy produces using current prices, unadjusted for inflation. This means it is less useful for comparing the same economy across different years because inflation can cause GDP to rise due to price increases, even if an economy’s output does not change. 

However, it is useful for measuring output in current terms and is often the simplest to calculate because you don’t have to adjust for inflation.

Real GDP

Real GDP is an inflation-adjusted measure of gross domestic product. It measures the output of an economy using constant prices.

For example, imagine an economy that produces $1,000 worth of goods in a year. The next year, it produces the exact same goods, but those goods sell for $1,050 because inflation for the year is 5%. 

The real GDP in both years will be the same because real GDP adjusts for inflation using the value of the economy’s currency in the base year to determine the GDP for future years.

For real GDP to increase, the output of an economy must increase rather than prices increasing due to inflation.

This makes real GDP useful for comparing changes in the same economy over time or comparing growth in different countries’ GDPs over time.

GDP Per Capita

GDP per capita is a measure of economic production per population. GDP per capita can be expressed in multiple forms, including nominal, real, and purchasing power parity.

Determining GDP per capita requires calculating an economy’s GDP then dividing it by the economy’s population.

For example, if an economy has a GDP of $10 million and a population of 2,000 people, its GDP per capita is: $10 million ÷ 2,000 = $5,000 per capita.

GDP Growth Rate

GDP growth rate measures economic growth over time. Usually, economists measure this on a quarterly or annual basis. This is typically expressed as a percentage rate.

For example, if an economy’s GDP is $10 million in one year and $10.5 million the next, its GDP growth rate is 5%.

GDP growth rate is a popular measure for economists for a few reasons. One is that it can help economists see the speed of an economy’s expansion or contraction. An economy that is growing too quickly may lead to inflation and prompt central banks to raise interest rates. If growth slows, the economy might be heading toward recession, prompting policymakers to attempt to bolster the economy.

A negative GDP growth rate indicates an economy that is shrinking or in recession.

GDP Purchasing Power Parity (PPP)

Purchasing power parity is a measure of the different standards of living between economies. It analyzes the price of a “basket of goods” that contains different common products and services people purchase. Higher PPP indicates a more powerful currency that can purchase more goods or a higher standard of living.

GDP PPP adjusts an economy’s GDP for exchange rates and the purchasing power of its currency compared to other currencies, letting economists compare the output of an economy to its cost of living.


How GDP Is Calculated

There are multiple different ways to calculate GDP but they all aim to measure an economy’s output. Each formula tries to account for the same factors, just in different ways. 

There are three methods economists use to calculate economic activity and determine GDP.

Expenditure Approach

The expenditure approach looks to determine the GDP of an economy by finding the total of all spending in that economy. The idea is that all of an economy’s outputs are purchased by someone, so finding out how much money is spent by individuals, businesses, and the government will tell you the value of all the goods an economy produces during a period of time.

To find GDP using the expenditure approach, you can use this formula:

Consumption + Investment + Government Exports + Net Exports = GDP

Consumption refers to consumer spending on items like food, rent, gas, clothing, and any other goods and services that they might need. It does not include capital investments like equipment, machinery, or real estate.

Investment is the portion of the calculation that accounts for investment in equipment, land, machinery, and the like by both individuals and businesses. It doesn’t include investment in financial products like stocks, bonds, or mutual funds.

Government spending is the aggregate of all the money the government spends on goods and services, including government employee pay, military spending, and infrastructure. Things like Social Security benefits aren’t included because they are transfer payments — a reallocation of money from one group to another. Unemployment, subsidies, and welfare are similarly excluded.

Finally, net exports measures the value of all goods an economy exports minus the value of the goods it imports. A country that exports more than it imports will have a positive value for net exports, whereas one that imports more will have to subtract the difference when finding its GDP.

The drawback of the expenditure approach is that it ignores some forms of investment, such as putting money in savings accounts or buying stocks. It also values goods and services at the price the purchaser pays, even if they pay a heavily discounted price below the true value of that good or service or an inflated price above its true value.

Production (Output) Approach

The production, or output, approach to calculating GDP uses the value of all the final goods that an economy produces. Here’s how this method of calculating GDP looks:

Gross Value Added – Intermediate Consumption = Value of Output (GDP)

  • Gross Value Added. How much value different economic activities add to goods and services.
  • Intermediate Consumption. The cost of the supplies and labor used to produce finished goods and services.
  • Value of Output. This calculation gives you the GDP of an economy by subtracting intermediate consumption from the gross value of an economy.

The drawback of using this approach is that it is nearly impossible to determine the true amount of production in an economy or the true value of that production. Some services are difficult to measure monetarily and may not wind up in the calculation, even though they have a major impact on the economy.

For example, someone who babysits children for a family probably won’t show up in this calculation. However, their babysitting lets the parents go out and spend money at restaurants, movie theaters, or other businesses.

People who produce goods at home, especially those who don’t sell them, also won’t have their production included, even though goods like home-grown vegetables have real value that should be included in GDP.

Finally, this method fails to account for the underground economy, which is not reported to the government. Services performed under the table — those done outside of the formal economy through barter or cash payments that aren’t reported to tax authorities — are excluded even though they add value to the economy.

Income Approach

The income approach to determining GDP looks at all the money individuals and businesses in an economy earn. To find GDP using this method, you can use the following formula:

Wages, salaries, and bonuses + Corporate profits + Interest and investment income + Farm income + income from unincorporated businesses – Depreciation of assets – (indirect taxes – tax subsidies) = GDP

Indirect taxes are those collected by intermediaries and then paid to the government, such as sales taxes. Tax subsidies include the various tax credits and deductions people and businesses can claim on their income taxes.

The benefit of this approach is that it can be easier to measure income than production. It stands to reason that the amount of income in an economy will be similar to its economic output because that output is what produces the income.

The drawback of this approach is that it fails to account for savings and investment. Also, income does not always perfectly correlate with production. For example, productivity at a factory can rise without workers seeing an increase in their incomes.


How GDP Affects You

GDP is one of the economic indicators groups like the Bureau of Economic Analysis and the Organization for Economic Cooperation and Development (OECD) use to analyze economies. However, it may not be obvious how GDP can affect you.

The truth is, macroeconomics and measures like GDP can have a major impact on people’s day-to-day lives and well-being.

Interest Rates

One way GDP can impact people is in the interest rate market.

Countries usually have central banks or other organizations tasked with managing the economy — helping it to grow while avoiding high inflation and recessions. If GDP begins to rise quickly, inflation can become a risk, which can cause central banks to raise interest rates.

Those rate increases impact individuals by making borrowing and credit more expensive, such as with mortgages, auto loans, and credit cards.

If GDP falls, the central bank may take the opposite approach, lowering rates and making it cheaper to borrow, encouraging individuals to spend.

Investing

GDP is one of the most popular measures of an economy’s output. You can use it to see how an economy is growing over time.

Investors typically want to buy investments in companies that are experiencing increases in production, and therefore value. When GDP is growing, it’s easier for investors to find opportunities in that economy. When an economy’s GDP is falling, it can be a sign that companies in that economy are facing a difficult financial future.

Wages

Because GDP is a measure of economic output, it makes sense that wages would correlate with GDP. When production and output rise, workers should earn more. Similarly, wages might decrease when output also falls.

According to a study by the Economic Policy Institute, this was largely true for a long period of time. Between 1950 and 1980, productivity and wages increased similarly. Since 1980, productivity has increased while wages have not seen significant changes in real terms.

Unemployment

Modern economies rely on constant growth, with periods of shrinking GDP referred to as recessions. Typically, when GDP growth is strong, unemployment falls. Recessions can lead to significant amounts of unemployment as employers lay off workers or go out of business.

According to data from Pew Research, recessions directly lead to rising unemployment, with the 1990-1991 recession causing unemployment to rise from just under 6% to about 8%. Similarly, the Great Recession of 2007-2009 caused unemployment to rise from just over 4% to a high of nearly 10%.

As GDP began to grow again after these recessions, employment began to rise.


Criticisms of GDP

GDP is a useful economic measure used by organizations like the World Bank, International Monetary Fund (IMF), United Nations, and economists across the world. However, that doesn’t mean GDP is a perfect measure of the economy. There are many criticisms of GDP and situations where using GDP data to make decisions might not be a good idea.

These important economic factors are overlooked in traditional measurements of GDP:

  • Recessionary Hangovers. By definition, a recession ends when an economy’s GDP begins to rise after a period of decreasing. However, even when a recession technically ends, it can take years before the economy returns to its pre-recession level. For example, despite the Great Recession’s end in 2009, it took nearly a decade for unemployment to return to pre-recession levels.
  • Impacts of Credit. Not all spending in an economy comes from the income it generates. Individuals, corporations, and governments borrow money to spend on goods and services. The costs and impacts of this debt are not fully accounted for in GDP even though they can have massive impacts on an economy.
  • The Underground Economy. For many reasons, economic activity can occur outside of the usual channels, making it hard to track. The sale of illegal goods, for example, is rarely tracked and included in GDP even though those are technically goods produced by an economy. Similarly, someone working under the table or without an officially incorporated business might not report their income or sales, causing that production to be excluded from GDP.
  • Bartering. Related to the underground economy, some economic activity relies on bartering or the exchange of valuables other than cash. This type of activity usually doesn’t show up in GDP even though it can play a significant role in an economy, especially in the middle of a recession.
  • Unpaid Work. Many people perform valuable work, such as caring for children or older relatives, without any compensation. This work produces immense value but isn’t counted in GDP calculations.
  • Sustainability. GDP is purely a measure of economic production. It does not account for damage to the local environment or whether actions that are causing growth now will cause the economy to shrink in the long run. Nations that raze their forests, strip-mine their land, and build factories that pollute the air can see major GDP growth, but will likely find that growth unsustainable as they drain or degrade the natural resources that are available.

Gross Domestic Product FAQs

What’s the Difference Between GDP vs. GNP vs. GNI?

Gross domestic product (GDP), gross national product (GNP), and gross national income (GNI) are all macroeconomic measures that look at slightly different things.

GNP adjusts GDP for net income earned from outside the country’s borders. For example, if some of the income produced by a multinational organization within a country is sent to another nation, it is subtracted from GNP even though it is included in GDP.

GNI measures all of a nation’s income, including income earned by its residents and businesses including all income from foreign sources. It includes income its residents earn while abroad but excludes income earned by foreign residents within its borders.

Does GDP Include Inflation?

GDP measures the value of an economy’s output based on current values. That means changes in inflation impact GDP. If inflation makes goods cost more, those higher prices will cause GDP to rise.

Real GDP is a measure of GDP that adjusts for inflation, calculating the value of goods and services at a set monetary value. This measure is more useful for measuring GDP changes over time because it removes the rise in GDP caused by inflation.

What Does GDP Not Measure?

One of the criticisms of GDP is that it fails to measure many important aspects of economic activity.

One major factor GDP excludes is the underground economy, which includes everything from the sale of illegal goods and services to unreported cash transactions and barter transactions.

GDP is also limited in that it is solely an economic measure. GDP doesn’t account for important quality-of-life measurements like the availability of quality health care and education, equality, opportunity, or the environment.

This limitation has led to other measures that provide a more complete look at people’s well-being. For example, Bhutan’s government has designed the concept of Gross National Happiness, which tries to account for economic development alongside sustainability, environmentalism, preservation and promotion of culture, and good governance.

What Countries Have the Highest GDP?

There are multiple types of GDP, including nominal GDP, GDP per capita, and GDP PPP, which all measure slightly different things.

According to the World Bank, in terms of nominal GDP, which simply measures economic output, the top three countries are:

  1. United States ($20.953 trillion)
  2. China ($14.722 trillion)
  3. Japan ($5.057 trillion)

For GDP per capita, a measure of output compared to population, the top three are:

  1. Liechtenstein ($175,813 per capita)
  2. Monaco ($173,688 per capita)
  3. Luxembourg ($116,014 per capita)

For GDP PPP, which measures output while controlling for the purchasing power and cost of goods in different currencies, the top three are:

  1. China ($24.283 trillion)
  2. United States ($20.953 trillion)
  3. India ($8.975 trillion)

Final Word

GDP is a popular macroeconomic measure that tries to calculate the total value of an economy’s outputs. Despite its popularity, there are limits to GDP, and each different way of calculating it has pros and cons.

GDP can have some impacts on people’s everyday lives. Generally, financial times are good when GDP is growing and bad when it’s falling. Most people can feel satisfied understanding that simple fact and leave the more complicated measures and implications of GDP to central bankers and economists.

There are plenty of other economic indicators and measures that have a more direct impact on people’s lives. For example, the Consumer Price Index (CPI) is a measure of inflation and how it impacts the price of goods people buy regularly.

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TJ is a Boston-based writer who focuses on credit cards, credit, and bank accounts. When he’s not writing about all things personal finance, he enjoys cooking, esports, soccer, hockey, and games of the video and board varieties.

Source: moneycrashers.com

The Cheapest Neighborhoods in Las Vegas for Renters in 2022

Come for the fun, and stay because you just can’t leave!

If you want to have some adult fun, Las Vegas is the place to go! But many people are looking for something a bit more permanent and are choosing to turn this city into the place they call home. In fact, it’s one of the fastest-growing cities with an annual average growth rate of 1.21 percent. In the past 10 years, the population has grown nearly 16 percent.

It’s no wonder why so many people want to move here. A New York Times article recently reported that Nevada is one of the top destinations for Californians trying to escape the high cost of living on the West Coast.

While the cost of living in Las Vegas isn’t one of the lowest in the country, it’s still significantly lower than on the West and East coasts. And you’ll find that even the cheapest neighborhoods in Las Vegas have some beautiful apartments that just might fit all your needs!

What is the average rent in Las Vegas?

The average cost of a two-bedroom apartment for rent in Las Vegas is $1,847 per month. Rent prices rose by nearly nine percent over the past 12 months.

While no one likes a price hike, some renters might find comfort in the fact that this rent increase is one of the lower increases. Many neighborhoods across the country had 15, 25 or 30 percent increases. Salt Lake City, UT, saw a rise of over 40 percent, while New York City prices rose nearly 50 percent.

Thankfully, this is just an average, which means there are plenty of cheaper neighborhoods in Las Vegas where you can find apartments that won’t break the bank.

The 10 most affordable neighborhoods in Las Vegas

If you’re on a tight budget, apartment hunting can seem daunting. Thankfully, we have you covered! Here are some of the cheapest neighborhoods in Las Vegas and why you should consider checking them out.

10. Southeast Las Vegas

Southeast Las Vegas

Southeast Las Vegas

  • Average 2-BR rent: $2,162
  • Rent change since 2021: +112.78%

Despite having the second-highest increase of the 15 neighborhoods we evaluated, Southeast Las Vegas is still one of the most affordable neighborhoods in Las Vegas.

There are some fun attractions in the area, like The Neon Museum, a non-profit organization started in the mid-90s to preserve something Las Vegas uses extensively, the neon light.

If you’re a nature-lover, you’ll be happy to know that Springs Preserve is right within the boundaries of your neighborhood. This 180-acre institution features botanical gardens and an interpretive trail system that takes you through scenic wetlands. The Preserve also hosts outdoor events (like amazing concerts) and is also home to several museums and galleries.

9. The Canyons

The Canyons

The Canyons

  • Average 2-BR rent: $2,108
  • Rent change since 2021: +41.44%

The Canyons is a residential neighborhood home to young professionals and retirees. Not many families live in the area, which means the neighborhood is relatively calm and quiet. The average commute takes approximately 25 minutes. Nearly everyone owns a vehicle because public transit in the area isn’t that great. Thankfully, it’s one of the cheapest neighborhoods in Las Vegas, so you’re better able to afford to own a vehicle.

Nearby is the Chamberlain University College of Nursing, an accredited, three-year nursing school with a 97 percent National Council Licensure Examination (NCLEX®) first-time pass rate. Thankfully, since this is one of the most affordable neighborhoods in Las Vegas, students can focus more on their studies and less on rental rates.

8. Peccole Ranch

Peccole Ranch

Peccole Ranch

Source: Rent.com/The Avondale
  • Average 2-BR rent: $1,929
  • Rent change since 2021: +39.30%

Parents looking for highly-rated public schools in the area should visit the Peccole Ranch neighborhood. The area has a good mix of families, retirees and young professionals. A slight majority of residents rent properties, which means there’s a variety of homes in the area, including single-family homes with yards and garages, as well as townhouses, condos and apartment complexes.

In addition to having some of the best schools in the city, Peccole Ranch is one of the cheapest places to live in Las Vegas — a win-win for parents!

Residents enjoy daily walks along the Paseos walking paths, which are great for exercise or just to enjoy the beauty of the area.

7. Lone Mountain

Lone Mountain

Lone Mountain

  • Average 2-BR rent: $1,828
  • Rent change since 2021: +39.17%

Lone Mountain is one of the top-rated neighborhoods in Las Vegas, in part due to its proximity to Downtown Las Vegas and the North Las Vegas Airport.

You’ll find two parks in the area that just might become your home away from home. In addition to the usual park amenities (picnic pavilions and playgrounds), Lone Mountain Regional Park also has walking trails and an equestrian center. The other park in the area is Majestic Park. This park has plenty of open space for frisbee, soccer and playing with your kids and pets. The park also has picnic areas, softball fields and playgrounds.

Though the area has a higher cost of living than the national average, Lone Mountain is still one of the cheapest neighborhoods in Las Vegas.

6. Centennial Hills

Centennial Hills

Centennial Hills

  • Average 2-BR rent: $1,711
  • Rent change since 2021: +22.48%

Centennial Hills has diverse home options, so there’s something for everyone. If you like townhomes, this neighborhood has them. If you prefer apartments or condos, you’ll find them here, too. Of course, there are also single-family homes, new construction, vacant lots for custom homes and resale properties, as well.

Because the community is growing, businesses are starting to move into the area, increasing growth. In addition to some locally owned businesses, you’ll also find well-known, national stores like Trader Joe’s. Because of this, there are more jobs in the neighborhood, and it’s easier for locals to run errands and get their daily essentials.

One of the perks of this neighborhood is that it’s not close to The Strip. The benefit of living about 30 miles from Downtown is that the Centennial Hills is more tranquil than communities closer to Las Vegas. It also means that Centennial Hills is one of the most affordable neighborhoods in Las Vegas.

5. Southwest Las Vegas

Southwest Las Vegas

Southwest Las Vegas

  • Average 2-BR rent: $1,688
  • Rent change since 2021: +33.72%

For those who want to live in a large community, we recommend checking out Southwest Las Vegas. It’s one of the largest areas in the entire Las Vegas Valley. Though it’s close to The Strip, it’s still far enough away to stay safe and to keep its rustic charm and rural character.

Despite its proximity to The Strip and Downtown Las Vegas, home and rental prices in the area are quite low, making this one of the cheapest neighborhoods in Las Vegas. If you’re a fan of Mediterranean-style homes, you’ll find lots of eye candy in the area, with stucco and red tile roofs in abundance.

Close to the I-15, it’s an easy commute from Southwest Las Vegas to other parts of the city. While there are some bus routes — as well as Lyft and Uber drivers — in the area, most residents prefer to own a vehicle.

4. The Section Seven

The Section Seven

The Section Seven

Source: Rent.com/Breakers
  • Average 2-BR rent: $1,547
  • Rent change since 2021: +23.53%

The Section Seven neighborhood is ideal for people who want close proximity to City Center but like suburban living. The residential community has apartment complexes, in addition to single-family residences. Apartments in The Section Seven are affordable yet have all the modern conveniences and amenities you could want.

The neighborhood is in close proximity to plenty of entertainment, shopping, dining and employment opportunities. The area is also close to freeways, making the commute faster and easier. You’ll find beautiful walking trails nearby, too.

Residents appreciate the strong sense of community in the area with plenty of community activities, like movies in the park.

3. Canyon Gate

Canyon Gate

Canyon Gate

Source: Rent.com/Shelter Cove
  • Average 2-BR rent: $1,425
  • Rent change since 2021: +24.32%

Young professionals make up the majority of residents in Canyon Gate, and there’s a 50/50 split between renters and homeowners.

The neighborhood is nearly 12 miles southwest of Downtown Las Vegas, and most residents have a 20-30 minute commute to work or to go shopping.

One of the reasons Canyon Gate is one of the cheapest neighborhoods in Las Vegas is that it has a dense, suburban vibe. It consists primarily of residential communities, small shopping centers and locally owned businesses. It doesn’t have quite as many amenities as more urban neighborhoods. And yet, that’s something that residents appreciate because it makes the community feel safer and more tranquil.

2. Rancho Oakey

Rancho Oakey

Rancho Oakey

Source: Rent.com/The Neon Apartments
  • Average 2-BR rent: $1,365
  • Rent change since 2021: +6.25%

Located less than four miles from the Las Vegas Strip is the community of Rancho Oakey, which is in the heart of the arts district. Though there are plenty of restaurants, museums and fun nightlife activities, Rancho Oakey doesn’t have the same busy vibe as the Downtown area. And that’s what makes it so popular.

If you’re a lover of the great outdoors, you’ll be happy to know that this neighborhood is close to Springs Preserve. So, you, too, will get to enjoy the trails, botanical gardens, outdoor exhibits and so much more the Preserve has to offer.

1. Twin Lakes

Twin Lakes, the cheapest neighborhood in Las Vegas, NV

Twin Lakes, the cheapest neighborhood in Las Vegas, NV

Source: Rent.com/Solstice
  • Average 2-BR rent: $947
  • Rent change since 2021: 0%

Of all the cheapest neighborhoods in Las Vegas, Twin Lakes is the most affordable. The cost of living in Twin Lakes is less than the Las Vegas average and the U.S. average.

Residents in the area say the neighborhood makes it easy to run errands on foot — like going to convenience stores or the post office. It’s also close to the Interstate, which makes it easy to get to Downtown Las Vegas and restaurants and attractions in the area.

Locals say they like that Twin Lakes is a pretty neighborhood with very friendly neighbors.

The most expensive neighborhood in Las Vegas

We’ve looked at the cheapest neighborhoods in Las Vegas, but what about the most expensive? Is it really out of your budget?

The most expensive neighborhood is East Village. In this community, the average monthly rental rate is $2,975. Rental fees rose in this area by 1.99 percent in the past 12 months, which is one of the lowest rates of all the Las Vegas communities we evaluated.

East Village serves as one of the entrances to Downtown Las Vegas. The community has undergone rejuvenation and renovation projects in recent years, including updating parks and remodeling/reusing old motels for new uses.

Residents like the neighborhood’s proximity to several public transit options. They also like that it’s a quick trip to get to their favorite restaurants, bars and nightlife activities. And even though it’s close to the Downtown area, residents say it’s a quiet area with friendly neighbors.

Find an affordable neighborhood for your next apartment

Finding the ideal apartment is only half the battle when you’re moving to a new area. You also need to know that your apartment is in the best neighborhood for your needs. Things to consider include whether it’s the most affordable neighborhood in Las Vegas and if it’s close to the amenities you need (doctor’s offices, shopping, restaurants, work, etc.).

You can find the best neighborhoods and apartments for rent in Las Vegas with our listings feature. Using our search filters, we can help narrow your search to make finding a rental faster and easier.

Rent prices are based on a rolling weighted average from Rent.com’s multifamily rental property inventory as of January 2022. Our team uses a weighted average formula that more accurately represents price availability for each unit type and reduces the influence of seasonality on rent prices in specific markets. The rent information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment.

Source: rent.com