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Apache is functioning normally

June 9, 2023 by Brett Tams

Higher education is rapidly becoming a necessity. Degree holders have better odds in the job market, and the right degree is a great way to follow a passion and make yourself marketable at the same time.

But the costs of college and graduate school are only climbing upward. In order to afford your dreams, you may have to join the 45 million Americans who have student loans.

Borrowing to pay for an education is a definite financial risk, but it can be affordable and manageable if you do it wisely. Ultimately only you can make a decision —and preferably a highly considered decision — about whether you should go into debt to advance your education.

What’s Ahead:

What Are Student Loans?

How Student Loans Work - What are student loans?

Student loans are sums of money you borrow for your education and then pay back over time — in most cases, with interest.

Loans will often be part of your financial aid offer from the school you attend. Look for grants and scholarships first, since those don’t have to be repaid. But if you don’t get a full ride, loans can make up the difference.

Types of Student Loans

How Student Loans Work - What types of loans are available?

In the U.S., there are two categories of student loans: federal and private.

How Do Federal Student Loans Work?

Federal student loans are offered by the federal government, and they account for about 92% of student loan debt in the United States.

There are different types of federal student loans available to different types of students, with varying loan terms.

Direct Subsidized Loans

With a subsidized loan, the government pays the interest while you’re in school and during any periods of deferment (“subsidizing” your education by offsetting the cost). Subsidized loans are available only to undergraduates with demonstrated financial need. The amount is capped to only cover your financial need, as determined by the FAFSA.

Direct Unsubsidized Loans

With an unsubsidized loan, the borrower is responsible for any interest that accrues while they’re in school and afterward. Unsubsidized loans are available to any undergraduate or graduate student. The amount is determined by the cost of attendance at your school and any other aid you’re receiving.

You may hear Direct Subsidized and Unsubsidized Loans referred to as Stafford Loans.

Read more: Subsidized vs. Unsubsidized Loans

Direct PLUS Loans

The U.S. Department of Education offers Direct PLUS Loans to graduate or professional students. They require a credit check and decent credit history. The amount is intended to cover any expenses other aid does not cover.

Direct Consolidation Loans

If you have multiple federal loans, you can combine them into a single loan from a single servicer. The new loan is known as a Direct Consolidation Loan.

Some Facts About Federal Loans:

In most cases, you won’t need a co-signer.
Unless you’re taking out a PLUS loan, you won’t need a credit check.
Interest rates are usually fixed (they stay the same over the life of the loan).
Interest is tax deductible.

How Do Private Student Loans Work?

Private student loans come from lenders not affiliated with the government, such as a bank, a credit union, a school, or a state organization. The amount you can take out and the options for repayment are up to the lender.

Federal loans are typically a better option than private loans since private loans offer much less flexibility.

Some Facts About Private Loans:

You may have to begin payments while still in school.
The loans may require a credit check and a co-signer.
The interest rates can be variable (fluctuating with the financial market).
Some private loan interest rates can be as high as 15%.
Interest might not be tax deductible.

How Do You Apply for Student Loans?

While you’re applying to schools, you’ll fill out a FAFSA, or Free Application for Federal Student Aid. Pay attention to the FAFSA deadlines, which change each year (the deadline is June 30, 2023 for the 2022-23 Academic Year). Usually, the FAFSA will be available starting in the fall for the next fall’s school year.

Read more: Guide to Filling Out the FAFSA

Applying for Federal Student Loans

The federal student aid website has a forecaster tool to predict what level of federal student aid you’ll be eligible for, and what your Expected Family Contribution (EFC) might be. This can give you an idea of how much you’ll likely need to pay out of pocket for your education, and it might also influence the schools you apply to.

When the time comes to fill out the FAFSA itself, gather your tax returns for the previous tax year, current bank and investment account statements, and pay stubs or employment info. If you’re a dependent student, use your parents’ or guardians’ financial information. If you’re an independent student, use your own.

If you’re admitted to a program, your school will send a financial aid offer that may include federal loans. Before receiving federal loan funds, you will:

Complete entrance counseling either in person or online with a financial counselor. You’ll learn your rights and responsibilities as a borrower.
Sign a Promissory Note or Master Promissory Note. This is a legally binding document that lists the terms and conditions under which you will repay the loan. Keep a copy of this document! You’ll need it later.

Applying for Private Student Loans

You can apply for a private student loan directly with the lender, and you don’t need to fill out a FAFSA. Because private student loan interest rates can vary widely, it’s a good idea to compare a number of different lenders before applying.

You can compare multiple private loans simultaneously via a loan marketplace like Credible. With a loan marketplace you enter some of your personal information and you’ll be matched with a list of lenders that are likely to approve your loan. The whole process takes just a few minutes, and it’s a convenient way to check private lenders’ interest rates and loan terms side by side.

Some private lenders, like Stride Funding, offer ISAs (Income Share Agreements) to students rather than traditional interest-based loans. With an ISA you agree to pay your lender a set percentage of your income after graduation for a specific period of time. It’s a good idea to check ISA options if the interest rates you’re quoted for traditional private student loans are exorbitantly high.

Read more: Best Private Student Loans of 2022

What Is the Maximum Student Loan Amount?

Private loan amounts typically won’t exceed your school’s total cost of attendance. Your individual loan amount will be influenced by your credit score, existing debt levels, professional prospects in your field of study, and the financial strength of your cosigner.

Federal loan maximums vary as follows:

Undergrads

Direct Subsidized Loans and Direct Unsubsidized Loans

Undergraduate students can borrow between $5,500 and $12,500 per year, up to an aggregate limit of $31,000 to $57,500.

Specific maximums vary depending on the year of schooling and the student’s status as dependent or independent.

Grad Students

Direct Unsubsidized Loans

Graduate students can borrow up to $20,500 annually and $138,500 aggregate.

Direct PLUS Loans

PLUS loans can cover the remainder of your college costs (the cost of attendance) not already covered by financial aid.

What’s the Maximum Amount You Should Actually Borrow?

How Student Loans Work - How much should you borrow?

Just because you can borrow the maximum amount doesn’t mean you should.

The financial aid offer will estimate your living expenses, and you can turn down a loan or request a lower amount if you feel their estimate is too high. Borrow only what you need. It’s a good idea to calculate your estimated living expenses yourself, with a cushion for the unexpected.

One rule of thumb is not to take out more loans than the anticipated first year’s salary in your field. You can check out our list of the best salary information websites to get a ballpark salary expectation for your profession.

Remember, you’ll still be expected to pay back the loan even if you can’t find work in your field, or if your plans change.

What Can Student Loans Be Used For?

Many students operate under the assumption that their loans can be used to pay for any living expense incurred while they are an enrolled student. They might be surprised to find out that the Federal Student Aid handbook technically limits the use of federal student loans to covering a student’s ‘cost of attendance.’ Permitted expenses include:

Tuition.
Books and other course supplies.
Purchase or rental costs for educational equipment, like a computer.
Exam and portfolio evaluation fees.
On or off-campus housing expenses, like rent or utilities.
Food, like a college meal plan or groceries.
Dependent care expenses, e.g., daycare expenses for your kids while you’re in class.
Licenses or certifications required for coursework.
Study abroad costs, like student visas.
Disability-related expenses.
Public transit expenses to and from school, like bus passes or train tickets.
Operation and maintenance expenses for a vehicle used to transport students to and from school (*not including* car payments or other costs for purchasing a vehicle).

Most private loan contracts include spending guidelines similar to the above.

Of course, your lender is unlikely to monitor how you utilize your student loan disbursements. But treating student loans as a free-for-all is a recipe for overspending and overborrowing.

You can minimize the amount of debt you incur while studying if you use your loans only for bonafide educational necessities. So hold off on that Cancun vacation until after you’ve graduated and landed a high-paying job.

How Does Student Loan Interest Work?

Remember calculating interest rates in middle or high school math classes? Fortunately, you don’t need to dust off your SAT prep book before taking out a loan, but you should know how interest rates affect your finances before you borrow.

Interest is money paid to a lender at a particular rate in exchange for borrowing a given sum. An interest rate is calculated as a percentage of your unpaid loan amount, also known as the principal. You are responsible for paying interest on any unsubsidized loans.

Federal Student Loan Interest Rates

The interest rates for federal loans are fixed, meaning the rates won’t change over the life of the loan. The rates are determined by Congress, and they vary depending on when the loan was first disbursed.

Below are the rates for loans disbursed after July 1, 2022, and before July 1, 2023.

Direct Subsidized and Unsubsidized Loans for undergraduates: 4.99%.
Direct Unsubsidized Loans for graduate and professional students: 6.54%.
Direct PLUS Loans: 7.54%.

Private Student Loan Interest Rates

Private loan interest rates are determined by the lender, and they may be fixed or variable. With a variable interest rate, the rate may change over the life of the loan.

Private student loan interest rates may range from 1% to 15%, depending on the borrower’s credit score. As of July 25, 2022, Credible reports that 5-year variable-rate private student loans average 4.78% interest. 10-year fixed-rate private student loans average 7.22% interest.

How to Calculate Student Loan Interest

To calculate the amount of interest that accrues on your student loan, divide the loan’s interest rate by 365.25 — the number of days in the year, including Leap Year. This number is the interest rate factor, or the daily rate on your loan.

For instance, a loan with a 5% interest rate (.05 divided by 365.25) would have a daily rate of 0.00013689253.

You can use the interest rate factor to calculate how much interest accrues on your loan from month to month. Use the daily interest formula:

Outstanding principal balance (how much of the loan remains unpaid) x the number of days since your last payment x the interest rate factor you figured out above = interest amount.

You can also use MU30’s loan calculator to determine how much interest a given loan will accrue.

When Does Student Loan Repayment Start?

How Student Loans Work - When and how do you pay loans back?

Repayment options are flexible (especially for federal loans) and can change as your life situation changes.

You can apply for deferment or forbearance — a period of time where you don’t have to pay back the loan — on federal loans and some private loans. If you have an unsubsidized loan, the interest will keep accumulating during deferment.

Paying Back Federal Student Loans

If you have federal loans, you won’t need to pay them back as long as you’re in school at least half time. You can start paying back early if you choose. There are no prepayment penalties.

After graduation, you’ll usually have a six-month grace period before your repayment schedule begins. Then your lender will ask you to choose a repayment option.

Each option requires you to pay a different amount per month. The more you can pay per month, the less you’ll pay overall.

Remember the daily interest formula above — if you make larger payments, you’re chipping away faster at the unpaid principal, which results in less accrued interest. By the same token, if you make smaller payments, you’re likely to pay more money overall, since the interest will add up.

The repayment plans below apply to every federal loan except Perkins Loans. If you have a Perkins Loan, the school (your lender) should inform you about repayment options, which will vary.

Standard Repayment Plan

You pay a fixed monthly amount with the goal of paying your loan off in 10 years (30 years for a Direct Consolidation Loan, which tends to be larger).

Graduated Repayment Plan

You start out with smaller payments, which then increase every two years — again, with the goal of paying off the loan in 10 years (30 years for a Direct Consolidation Loan).

Extended Repayment Plan

You pay monthly on a fixed or graduated plan with the goal of paying the loan in 25 years. This option is only available to borrowers with $30,000 or more in debt.

Revised Pay As You Earn Plan (REPAYE)

Your payments are capped at 10% of your discretionary income. Discretionary income is the difference between your income and 150% of the poverty guidelines for your state and family size.

Income-Based Repayment Plan (IBR)

You pay, monthly, either 10% or 15% of discretionary income, based on the date you received your first loans. You’ll never pay more than what you would have paid under the standard plan.

With this plan, the amount of your payments is reassessed every year based on how your income and household have changed. After 20-25 years, any outstanding balance on your loans will be forgiven.

Income-Contingent Repayment Plan

Each month, you’ll pay the lesser of 20% of your discretionary income or the amount you’d pay monthly with a fixed payment over 12 years. Payments are recalculated each year based on your income and family size. Any amount not repaid in 25 years will be forgiven.

Income-Sensitive Repayment Plan

You make monthly payments based on your annual income for up to 10 years.

If you find you can’t afford your payments, get in touch with your loan servicer and see if you can switch to a more affordable plan. Nonpayment will hurt your credit and may eventually lead to default.

Paying Back Private Student Loans

Immediate Repayment Plans

Some private loans may require payment while you’re in school, but this isn’t cut and dried. You may find that you can pay interest only or make a reduced payment during the time you’re in school. Some private loans require that you make the same full payments whether you’re still in college or not.

Deferred Repayment Plans

Many private lenders now let you delay payment until graduation. You may even find they give you a grace period of six months or longer after graduation to start making payments. This can help take some of the pressure off while you’re looking for that first job.

Flexible Deferment Plans

With some lenders, you can occasionally skip a payment or put off paying for a while when you’re going through a tough time. Another benefit you may get with some private loans is the ability to renegotiate (refinance) a high variable interest rate.

Refinancing Student Loans

Refinancing a loan is when you replace your current loan with a new loan that offers more favorable terms. Whether you have a private or federal student loan, refinancing is always an option.

Refinancing is particularly attractive when your new loan offers a significantly lower interest rate than your existing loan. But it can also be a good idea if you have multiple loans that you want to combine into one, as it’s easier to stay on top of only one payment.

When considering refinancing, it’s important to take a close look at any fees you’ll be charged. While you can save on interest by refinancing, hefty origination fees might eat into those savings considerably.

Read more: Student Loan Refinancing Options

Summary

As tuition skyrockets and a college degree becomes more necessary for a middle-class life, student loans play a bigger and bigger part in most people’s financial lives.

Student loans can be scary, overwhelming, and painfully tedious to contemplate. But knowing what you’re getting into — in terms of interest rates and repayment plans — can take some of the terror out of borrowing large sums to finance your future.

Apache is functioning normally

June 9, 2023 by Brett Tams

We at The Motley Fool have always been champions of the individual investor, encouraging each person to take control of her or his financial destiny. In theory, the transition of America’s retirement apparatus from defined-benefit plans — i.e., pensions that pay a monthly amount — to defined-contribution plans — such as 401(k)s and 403(b)s — is consistent with this Foolish philosophy. The individual makes all the contribution, investment, distribution, and inheritance decisions, whereas with a defined-benefit pension, the worker has very little control.

However, for the majority of Americans, the transition away from defined-benefit has not been to their benefit. It requires each person to become an investing expert and financial planner in their spare time, and too many Americans don’t seem to have the time, interest, inclination, or skills.

According to the Employee Benefit Research Institute, the average 401(k) account is a tad over $60,000; those within a decade of retirement have a bit more, with an average balance of $78,000, but more than a third have less than $25,000. Almost half of workers (43%) between the ages of 45 and 54 reported they weren’t saving anything for retirement.

Not that traditional defined-benefit pensions don’t have their own problems. Many are underfunded, and the benefits accrue mostly to workers who stay with the same employer for many years, which is less common in today’s mobile workplace. But it’s clear that 401(k)-based retirement planning will result in not much of a retirement for many workers.

We can chalk a good deal of this up to people not taking responsibility for their finances, but the problem also lies with the 401(k) system itself. Employees are stuck with the plan and the investments that have been chosen by the employer and/or HR department (who may be fine people, but not necessarily investment experts). Too often, the fund choices are mediocre or worse, and the costs are high.

Get Ready to Look Under the Hood
Unfortunately, you likely don’t know the true costs of your 401(k). They’re hidden in boring legal filings or embedded in the expense ratios of the mutual funds within the plan. But that’s all about to change.

Beginning later this year, 401(k) plans will be required to disclose how much the administration of the plan and the investments is costing participants. This is important information, since — according to human resources consultant Towers Watson — an increase of 0.5% of expenses (i.e., $50 for every $10,000 invested) could consume eight years’ worth of savings for an above-average earner. After all, the $30 billion to $60 billion the financial-services industry makes from 401(k)s each year doesn’t grow on trees; it’s usually taken directly from investors’ accounts.

The amount of fees being extracted from 401(k) accounts may be shocking to some investors. Indeed, many might be surprised they’re paying fees at all, if an AARP survey is to be believed, which found that 70% of worker didn’t know they were paying fees. Alas, that is just not the case.

With the new disclosures, it will be easier to see what you’re paying, and whether that’s too much.

Generally, smaller plans pay higher costs — “smaller” meaning both the number of plan participants as well as total assets in the plan. According to a study [PDF] conducted by Deloitte for the Investment Company Institute (a trade organization for the mutual fund industry, so not necessarily an unbiased crew), the median all-in cost — which includes administrative costs as well as investment expenses — to plan participants in 2011 was 0.78%. But the numbers vary widely, with plan size being the primary factor.

The median cost for a plan with more than $1 billion in assets was 0.38%, whereas the median cost for a plan with less than $1 million was 1.41%. Similarly (and relatedly), the median cost for a plan with fewer than 100 participants was 1.29%, compared to 0.43% for those with more than 10,000 participants.

You can use those figures as a benchmark to determine where your fees fall in relation to other plans. Then, figure out who’s paying those fees — you or your employer. Chances are, it’s the person you see in the mirror (unless your boss follows you into the bathroom, which is kinda weird). According to the Deloitte study:

[P]articipants bear the majority of 401(k) expenses. Similar to any other employee benefit (e.g., health insurance), the employer determines whether the employee, employer, or both will pay for the benefit. According to the Survey, on average, participants pay 91% of total plan fees while employers pay 5% and the plans cover 4%. This compares with participants paying 78%, employers paying 18% and plans paying 4% in the 2009 Fee Study.

In other words, employees are paying the majority of fees, and the share that they’re paying is going up.

Are you getting your money’s worth from your 401(k)? Here’s how to find out, and what to do about it:

Evaluate your investment choices. See if the funds in your plan, over the past five years, have beaten a relevant index fund as well as the majority of other funds with a similar investing objective. This information may be found in your quarterly statements or on the website of your plan provider. Important note: Your funds’ mileage may vary from the information on Morningstar or other fund-info sites since funds in 401(k)s often have additional costs.
Use the side brokerage account, if offered. Approximately 20% of 401(k)s allow participants to open an account with a discount brokerage within the plan. This will let you buy individual stocks, bonds, ETFs, and other mutual funds. However, compare the benefits to the costs, since these accounts often have higher maintenance fees.
Advocate for a better plan. Talk to the folks in your HR department and raise your concerns. After all, their retirement is on the line, too, and they should also be motivated to have the best possible plan. Here’s an example of a letter you can write to ask for a better plan.
Don’t ignore other accounts. If your 401(k) is stin(k)y, contribute just enough to take full advantage of the employer match, and then max out an IRA with the discount brokerage of your choice. You might pay lower costs and have more investment options. However, if you are in a higher tax bracket — and thus ineligible for the Roth IRA, and your contributions to a traditional IRA wouldn’t be deductible — then it might make sense to invest in non-dividend-paying stocks you’ll hold for many, many years. You don’t get a tax break up front, but you’ll pay long-term capital gains when you do sell, which (at least according to current laws) are lower than the taxation rate on ordinary income (the rate at which your paycheck and traditional 401(k) and IRA distributions are taxed).
Move your money. You generally can’t transfer the money in your 401(k) to another account while you’re still working for the employer sponsoring the plan, but some companies allow it, especially for older workers. If your plan is sub-par, ask if your employer allows “in-service distributions.” If so, or once you leave that employer, transfer the money to an IRA. But do not just get a check and cash it; that is considered a distribution, which will be subject to taxes and a 10% penalty if you’re not 59 ½ years old. Instead, get the money to an IRA, ideally through a “trustee-to-trustee transfer,” in which the money is sent directly from your 401(k) to the IRA.
Get help. If you’re looking for professional advice with your investment choices, look for a fee-only planner who charges by the hour, such as the Certified Financial Planners at the Garrett Planning Network or the National Association of Personal Financial Advisors. She or he can also estimate whether you’re saving enough to retire when and how you want.

Hug Your Boss, Then Make the Request
Employers deserve credit for sponsoring retirement plans. They don’t have to do it, it consumes the HR department’s time, and it might even cost them actual money. I’m on the 401(k) committee of The Motley Fool (where the company covers all administrative costs, thank you very much), and I can tell you that it’s more work than most people would think.

But don’t be bashful about politely asking for a better plan. No one is planning your retirement for you, and no one cares more about your retirement more than you do. The more your retirement will rely on your own contribution and investment decisions, the more you must take charge.

Source: getrichslowly.org

Apache is functioning normally

June 9, 2023 by Brett Tams

The mortgage industry has its own language, and in order to understand it, homebuyers need to learn different acronyms and jargon when shopping for a home loan. A typical home loan payment or mortgage payment involves a single payment, which is the sum of four different line items: the loan principal, interest, taxes, and insurance – also referred to as PITI.

Before you set your sights on a home, know if you can afford the costs by learning what PITI is and how it impacts your monthly mortgage payments.

What does PITI stand for?

PITI stands for the loan principal, interest amount, taxes, and insurance on your home – the four major elements that make up mortgage payments.

Homebuyers often underestimate the true cost of homeownership by failing to take into account property taxes and homeowners insurance. It’s crucial that you budget for all the components of your mortgage payment before purchasing a home.

What is PITI? The four components

Now that we know what PITI stands for, let’s break down each of the four components and analyze the individual elements that make up your monthly mortgage payment.

1) Principal

The mortgage principal is the loan amount before any interest is calculated. This is the base amount of your home purchase price minus any down payment you make.

We’ll use a hypothetical home purchase for reference; if you buy a home for $450,000 with a 20% down payment ($90,000), your mortgage principal amount will be $360,000.

Over your mortgage term, you pay substantially more than the original $360,000 to the lender in the form of loan interest. The principal is the base amount used for loan calculations to determine if they will extend a loan to you.

2) Interest

Your mortgage interest rate is what you pay the lender as part of your monthly mortgage payment to borrow the funds to purchase your home. The mortgage lender calculates interest as a percentage of your outstanding principal. If your principal loan is for $360,000 and your lender charges you an interest rate of 6%, this means that you will pay $21,600 (6% of $360,000) in interest for the first year of your mortgage.

Your mortgage interest and principal payments are itemized on a mortgage amortization table. The amortization charts show how much each mortgage payment pays down your principal and interest. When you first start making mortgage payments, most of your monthly payment goes toward interest instead of the principal.

This split shifts over time, and eventually, the amount you pay toward interest decreases, and more is paid toward the principal. As the principal amount of your loan decreases, you start to earn equity on your home. Equity is the portion of your home that you own outright. Your interest decreases as well, as you only pay interest on the principal amount you have not paid off.

For our example, you will pay $21,600 in interest over the first year of your $360,000 mortgage. By the time you have paid down $260,000 of that principal, your principal amount will be $100,000; at that point, you’ll pay interest of $6,000 annually (6% of $100,000).

3) Taxes

When you own your house, you pay taxes on the property to your local government to maintain roads, emergency services, police, firefighters, schools, and more. Buyers often overlook property taxes when estimating homeownership costs, but it is important to consider this recurring annual cost when you’re searching for your new home. Property taxes vary by location and are the most expensive tax homeowners pay. Taxes may be higher in a newer neighborhood or an area coveted by many homeowners. They are often less if you live just outside coveted neighborhoods and in rural areas.

The amount of property tax you pay is determined by the local property tax rate and the value of your home. A general guideline to estimate property taxes is to allocate approximately $1 for every $1,000 of your home’s value, paid on a monthly basis.For example, if your home is worth $450,000, you can expect to pay around $450 per month in property taxes or $5,400 per year.

As part of the home purchase process, most states require that you get an unbiased, official appraisal to estimate your taxes accurately. Your lender usually orders the home appraisal and includes the cost in their list of closing costs. After you close on your home purchase, keep in mind that your local government will regularly reassess properties every few years for tax purposes, which could lead to a change in your tax bill.

4) Insurance

The “insurance” component of PITI refers to homeowner’s insurance and, when it’s required, private mortgage insurance (PMI). Let’s discuss each of these concepts in more detail.

Private mortgage insurance (PMI)

Your PMI rates depend on how much of a down payment you made and your credit score. If you’re putting down less than 20% on a conventional loan, you’re required to pay for private mortgage insurance (PMI), which protects the lender if you default on your mortgage payments. Once you build at least 20% equity in your home — and your loan-to-value (LTV) ratio is 80% or less — you can get rid of PMI. For FHA loans, a similar mortgage insurance premium has to be paid throughout the life of the loan on any FHA-backed mortgage loan.

If your PMI comes in at a rate of 1%, here’s how you’d calculate a mortgage of $360,000: $360,000 x 1% = $3,600 per year; $3,600 ÷ 12 monthly payments = $300 per month.

Homeowners insurance

Most mortgage lenders require a homebuyer to purchase and maintain homeowners insurance over the entire loan term. Homeowners insurance covers you and the lender if something catastrophic happens to the home, and you need to rebuild or move. Most homeowners insurance policies cover your home in the event of a break-in, fire, or storm damage.

Most insurance companies require you to buy additional coverage for damage from earthquakes or flooding. You can also purchase insurance riders to cover items of significant value, such as an expensive musical instrument, art, or jewelry. If you buy a condominium, you’ll also pay a homeowners association fee. Your lender may consider your HOA fee your insurance as the HOA carries its own insurance that covers the building, and thus you may not need another policy.

Property insurance amounts can vary among different insurances. It’s wise to shop around after the seller accepts your purchase contract, and before you close on the property, to get a good idea of reasonable rates. Insurance companies consider these factors when calculating an insurance premium:

The home’s value
Whether you live in an urban area or a rural area
Whether you live in an area with high climate risk
How close your home is near a fire department or fire hydrant
Whether you have an insurance risk on your property, i.e., something could injure children, such as a trampoline, pool, or specific dog breed
How many insurance claims you make each year for other types of insurance

When estimating your homeowner’s insurance costs, it’s helpful to keep a general rule of thumb in mind. On average, you can anticipate paying approximately $3.50 per every $1,000 of your home’s value in annual homeowner’s insurance premiums. For instance, if your property is valued at $450,000, you can expect to pay around $1,575 per year for insurance coverage, which translates to roughly $131 per month.

How to calculate PITI

Before you start your search for a house, it’s a good idea to calculate PITI to determine your price range and help you find a mortgage option that will fit your budget. The exercise will make you a more rational home buyer and keep you from falling in love with a house outside your price range.

The simplest way to calculate PITI is by using an online monthly mortgage calculator. Redfin’s mortgage calculator includes the principal and interest, taxes, insurance, HOA, and PMI. You can also add in your location for more accurate estimates.

PITI and the 28% Rule

Your PITI gives you a rough idea of what purchase price range you can afford. One way to identify a purchase price within manageable limits is to use the housing expense ratio. To ensure your ongoing ability to make your mortgage payments, home finance experts typically recommend that your housing costs should be equal to or below 28% of your monthly household budget. If your PITI is more than 28% of your monthly budget, your lender may require you to pay for additional mortgage insurance.

In our example, you can estimate your housing expense ratio by dividing your PITI by your total monthly income. If your household income is $10,000 a month, your PITI will make up about 28% of your monthly budget, well within recommended guidelines. ($2,800/$10,000 = 28%.)

Keep in mind that PITI may just account for just some of your monthly expenses when owning a home. Depending on where you live and how you are paying for your home, there may be additional costs to consider. Additionally, the components that make up PITI are broadly defined here; there is often more complexity that goes into each part of PITI.

How PITI impacts loan approval

During the home buying process, it can be easy to trick yourself into thinking you can afford a more expensive home if you only look at your mortgage’s principal and interest cost without considering the total PITI with taxes and insurance.

For instance, let’s take a 30-year mortgage on a $450,000 property, assuming a property tax rate of 1.25% ($5,625 per year) and an annual homeowners insurance premium of $3,600. In this scenario, your monthly financial commitment would go beyond just the principal and interest amount, as you would need to allocate an additional $581 to cover taxes and insurance. Understanding and accounting for these factors will provide you with a comprehensive understanding of the actual costs involved in homeownership.

Here is a breakdown of the example discussed above.

	Principal and Interest	PITI
Interest rate	7%	7%
20% down payment	$90,000	$90,000
Property taxes	N/A	$450
Homeowners insurance	N/A	$131
Private mortgage insurance	N/A	N/A
Monthly payment	$1,800	$2,381

How DTI factors in

The principal balance will factor into your debt-to-income (DTI) ratio. Your DTI ratio gives lenders an idea of how capable you are of managing money and the likelihood that you will consistently make your monthly payments. To determine your DTI, the lender uses your total minimum monthly debt obligation and divides it by your gross monthly income to arrive at a percentage. This calculation also includes payments on credit card accounts, auto loans, student loans, and other recurring debt payments. Lenders consider you a higher risk if your DTI ratio exceeds 43%, some lenders will allow a DTI as high as 50%.

Don’t overlook other housing costs

PITI is just one fundamental concept to understand before applying for a mortgage. As you consider how much house you can afford, you’ll also need to plan for additional costs typically associated with homeownership. These include HOA or condo fees, which can range from $100 to $1,000 per month, with an average of $200 to $300. Additionally, budgeting for repairs and maintenance is crucial, with a general guideline of saving 1% to 5% of your home’s value annually. For a newer $450,000 home, this would mean setting aside $4,500 to $22,500 per year. Utility bills for electricity, water, gas, sewer, cable, trash, and internet should also be factored in, and contacting the utility company or asking the seller or neighbors can help estimate these costs.

The bottom line on PITI

Buying a home is very exciting, but before signing your mortgage contract, know what payment amount you can afford based on PITI and other monthly costs. The more you understand the home buying and mortgage process and the total cost of homeownership, the easier it will be to finalize your purchase decision. Your home purchase represents an important milestone in your life – avoid confusion and uncertainty by gaining a solid understanding of PITI and the cost of homeownership.

Source: redfin.com

Apache is functioning normally

June 8, 2023 by Brett Tams

Cosigning A Loan - Read This Before Being A Cosigner

Cosigning A Loan - Read This Before Being A Cosigner Recently, the topic of cosigning a loan came up in a conversation I was having with a friend. Someone I know of cosigned a loan for another person, and now the original borrower isn’t paying any of the monthly payments. They are doing this on purpose – to get back at the person who cosigned a loan for them because of a recent falling out.

The above may sound crazy, but I have heard many stories where a person cosigned a loan and it went badly. Being a cosigner can have many consequences.

I did some research to see if there were any others who had shared crazy cosigning stories. I came across Learnvest’s article The Mistake That Plunged My Credit Score 200 Points. If you don’t believe me after reading today’s post that cosigning a loan, in general, is a bad idea, I recommend you read that article plus all of the comments on it.

Here’s a little snippet from that article:

It wasn’t until the fall of 2009, when I was thinking about getting satellite television, that I checked my credit report and discovered $10,000 in past due payments. My friend had missed not one, not two, but three mortgage payments!

Another interesting post is one I found on Reddit titled Co-Signing on a loan mistake.

As you can see, there are many who have an unfortunate story to share.

Here’s what you need to know about cosigning a loan.

What is a cosigner?

A cosigner is someone who agrees to be on a loan with another person so that they are more likely to be approved. For example, if your friend can only get a car with a cosigner (either due to them having a low credit score, not making enough money, etc.), then they may ask you to cosign so they can get approved.

However, a cosigner is agreeing to pay off the debt if the original borrower is unable to pay it in the future. So, even if the original borrower doesn’t pay a penny, the cosigner would have to make all of the payments or risk being sued, credit report damage, and more.

Related: Paying Off Debt And Budgeting: Tricks For Staying Motivated

Cosigning a loan may prevent you from being approved for future loans.

If you are thinking about buying a house, car, or something else soon that will need to be financed, you should think long and hard before you decide to be a cosigner on someone else’s loan.

This is for multiple reasons.

One, if the person doesn’t pay the monthly bills on time then you may be rejected for a loan in the future. Missed payments can damage your credit score and your credit report.

Two, your debt-to-income ratio will increase. So, even if your friend/family member pays every single bill on time, your debt to income ratio will increase and this may prevent a lender from approving your loan because they will think you have too much debt on your plate.

Being a cosigner isn’t something you can easily get rid of.

There’s not much you can do to remove yourself from a loan that you cosigned on. If the person isn’t making payments, you are stuck with it for the most part.

The loan would have to be refinanced to get your name off of it in most cases and there are many horror stories out there where the original borrower refused to refinance because then they wouldn’t be able to force the cosigner to continue to pay the monthly bill.

Plus, there are instances in which refinancing is impossible because of values tanking, the economy changing, and so on. So, while the original borrower may want to get you off the loan and refinance, it’s entirely up to the lender.

Cosigning a loan can ruin relationships.

Many cosigning relationships go sour. I have heard of many stories where someone cosigned a loan for someone else and then didn’t talk to them for decades because of a falling out of some sort.

I have always been a firm believer that money and relationships do not mix well. If you are going to cosign or lend money to someone then you should consider it a gift because there is a chance that you will never see that money again.

Cosigning a loan is up to you.

Everyone always feels like all of the cosigning horror stories out there would never happen to them. However, isn’t that how you think all cosigners felt at one time as well?

It’s up to each individual person to decide if they will cosign. However, I want you to remember that if you cosign then you should make sure that you can afford to make the monthly payment.

You never know – one day you may be making them. The original borrower may be a great person, but they may lose their job, have an unexpected expense come up, or something else that prevents them from paying their bills.

Cosigning a loan may not always be bad. However, I believe it’s better to realize what the consequences may be. It’s always better to be prepared!

Would you ever try cosigning a loan and being a cosigner? Why or why not?

Apache is functioning normally

June 8, 2023 by Brett Tams

Whether you’re in the process of creating your bucket list or you’ve already checked off most experiences, we have another one you’ll likely want to add: watching the total solar eclipse from a cruise ship deck in 2024.

Trust me on this. A total solar eclipse trip is a once-in-a-lifetime experience — even if you’re not an astronomy geek.

On Aug. 21, 2017, I climbed to the top of the Green Ridge Lookout in Bend, Oregon’s Deschutes National Forest in the early morning hours to wait for the moon to pass between the sun and Earth. At approximately 10:19 a.m. PDT, I witnessed one of the most amazing events of my life while donning solar eclipse glasses and sipping Champagne on a mountaintop as the sky darkened around us.

For cruise news, reviews and tips, sign up for TPG’s cruise newsletter.

This awe-inspiring experience is even better at sea. Discover the best solar eclipse cruises setting sail in 2024 and why they are the places to be when the moon blocks out the sun’s light.

When and where is the total eclipse in 2024?

A total solar eclipse over water and mountains. LG0RZH/GETTY IMAGES

The total eclipse on April 8, 2024, will occur in North America, beginning in the South Pacific Ocean. It will pass over Mexico, the U.S. and Canada, with Mexico’s Pacific Coast predicted to be the first locale to experience totality at 11:07 a.m. PDT. The eclipse path will extend from Texas to Maine and then exit off the Atlantic coast at Newfoundland, Canada, at 5:16 p.m. NDT.

Why book a cruise to watch the eclipse?

Approximately 31 million U.S. residents live inside the path of totality for the 2024 eclipse, 2.5 times more than the 12 million residents that lived within the path of totality in 2017, according to GreatAmericanEclipse.com. So, if you can witness the eclipse from land, why would you want to head out to sea to watch it?

First, you’ll sail with a small group of like-minded eclipse enthusiasts and have access to astronomy and space exploration experts. You can also avoid the crowds and traffic on land with people driving to the viewing spots and jockeying for the best places to park and watch the show.

Additionally, a cruise ship positioned off the coast of Mazatlan, Mexico, will provide four minutes and 26 seconds of totality, close to the maximum viewing anywhere along the eclipse path.

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Related: Travel to these places to see the total solar eclipse in April 2024

“Many people think that a large ship rocks too much to view a solar eclipse. But they’re actually steady enough to do high-quality photography,” said J. Kelly Beatty, senior editor of Sky & Telescope, a print and online magazine for avid sky and stargazers.

Beatty explains that a ship’s maneuverability and weather instrumentation are essential since they provide the flexibility to sail to another location for optimal visibility. Also, if you’re sailing with astronomy experts, they can help guide the crew on the bridge to reposition the ship so all passengers have the best views of the eclipse.

Only a few cruise lines and professional groups are planning festivities for the big event. So, book your spot soon for the ultimate total solar eclipse viewing party in North America. Below are the best solar eclipse cruises for 2024.

Holland America Line

Holland America Line offers two sailings where the ships will be positioned in Mexico for the total eclipse. A representative for the line says they will host special events for the sailings, although the line hasn’t released specific details yet.

The line’s 14-day Solar Eclipse & Mexican Riviera itinerary on the 1,432-guest Zaandam sails round trip from San Diego on March 30, 2024. The ship will call on eight ports in Mexico, including Mazatlan, where it will be positioned the day before for optimal viewing of the eclipse from the ship’s wraparound deck.

Konigsdam’s 22-day Solar Eclipse & Hawaii Circle voyage departs from San Diego on April 5, 2023, for Mexico, where the ship will also be positioned off the coast of Mazatlan for the eclipse. Following a stop in Puerto Vallarta, the 2,650-passenger Koningsdam will sail across the Pacific Ocean to Hawaii, disembarking in Hilo on April 20.

Related: The 5 best destinations you can visit on a Holland America ship

Princess Cruises

Princess Cruises’ 10-day Mexican Riviera with Total Solar Eclipse cruise is already sold out for the rare event aboard the 3,660-passenger Discovery Princess.

Due to the popularity of the solar eclipse-themed cruise, the line added another sailing with a different itinerary — a 15-day Panama Canal cruise aboard the 3,080-guest Emerald Princess. This ocean-to-ocean extended voyage from April 5 to 20 will depart from Los Angeles and end in Fort Lauderdale.

Highlights of the voyage include six ports of call, six days at sea and total solar eclipse viewing between Cabo San Lucas and Huatulco, Mexico, on April 8. An astronomy and space exploration enthusiast, Fred Cink, will be on board to answer questions. Guests will also enjoy eclipse-themed drinks and bites while watching the rare phenomenon.

Prices start at $1,999 per person for an inside stateroom with Princess’ “no frills” cruise fare, which includes core experiences — accommodations, dining and entertainment.

Related: The ultimate guide to Princess Cruises ships and itineraries

Sky & Telescope and Insight Cruises

If you want to go all in on the eclipse theme, consider booking with a special interest group. Sky & Telescope and Insight Cruises have partnered to offer S&T’s 2024 Total-Eclipse Cruise aboard Holland America’s Zaandam, departing on March 30, 2024. You could book the sailing on your own, as noted above, but if you want to be part of a group of like-minded travelers and have access to special events and educational programming, it’s worth paying more to go with Sky & Telescope.

The themed cruise’s optional speaker program has an impressive lineup of experts, including Sky & Telescope’s Rick Fienberg, whom Beatty refers to as the “expert’s expert.” Other special guests include actor and singer Tim Russ and former astronauts Jeffrey Hoffman and Garrett Reisman.

Beatty says he anticipates their group will be the largest organized solar eclipse group on the ship, with about 200 attendees.

Prices for the cruise vary, depending on the stateroom category and add-ons like beverage packages and specialty dining. The entire conference program for the event is $1,750 per person, which includes a one-hour cocktail party package every night of the cruise.

The mini-conference option is $750 per person and allows passengers a one-time admission to each speaker’s presentation. Traveling companions who don’t want to attend either conference will be charged a “facility fee” of $200 per person, which includes invitations to the group’s private parties (beer and wine included) and access to the group’s exclusive viewing area during the solar eclipse.

UnCruise Adventures

UnCruise Adventures is offering a seven-night eclipse sailing aboard its 66-passenger Safari Voyager.

The round-trip voyage departs on April 6 from San Jose del Cabo, Mexico, and features several days at sea, including time spent whale and dolphin watching on the beautiful Sea of Cortes. Expert guides and fellow umbraphiles will be on board to share in the excitement of this adventure at sea.

The ship will position northwest of Mazatlan for the eclipse, and the crew will be on hand to provide viewing and photography tips to best capture the once-in-a-lifetime moment. Afterward, guests can celebrate with a glass of Champagne or other beverage.

Stops include Isla San Francisco, Isla Partida and Bahia de la Paz, where passengers can opt to swim whale sharks.

Prices start at $7,150 per person and include all meals, excursions and alcoholic and nonalcoholic beverages. Gratuities are an additional expense.

Ring of Fire Expeditions and Eclipse Tours

Ring of Fire Expeditions and Eclipse Tours are hosting a nine-night land and cruise package that begins on April 1. The itinerary features a one-night stay in Acapulco, Mexico, an eight-night voyage on Swan Hellenic’s new ship Diana, an eclipse expedition in Mazatlan and a solar eclipse briefing at sea before eclipse day.

Ring of Fire Expeditions has an exclusive charter for the 196-passenger ship. The memorable voyage features science experts Paul D. Maley of NASA’s Johnson Space Center Astronomical Society and Michael Shara from the American Museum of Natural History. This sailing will be Maley’s 84^th solar eclipse trip and Shara’s fourth total solar eclipse adventure.

Prices cover most expenses, including a pre-cruise hotel stay, pre- and post-cruise transfers, a welcome dinner at the hotel, all meals and an onboard open bar, complimentary Wi-Fi, all excursions and gratuities.

Passengers will disembark in La Paz, Mexico, on April 10.

Planning a cruise? Start with these stories:

Source: thepointsguy.com

Apache is functioning normally

June 8, 2023 by Brett Tams

What happens when a great opportunity comes along, but you don’t quite have the resources to take advantage of it? That’s what Greg wants to know. He and his wife have found their Dream House. They think they can buy the place — but only if they’re willing to take on some short-term debt in addition to the mortgage. Greg wants to know if this is a smart move. Here’s his story:

My wife and I are in our late twenties, no kids (yet), both safely employed and living very comfortably with a combined monthly income of around $5,000 after taxes. We currently have about $28,000 in student loans, and plan to pay them all off within the year. The original amount was $37,000 six months ago, so we’ve been making quick progress with them. One loan is in deferment while my wife is in school, another requires $80 a month for the payments, and the one we are aggressively paying off has no monthly payment due until 2014 because of our extra payments. Basically, we only need $80 a month to satisfy our loans for the next two years. We have no car payments, credit card debt, or anything other than the student loans.

Everything was going as planned until two weeks ago we found a house we absolutely loved. We’ve checked it out, and aside from minor cosmetic things, its move-in ready. It’s a foreclosure with an asking price around $136,000 (houses are cheap in the Houston area!). We’d plan to stay in the area a minimum of ten years, if not longer.

Given our situation, is it wise to scramble to get the minimum amount necessary to buy this house? We hadn’t planned to begin saving up for a house for another six months. Last week, my dad offered us a monetary gift to cover the down payment. We have the ability to pay for inspections, closing costs, insurance and everything else (about $7,000 total, assuming the seller won’t cover some of these costs), but it might mean wiping out our small savings and taking on some short-term debt. We’d also have to pay about $1,600 to break our apartment lease, but at least that can be spread out over three months.

Moving so quickly without any heavy financial preparation was not how we envisioned buying a house, but we don’t want to risk losing what amounts to our Dream House. Since it only recently came on the market, we don’t know if it will be something we can wait on or not.

Being the committed debt-haters that we are, the minor (non-mortgage) debts we’d have to incur to buy the house hopefully wouldn’t last very long anyway. Worst case scenario puts our monthly house/tax/insurance payments well within the range of affordability for us too. Our current loans would go on hold for maybe six months while the minor debt is paid off, then proceed at a slower pace due to the $1200 a month we’d be paying for housing instead of the the $600 we currently pay.

If you were in my position, what would you do? Jump on the chance for a Dream House? Or take a more financially conservative approach and risk losing out on it? Any and all opinions would be much appreciated!

This is a tough call. Folks like Dave Ramsey would say, “Don’t do it.” Ramsey would argue that Greg and his wife should first repay all of their student loan debt and then save enough for a substantial down payment. (Or even enough to pay for the house in cash.)

I’m not nearly that prescriptive. Absolutely, the prudent financial choice is to wait. Dream Homes are problematic — dreams change, and Dream Homes are often more common than buyers believe. Plus, when you have to scrape money together to buy a house, you leave yourself vulnerable to unexpected disasters. By exercising deferred gratification, Greg and his wife could reduce their debt and/or build enough savings to make a substantial down payment.

That said, personal finance is as much about emotions as it is about money. And heaven knows, Kris and I have made a pair of impulse home-buying decisions:

In 1994, we bought our first home. We didn’t really have a reason for buying a house; it just seemed like the adult thing to do. A mortgage broker crunched the numbers, told us what we could afford, and we started shopping. We didn’t shop for long. Within a week, we’d found a house we liked. Two days later, we’d made an offer and had it accepted. Looking back, we rushed things, but it turned out okay because we bought less home than we could afford.

In 2004, Kris and I bought our Dream House. We hadn’t intended to move, but when one of Kris’ co-workers brought in a sale flyer for an old farmhouse, we acted quickly. Within 48 hours, we’d made an offer (and had it accepted). In retrospect, this was a poor financial decision. On paper, we could afford the place, but in reality, my debt-load made things tough. If I could give my younger self advice, I’d say, “Don’t do it!” Things have worked out for us, but they could easily have turned sour.

If Greg and his wife are willing to unwilling to pass up this opportunity, they should at least take steps to mitigate the possibility that things will go wrong.

Take out a small mortgage with a low interest rate. Banks will grant mortgages with housing-expense ratios of 33%. That is, they’ll let borrowers spend up to 33% of their gross (pre-tax) income on housing, including taxes and insurance. But what’s good for the bank isn’t necessarily good for you. Greg and his wife can make things easier by trying to keep their monthly expenses below 25% of their gross income.

Make debt reduction a priority. If they buy this house, Greg and his wife have to be willing to make some short-term sacrifices: cheap vacations, a reduced restaurant budget, and so on. They have to give up a lot of the little everyday pleasures in order to attack their non-mortgage debt. All purchases require trade-offs, and big purchases require big trade-offs.

Build a big emergency fund — ASAP. Speaking from experience, owning a home is expensive. One rule of thumb is that it costs 1% of the home’s value every year for maintenance and repair. This seems accurate to me. Greg and his wife should work hard to create a home repair fund, one that’s separate from their everyday emergency fund.

What do you think? Should Greg and his wife jump at the chance to buy their Dream Home? Even if doing so means carrying more debt than they’d planned for a few years? Or should they wait until they know they’re financially prepared? Share your personal experience so Greg and his wife can make an informed decision!

Note: Upon reading this post, Kris made an interesting observation. “You’re missing an important point,” she said. “Are they looking at a one-of-a-kind home? That makes a difference. Maybe their Dream House is a converted fire station or an old farmhouse in a sea of cookie-cutter homes. If that’s the case, they should take it. But if it’s similar to a lot of other homes, they should wait.”

Update: This has been a great discussion. Thanks for contributing. Here’s a response from Greg, answering many common questions. (And here’s another.)

Source: getrichslowly.org

Apache is functioning normally

June 8, 2023 by Brett Tams

This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.

Investing in stocks can seem like a daunting task.

There are so many things to consider when it comes to investing, and the stock market is constantly moving.

Stock market investing is a popular option to increase net worth and make money.

Many people are looking for ways to invest their money, with the number of individual investors increasing rapidly in recent years.

This guide covers many important factors for how to invest in stocks for beginners.

Starting out as a newbie trader can be scary and overwhelming… don’t worry, all seasoned traders had to start at the beginning too!

Let’s take away that quell those thoughts and focus on why you want to learn to invest in stocks.

This guide will give you everything you need to know about how to invest in stocks as a beginner investor!

Investing in stocks is a popular way to make money, but you need a solid investment strategy first. Get plenty of tips on investing in stocks for beginners.

What Are Stocks?

In the most basic form, stocks are a form of investment. When you own a stock, you have a piece of ownership in the company’s equity.

The stock market is a real-time financial market in which investors buy and sell stocks and other securites. The stock market is made up of many companies and individuals who are actively investing in stocks.

Stocks are an excellent way for companies and individuals to invest in a company and receive a share of the company’s profits.

Many of the growth stocks (FAANG stocks) are those who investors want their stock price to increase over time. Thus, increasing their overall portfolio’s net worth.

FAANG Stocks is an acronym for: Meta (formerly known as Facebook), Amazon, Apple, Netflix, and Alphabet (formerly known as Google).

Some companies like Chevron (CVX) pay out a dividend each quarter to their investors.

There are thousands of stocks available to trade.

What Can You Invest In The Stock Market?

There are many investment opportunities in the financial market, so it is important to be informed about what you can invest in. Below are some of the places where you can invest your money:

Stocks
Bonds
Mutual funds
ETFs
Commodities
Futures
Options

Now, we are going to look at the most common.

Individual stocks

Individual stocks are a type of investment that you can make yourself.

You can choose how many shares of a certain company you want to purchase.

For example, you like Tesla for how they are innovative in the electric car space. You can choose to invest 20 shares of their stock.

As a long-term investor, you want to hold a portfolio of 10-25 stocks. Find a list of beginning stocks to build your portfolio.

Individual stocks can be bought or sold as a way to dip your toe into the stock-trading waters.

As a short-term investor, you are looking to make money as the stock price increases or decreases.

Mutual Funds

Mutual funds are managed portfolios of stocks.

As a result, mutual funds typically have load fees equal to 1% to 3% of the value of the fund.

One of the most popular mutual funds is VTSAX because of its expense ratio is .04%

Mutual funds are a clear choice for most investors because of the simplicity to invest in the market. This can be a good investment for both novice and experienced investors, as they offer decent returns with lower risk.

They tend to rise more slowly than individual stocks and have less potential for high returns. Mutual funds are a great way to diversify your portfolio and gain exposure to a variety of different securities.

All mutual funds must disclose their fees and performance information so that you can make an informed decision about whether or not to invest.

Exchange traded funds (ETFs)

Exchange traded funds (ETFs) are a type of exchange-traded investment product that must register with the SEC and allows investors to pool money and invest in stocks, bonds, or assets that are traded on the US stock exchange.

They are inherently diversified, which reduces your risk.

This is a good option for beginner investors because they offer a large selection of stocks in one go.

ETFs have a lower minimum to start investing, which is a draw for many investors starting out with little funds. Plus there are many different types of ETFs to choose from.

ETFs are similar to mutual funds, but trade more similarly to individual stocks. With ETFs and Index Funds, you can purchase them yourself and may have lower fees.

Why Stock Prices Fluctuate

Picture of a bull market vs bear market on why stock prices flucate.

Stock prices fluctuate because the financial markets are a complex system. There are many factors that can affect the price of a stock,

There are a number of factors that can influence stock prices, including:

Economic indicators like GDP growth, inflation, and unemployment rates
Company earnings reports
The overall health of the economy
Political and social instability
Changes in interest rates
War or natural disasters
Supply and demand,
Actions of the company’s management
Short squeezings like what happened with GME or AMC

The volatility in the stock market is the #1 reason most people stay out of investments. However, on average, the stock market has moved up 8-10% a year.

What is the best thing to invest in as a beginner?

The best thing to invest in as a beginner is your time.

You need to learn how the stock market works. Just like you would get a certification or degree, you should highly consider an investing course.

Learn and devote as much time as you can to investing in stocks.

How To Invest In Stocks For Beginners?

Picture of a stock market gains to show how to invest in stock for beginners.

Investing in the stock market can be a great way to make money! If you’re looking for ways to make money or grow net worth, investing in a stock is a smart choice.

With online access and trading being easier now than ever, it can be easier than ever to start buying stocks.

Let’s dig into how to invest in stocks like a pro.

FYI…You should do your own research before investing.

Step #1: Figure out your goals

Figure out your goals to help with setting an investing strategy.

What are you trying to achieve with stock market investing? Is it supplemental income? A certain level of wealth for retirement? Are you looking for short-term or long-term gains?

Once you know what you’re aiming for, it will be easier to find the right stocks and make wise investment decisions.

Your reason to invest in stocks will be different than everyone around you.

Some people want to supplement their weekly income.
Others want to invest in companies for the long term.

My goal is to make weekly income from the stock market. That is my investment strategy for non-retirement accounts.

You need to spend time understanding WHY you want to buy stocks.

Knowing this answer will help you define what type of trader you will be.

Step #2. Decide how you want to invest in the stock market

When you decide to invest in the stock market, you need to choose what you want to invest in.

You can invest in stocks, which are shares of ownership in a company, or you can invest in bonds, which are loans that a company makes. There are also other options like mutual funds and exchange-traded funds (ETFs), which are collections of stocks or bonds.

Also, you can expand this to what types of investments will you have in various retirement or brokerage accounts. For example, you may invest in mutual funds with your 401k, ETFs with your Roth IRA, and stick with individual stocks for your taxable account.

This is a personal decision.

Many people when they are first starting to trade stocks choose to limit purchasing stocks with a limited percentage of their overall portfolio.

Step #3. Are you invest in stocks for the short term or long term?

The buy and hold investor is more comfortable with taking a long-term approach, while the short-term speculator is more focused on the day-to-day price fluctuations.

Once again, this is a personal preference.

One of the most common themes of many investing gurus is, “Remember that stock prices can go down as well as up, so it’s important to stay invested for the long term.”

However, this full-time trader wants to make money on those highs and lows.

Knowing your overall investment horizon will help you decide how much time you plan to hold onto your investments to reach your financial goal.

Also, you can choose different time horizons for different accounts.

Step #4: Determine your investing approach

Passive and active investing are two main approaches to stock market investing.

Passive investing does not involve significant trading and is associated with index funds.

Passive investing is a way to DIY your investments for maximum efficiency over time.
Thus, you would contribute to your investment account on the xx day of the month with $xx amount of money.
This happens with consistency regardless of where the market stands on that day.
You are less warry of where the stock market will go and focused on overtime it will continue to go up.

Active investing takes the opposite approach, hoping to maximize gains by buying and selling more frequently and at specific times.

Active investing is when an investor is actively acquiring, selling, or holding bought stocks.
This could be with day trading or swing trading.
You may hold stocks for less than a day, a few days, or a couple of weeks.
The purpose of having active investing is to make profits.

In the stock market, investors make efforts to increase their net worth over time or to make income off the market.

Step #5: Define your investment strategy

When it comes to investing in the stock market, there are a few key factors you need to take into account: your time horizon, financial goals, risk tolerance, and tax bracket.

Do you want to be an active trader or stick with passive investing? What kind of investor am I?

There is no right or wrong answer as this is a personal preference.

Ultimately, you want returns to be greater than the overall S&P 500 index for the year.

Once you’ve figured these out, you can start focusing on specific investment strategies that will work best for you.

Be aware of any fees or related costs when investing. Fees can take a bite out of your investments, so compare costs and fees.

Step #6: Determine the amount of money willing to lose on stocks.

Trading stocks online is inherently risky.

You want to consider what your “risk tolerance” is. Simply put, how much are you willing to lose in stocks before you want to quit?

The biggest reason most people quit trading stocks is that they do not know their risk tolerance and fail with risk management.

You will lose on trading stocks. The goal is to lose a small amount on some of the trades and gain a greater amount of more of your trades.

How much risk you can reasonably take on given your financial situation?
What are your feelings about risk?
What happens when your favorite stock drops 25%?

Understanding your risk tolerance and how much you are willing to lose will help you keep your losses small.

Start with a small amount of money when investing in stocks. Also, make sure you have enough money saved up so you can handle any losses that may occur.

How to Start Investing in Stocks

Picture of a pig and not for how to start invest in stocks.

There are a variety of ways to start investing in stocks. Some methods include getting a small account balance and then buying shares, creating an investing club with friends, or researching the companies you want to invest in.

Now, that you have determined how and why you want to invest in stocks. Let’s dig into the nitty gritty of how to manage a stock portfolio.

On the other hand, if you don’t invest enough, you could miss out on potential profits. Try starting with an amount you’re comfortable losing if the stock market does go down.

1. Open an investment account

There are a few things you need to do in order to start investing in the stock market.

The first is to open an investment account with a broker or an online brokerage firm.

There are different types of accounts you can open:

Taxable accounts like an individual or joint brokerage
Retirement accounts like IRA or Roth IRA
These are the most basic investment accounts, here is a list of types of investment accounts.

If you plan to hold EFTs or mutual funds, Vanguard is a great place to start.

If you plan to be an active trader, I would look at TD Ameritrade or Fidelity. Be wary of Robinhood or WeBull.

2. Saturate yourself in Stock Market Knowledge

On the simplest level, it can be incredibly easy to begin your investing career with little-to-no knowledge, research, and expertise.

If you have even a remote understanding of stocks, then learn what you need from an easy-to-find YouTube video, followed by watching some of your favorite TV shows to learn more about the market and its secrets.

With that said, you need to be digesting the basics from start to end of getting your first investment started.

As the title reveals, investing can seem intimidating and complicated. Thus, stock market knowledge is invaluable.

3. Consider an Investing Course

A typical investing course would teach how to invest in stocks (and possibly other investments).

As a beginner trader, it is unlikely you will know the full extent of how the stock market works. There are many intricacies you must learn and understand.

Beginners should learn about stock investing basics, such as diversification and investment criteria.

Many investing courses offer a platform on how to make money by trading stocks.

Personally, I highly recommend buying this investing course.

If you choose not to follow my advice, that is fine. Come back when you have lost more money in the stock market than the price of the courses.

I CAN NOT STRESS ENOUGH… how important it is to have a solid foundation and practice in a simulated account before you use your real money.

4. Research the companies you want to invest in

When you’re ready to start investing in stocks, it is important that you do your due diligence and research the companies you want to invest in.

Look for trends and for companies that are in positions to benefit you.

Consider stocks across a wide range of industries, from technology to health care. It’s also important to remember that stock prices can go up or down, so always consider this before making any investment decisions.

5. Choose your stocks, ETFs, or mutual funds

Picture of a stock chart to show how to start invest in stocks.

Next, you have to decide what fits your investing strategy. Are you looking to buy:

Stocks
ETFs
Mutual Funds

Regardless of which type of investment you make, you must look for companies that have attractive valuations and growth prospects. In the case of index funds or ETFs, which fund has the companies you find attractive.

Most importantly, you should also take into account the company’s financial health and its prospects for future growth.

Make sure you understand the risks associated with holding a particular stock, including possible price fluctuations and loss of value.

7. Take the Trade

This is the hardest step for most people is to take their first trade.

Thus, why learning to trade stocks is great to learn a simulated account using fake money. Then, move to a LIVE account using your real money.

At some point, in your investing in stocks journey, you must press the buy button.

For many the investment platform may be overwhelming to use, so check out your brokerage’s YouTube videos to help you out.

8: Manage your portfolio

Managing your portfolio is important to keep your investments in good shape.

If you are a long-term investor, diversify your portfolio by investing in different types of investment vehicles and industries.

If you prefer to swing trade or day trade, then you want to make sure you always have cash on hand and are rotating your portfolio to take profit.

Investing can be difficult for beginners who often lack knowledge about the stock market.

It is important to remember to keep investing money and rebalance your portfolio on a regular basis. This will help ensure that you stay on top of your investments and achieve the desired result.

9. Selling Stocks

For most investors, it is harder to sell their stocks than to purchase them. There are a variety of factors for that. But, you must sell your stocks at some time to realize your gain.

Don’t panic if the market crashes or corrects – these events usually don’t last very long and history has shown that the market will eventually rebound. Most people tend to panic sell when stocks are low and FOMO buy when the market is at highs.

When you are ready to sell, aim to achieve a percentage return on your investment.

This will require some focus on your time horizon and the stocks you want to invest in.

Also, you need to consider any taxes that may be owed on the sale of stock.

If you’re new to stock investing, consider using index funds instead of individual stocks to gain broad market exposure.

10. Journal & Analyze your Trades

Journaling is a way of recording the important decisions you make during trading to help yourself remember what happened in your trades. It can be used as a tool for reflection, learning from mistakes, and reviewing your strategy.

Analyzing your trades means looking back on your trading history with the goal of improving it.

This is the most overlooked step of the investing process.

When it comes to buying and selling stocks, journalling what is happening in the market is an important part of being a successful investor.

Stock Market Investing Tips for Beginners

Ask any seasoned trader, and they will have a list of investing tips for beginners.

They have made plenty of trading mistakes they do not want to see newbies do the same thing.

When starting to invest in the stock market, beginner investors often seek out consistent and reliable investments.

This allows them to slowly learn about the stock market and take calculated risks while also earning a return on their investment. Over time, as they gain experience, they can expand their portfolio to include riskier but potentially more rewarding stocks.

1. Invest in Companies That You Understand

An investor should know the company they are investing in and have an idea of what type of return they expect.

When you are starting out, it is best to invest in stocks of companies that are easy to understand and have a proven track record.

Do NOT invest in stocks based on the advice of friends, what you read in the news, or on a whim – these can be risky moves. Be wary of the popular stocks you can find on the Reddit Personal Finance threads.

2. Don’t Time the Market

In the world of investing, there is one rule that no investors should ever break: do not time the market.

By following this rule, you will always be on top of your investments and will be able to reap the rewards.

There are times to buy stocks and sell stocks. This is something you will learn when investing in a high-quality investing course.

As an average investor, trying to time the market will leave you frustrated by your minimal returns or great losses.

3. Avoid Penny Stocks

Penny stocks are the lowest-priced securities on the market, and they don’t offer any significant upside potential to their investors. While you may hit a home run return on some, many penny stocks tend to trend sideways.

The risk is not worth the return.

If you plan to invest in stocks, avoid penny stocks and focus on healthy companies.

4. Consider Buying Fractional Shares

Fractional share investing lets investors buy less than a full share at one time. Many times, you may not be able to afford the price of a full share.

For example, buying a share of Amazon (AMZN) may cost you upwards of $2800 or more. Thus, you can invest a smaller amount with a fractional share.

You would have to check if your brokerage company allows the purchase of fractional shares.

5. Stay the Course

In order to be successful, a trader must stay the course and maintain their focus. By staying focused, they will have less chance of making mistakes that may lead to big losses or overtrading.

When you’re starting out in the stock market, it’s important to be disciplined with your buying. Don’t try to time the market, because you’re likely to fail. Instead, buy shares over time and stay the course.

That way, you’ll be more likely to see a profit in the long run.

6. Avoid Emotional Trading

In order to be successful in the stock market, you have to maintain a level head.

Responding emotionally will only lead to bad decision making. Instead, stay the course and trust your research and analysis.

Know your weaknesses as well as your strengths.

7. Do Your Research

When you’re ready to start investing in the stock market, it is important to do your research so you can make informed decisions.

There are a lot of stocks to choose from, and it can be tempting to invest in them all.

But remember, you don’t want to spread yourself too thin. Invest in stocks that you believe in and that have a good chance of making you money.

8. Build Wealth

Stock market investing is one of the best ways to grow your money over time.

For long-term investing, you buy stocks in companies and hold them for a period of time, typically years. Over time, as the company grows and makes more money, so does your stock. This is one of the most common ways to build wealth over time.

The other way with short-term investing is to consistently take profit and grow your account over time.

Stock investing FAQs

Here is a list of the most common questions and answers on stock investing.

Q: What is the difference between investing and trading?

Trading is buying or selling financial products with the goal of making a profit. This is normally a day trader or swing trader.

Investing, on the other hand, refers to the process of putting money into an investment with the hope that it will grow. Someone who is focused on the long-term.

Q: Do you have to live in the U.S. to open a stock brokerage account?

No, you do not have to live in the U.S. to open a stock brokerage account. You must find a brokerage company in your area of residence abroad.

Q: How much money do I need to start investing?

The very common question of, “How much should you invest in stocks first time?”

It is recommended to start investing with $500 or more. However, you can start with Acorns with as little as $5.

Check out this investor’s story by starting with a small account of $500 and growing it over $35k in less than 6 months.

It is best to grow your account with your growth or profit.

Q: Do I have to pay taxes on the money I earn from stocks?

Yes, you will be required to pay taxes on the money you earn from stocks.

Q: What are the best stocks for beginners to invest in?

The best stocks for beginners to invest in are those that have a history of staying consistently on an uptrend. These companies’ stock prices have typically risen over the course of the year.

Find a list of beginning stocks to build your portfolio.

Q: How do beginners buy stocks?

Above, we outlined this in detail. In order to buy stocks, there are a few different steps that you should follow in order to maximize your chances of success.

The first step is making sure you have an account. Once you have an account, the next step is to decide which stocks you want to invest in. Then, you must buy your stock. Finally, you must decide when you want to sell your stock for a realized gain or loss.

Q: How many stocks should you own?

The best answer is it depends on your investing strategy.

As a short-term investor, you can only manage a smaller number of trades.
As a long-term investor, you need a more well-rounded portfolio. of15-25 stocks.

More likely than not, the short answer is “as many as you can afford.”

Q: What is the best thing to invest in as a beginner?

The best thing to invest in as a beginner is an index fund.

Indexes are great because they diversify across many different types of investments and don’t require much effort on the part of the investor to maintain. Index funds are also less risky than other investments, especially in the beginning stages of an individual’s investing career.

Q: How do we make money?

Traders make money in many ways. They can trade stocks, bonds, futures, and options on equities. They can go long when the market goes up and short when the market goes down.

Traders also use trading systems that are usually automated to manage the trades they make to maximize profit.

Trading is a risky investment and it’s not uncommon for traders to lose money. In order to keep losses small, many traders use the trading strategy based on minimizing risk in order to get the desired return.

Learn how fast you can make money in stocks.

Q: Why is Youtube Option Trading So Popular?

Video on how to trade options is very popular on Youtube. This is because of the high volume of interest on this topic.

For many people, learning options is an advanced strategy that takes more time and knowledge to learn.

This is my favorite youtube option trading channel as well as an overall investing strategy.

Additionally, traders are able to get a much higher return on motion trading versus going long or short on stocks.

Q: What is volume in stocks?

Volume is a measure of the number of shares traded in a given period, usually trading days.

This is an important metric if you plan to exit your trade to know there are enough buyers to buy your stock.

Q: How to invest in penny stocks for beginners?

Penny stocks are shares of a company that typically trade for less than $5 per share, which is also known as penny stock trading.

Investing in penny stocks can be a lot of fun and the highest risk, and there are many ways to get involved. For anyone who is new to the world of investing in penny stocks, it can be intimidating to know where to start.

However, there are a few things that you should keep in mind before diving into the world of penny stocks. One of these is researching what types of companies you want to invest in. Many of these penny stocks are not healthy companies and burning through cash.

It is important to always be careful when investing in penny stocks. Keep in mind that the risk of losing money is high and you should invest only what you are willing to lose.

Q: How to invest in stocks for beginners robinhood?

Robinhood is a stock brokerage company that allows users to invest in stocks without paying any fees. It also provides real-time quotes and charts. To invest, the user must have an account with Robinhood that holds at least $0.

Most major brokerage companies have zero commission fees on trading stocks as well.

Beware, Robinhood is known for stopping to trade various stocks during times of volatility whereas other’s brokers do not.

Q: What is a good price to buy at?

This is a hotly debated question as every investor sees the market from their view.

More often than not, people wonder the best time to buy stocks.

As such, you can read is now a good time to buy stocks?

Ready for Stock Market Investing?

If you are new to investing in stocks, there are a few things you take into consideration before diving into the market.

For starters, it is important to understand how stock markets work. You should also know the difference between a stock and an investment.

Investing in stocks can be a bit complicated, but this guide walked you through the basics of how to invest.

Before you invest in stocks, it is important that you understand your investment strategy. That way, you can make informed decisions about where to put your money and how much risk you are willing to take on.

Most people shy away from learning how to actively trade stocks because of the movies about Wall Street they have watched.

You will get a deeper understanding of investing in stocks the longer you educate yourself on the concept.

Overall, it is wise to diversify your portfolio and don’t put all your eggs in one basket.

So, what is your next move to start investing?

One of the best ways to improve your personal finance situation is to increase your income.

Here are the best investing courses to guide your path. With time and effort, you can start enjoying the lifestyle you want.

Learn how to supplement your daily, weekly, or monthly income with trading so that you can live your best life! This is a lifestyle trading style you need to learn.

Honestly, this course is a must for anyone who invests. You will lose more in the market than you will spend this quality education – guaranteed.

Read my Invest with Teri Review.

Photo Credit:
studentloanplannercourse.com

Learn how to reach a six figure net worth in 5 to 10 years, even if you have a massive amount of student loans.

This beginning investment course will help you pay off debt and start your path to six figures.

After taking a second job as a driver for Amazon to make ends meet, this former teacher pivoted to be a successful stock trader.

Leaving behind the stress of teaching, now he sets his own schedule and makes more money than he ever imagined. He grew his account from $500 to $38000 in 8 months.

Check out this interview.

Source: moneybliss.org

Apache is functioning normally

June 8, 2023 by Brett Tams

In life, you and your marriage partner may find yourselves facing many troubles and situations. While many of these are easier when together, that is not always going to be the case.

There are times when life is taken from a person quickly, leaving the partner without them. You never know what’s going to happen tomorrow.

You can’t predict the future, but you can prepare for the worst. Nobody wants to think about losing their spouse, but it’s a conversation that you should have

To soften the blow of this, insurance is often used to offer financial stability when the cost of the funeral, hospital stay, and bills are too much to handle alone. The cost of a funeral alone can easily add up to $10,000 or more. This can be a heavy bill to leave behind for your family to pay.

When the surviving partner dies, though, that same insurance might not be enough. For many, a survivorship life insurance policy is the go-to for coverage, security, and stability when it comes to dealing with everything left behind.

Common Use for Survivorship Life Insurance Policies

Most insurance policies work by providing money to a specific person after the one who was insured passes. This helps to ease the financial burden left behind by a death, which includes several expenses and more stressful bills that are without that extra paycheck.

With survivorship life insurance, though, two people are covered to pay for the costs associated with an estate. Unlike your ordinary life insurance, this only pays out when both parties have passed, as the name would suggest. It is mostly to cover the taxes and expenses with an estate so that the heir does not have to pay.

An estate comes with costs that could otherwise ruin its value, or at least drop it dramatically. When passing this to an heir, those costs could cause them to receive far less than promised.

Depending on the situation for which this person is receiving the estate that can be damaging. Not only that, but you would also not be giving the person as much as you had hoped. There is a reason they were chosen to receive your estate, obviously, and not giving them the full amount was probably never your plan. With this, you can ensure that they receive as much of the full amount as possible.

There are thousands of families members that find themselves with drastically less heritage than they assumed they would receive because of unpaid expenses, taxes, fees, and much more. If you want to leave your legacy with your children or loved ones, a survivorship insurance policy will protect your savings and allow your inheritance to reach its full potential.

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Estate Planning with Life Insurance

Having any type of final expense insurance is not difficult.

In fact, it is often easier than your average life insurance because it can be issued as a no medical exam life insurance policy. These policies are exactly what they sound like, you’ll be able to get the insurance coverage that you need, regardless of your health or any pre-existing medical conditions.

This can help you to insure your estate without issue so that whoever is receiving it is not stuck with massive bills that chip away at the overall amount. The ease of getting it also makes it easier on you, obviously. While other types of life insurance have stresses and because you to go through several steps to finally be insured, this makes it easier. When going for this type of insurance, it is possible to get it and get out without becoming stressed, worried, or bothered by what must be done.

With the importance of your estate, it is necessary to ensure it goes to your chosen heir in a complete amount. Having survivorship life insurance is the option to keep your estate at full value and help your heir get it without spending large sums of money.

It’s always best to meet with a trusted estate planning attorney to see if you are in need of a survivorship life insurance policy. There are a lot of different factors that you have to consider when deciding if you need a survivorship life insurance policy or a traditional plan. An estate planning attorney can help walk you through the process and make the best decision for you and your family.

Advantages and Disadvantages of Survivorship Life Insurance

Because there are so many different life insurance options, it’s important to understand the pros and cons of each option. Life insurance is one of the most vital purchases that you can make for you and your family, you should make well informed and educated decisions.

Not having the right type of policy, or not having a policy at all, is one of the worst mistakes that you can make. It could leave your loved ones with a mountain of debt and no way to pay for it. That’s not the inheritance that most people want to leave behind after they pass away.

One of the advantages to these survivorship life insurance policies is the standards that most companies used to issue them. If you go with a plan that uses medical underwriting, it’s going to be very different from a traditional term life insurance policy, because it’s based on the health of two people instead of just one.

This means that even if one person doesn’t have perfect health, you’ll still be able to get coverage as long as the other person is in good health. For anyone with any serious health complications or any pre-existing conditions, this can be extremely beneficial.

Another major advantage to these policies is the monthly premiums. In most cases, a survivorship life insurance policy is going to be cheaper than buying two separate policies for each person. These plans will give you life insurance coverage for less expensive monthly payments.

Just like other life insurance plans, there are disadvantages to these policies. The biggest disadvantage is obvious, you won’t receive any payment for the loss of your spouse.

When the first person dies, the surviving spouse will be left with all of the funeral expenses, medical bills, unpaid debts, and much more, but they won’t receive any funds from the life insurance policy. For a grieving spouse, it can be difficult to pay for all of these expenses.

This is where a traditional policy is an excellent tool. One alternative to the survivorship life insurance is purchasing a traditional term life insurance policy for both you and your spouse. These policies only cover one party instead of two.

In most cases, a term policy is much less expensive than most applicants think. Aside from how affordable they are, it’s also much more beneficial when your spouse dies, it will leave you with the money you need to pay off any debts or pay for any funeral expenses.

Just like with most other policies, you can always go with a no medical exam term life insurance plan. They are easy to apply for, and you can get insurance coverage quickly. In some cases, it can be as quick as a couple of days.

Getting Life Insurance

It’s easy to see why everyone should have a quality life insurance policy, but getting an affordable plan can be a long and stressful process. There are hundreds of companies that offer dozens of different insurance products.

Source: goodfinancialcents.com

Apache is functioning normally

June 8, 2023 by Brett Tams

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To get a house with a decent mortgage rate, you need a good to excellent credit score. But your biggest, most important payment — your rent — doesn’t even count. That’s an even bigger problem if your credit score doesn’t show any other key forms of credit, like a credit card or car payment.

It seems like the odds are stacked against you, as though renting an apartment or house, which costs a pretty penny by the way, isn’t a legitimate living situation. Fortunately, there are now ways around that.

In fact, as long as you can get the property owner on board, and sometimes even if you can’t, it’s really easy to ensure your rent payments count toward your credit score.

Why You Should Add Rent Payments to Your Credit Report

There are many factors that go into your credit score, and your payment history accounts for 35%.

But that’s a dilemma if you haven’t yet built or have to rebuild your credit score. How can you prove your creditworthiness if you don’t have something to repay?

Enter rent-payment reporting.

Rent is a massive monthly expense. Unfortunately, credit bureaus like Experian, TransUnion, and Equifax haven’t traditionally accounted for your housing costs unless it was a mortgage, creating a stubborn catch-22 for some would-be homeowners.

You need a higher credit score to afford a home — or even just a credit card with better rates and perks. But you can’t raise your credit score if no one knows about the payments you’re making. It’s so ridiculous it would be funny if it weren’t so depressing.

But thanks to rent reporting, people with a low or no credit score can use their on-time rent payments to bolster their score, improving their odds of obtaining credit.

How to Add Rent Payments to Your Credit Report

You have options when it comes to adding rent payments to your credit report: You can sign up for a service yourself, though the rental property owner may already work with a rent-reporting company. Though the specific steps vary from company to company, the process always follows a predictable pattern.

1. Determine Whether Your Property Reports Rent Payments — & to Whom

Some property owners already allow renters to opt into rent-reporting programs. Typically, the service is free to the renter. However, they may require you to have rent automatically deducted from your bank account each month.

There are even government-sponsored programs to help disadvantaged renters build their credit scores. These are renters the government considers “credit invisible,” which basically just means they have an insufficient credit history. If you’re one of them, you should take the government up on that. Falling into this category makes borrowing more expensive and can throw up barriers to housing and employment, according to the Consumer Financial Protection Bureau.

And if neither of those is an option, there may be free or low-cost rent-reporting services you can sign up for on your own. Those require varying levels of input from the property owner, though, so ensure they’re willing to participate to the degree required before handing over any dough.

Note that not all rent-reporting companies report payments to the same credit bureaus. For instance, some only report to TransUnion, others report to TransUnion and Experian, and still others report rent payments to all three credit-reporting bureaus. Be sure to understand which bureaus your service reports to.

2. Enroll in a Rent-Reporting Service

If the property already has a rent-reporting service, just ask the people in the office how to sign up or opt in. It may be as simple as filling out a form giving them permission to do it. If not, it’s unlikely to take any longer than the DIY method.

If your property is a no-go on rent reporting, it doesn’t hurt to ask if they’d be willing to sign up. Just in case, show up equipped with information on how it could benefit the property owner (like this article on Forbes).

And if they say no, you can sign up for one yourself. That means you have to pay the fees, which are usually less than $100 per year, though they can go higher for more benefits, such as reporting to all the bureaus or expanding the length of time they report for. There may also be a setup fee, though that’s usually less than $100 (often as low as $25 or less).

The one potential hiccup is that the rent-reporting company may ask the property owner to participate by verifying your rent payments. And that means they may have to at least be willing to provide some support. But some services can do it through your bank account without going through the property.

To enroll in a rent-reporting service, you must provide a copy of your lease along with some personal information, such as your name, birthdate, and address. The process is easy, and you can complete it online in a matter of minutes.

3. Ensure Accurate Rent Payment Reporting

If you’re making the effort to report your rent payments to build credit, it’s crucial to verify the accuracy of your credit report. There are a couple of methods to monitor your credit score effectively.

One option is to visit AnnualCreditReport.com, where consumers can obtain a free credit report from each credit bureau once per year. A few months after rent reporting starts, check the relevant bureau’s credit report. If you rent reports to more than one bureau, check them a few months apart so you can keep tabs.

Hint: In light of numerous scams associated with the COVID-19 pandemic, the website now allows individuals to access their credit reports weekly until December 2023.

Another approach is to create an account with the three major credit bureaus. Most allow at least some access for free. Paid accounts have more features, but they can cost $10 to $30 per month and only give you access to one bureau’s reports.

Fortunately, there are other options. Many credit cards, banks, and free credit monitoring apps like Credit Karma also offer similar services, allowing you to stay informed about any updates or modifications to your credit information. Some may even give you access to more than one bureau’s info.

How Much Do Rent-Reporting Services Cost?

The cost for rent-reporting services really runs the gamut. Supposedly, you get what you pay for. But it really depends on what you need, so you can’t just opt for the most expensive one and call it a day. Nor can you opt for the cheapest and expect to get the results you’re looking for.

There are three charges to be on the lookout for.

Many rent-reporting companies charge a setup fee. The more they offer (again, supposedly), the more it costs. For example, Rent Reporters charges almost $100 as a one-time setup fee. And you get a personal credit specialist to help you improve your score. Boom’s setup fee is only $10, but all it does is report rent payments.

Then there’s the monthly subscription fee. You can get Boom for as little as $2 per month. But Rent Reporters and LevelCredit charge a minimum of around $7. But unlike Boom, Rent Reporters provides 24 months of rent history for free, and LevelCredit also reports your cellphone and utilities.

Lots of these companies offer additional paid services. You can get past rent history, often as far back as two years (24 months), discounts for roommates or domestic partners to add it to their credit reports, and even credit monitoring. Past credit history is often around $50, though you can get it for less, but not every service offers it. And the other services depend on what they offer and how much they already cost.

Have I mentioned that they supposedly charge based on their level of service? The reality is that may or may not be true for you. It’s not that the statement is untrue on its face. It’s that it really does depend on what would benefit you the most.

For example, Boom is dirt-cheap compared to its peers, but it also reports to all three bureaus. Rent Reporters and LevelCredit only report to TransUnion and Equifax. So despite having more features, if what’s most important to you is credit bureau coverage, Boom wins out.

And it doesn’t stop there. Experian Boost also gives you credit for paying your utilities. Boom and Rental Kharma include your previous rental history at no additional charge. Some, like Rock the Score and PaymentReport, give you options if the property owner won’t participate. And Piñata has a rewards program.

All these options mean you can get exactly what you want for a price you can afford.

How to Choose a Rent-Reporting Service

When choosing a rent-reporting service, it’s tempting to sign up for the first one with the right price. But there are several factors to consider. Follow these steps to find the best rent-reporting service for you.

Check with the property owner. Check to see if your property already uses a rent-reporting service. If so, sign up through them. That means you could skip the rest of the steps. But if their service doesn’t report to all bureaus, you can still sign up with another one to compliment the one they offer.
Research available services. Look for rent-reporting services online and compare their features, costs, and reputation. Pay attention to factors like the duration of reporting, customer support, and ease of use.
Check credit bureau partnerships. Ideally, the service should report to major credit bureaus like Experian, Equifax, or TransUnion. Reporting to multiple bureaus increases the likelihood of your rental payments being included in your credit history with the specific bureau a particular creditor uses.
Evaluate the reporting method. Some services require a direct connection with property management, while others rely on alternative data sources like bank statements. Choose a method that suits your preferences and provides accurate reporting.
Number of months reported. Some rent-reporting companies can report as far back as 24 months, while others report starting with your first payment while you’re signed up moving forward. The former is expensive, but it could help you qualify for credit or a loan faster. If you don’t need that, sticking with the latter is usually cheaper.
Assess the cost. Some services charge a monthly fee, while others have an annual fee or one-time payment. Consider your budget and choose a service that provides good value for the features offered.
Read customer reviews and ratings. Read reviews on trustworthy platforms like Trustpilot or the Better Business Bureau to get an idea of the experiences and satisfaction levels of other users. That can give you insights into the reliability and performance of the service.
Consider additional features. Some rent-reporting services offer additional features that can enhance your financial well-being. For example, they can provide credit-monitoring services, educational resources, or tools to track your credit score progress.
Understand privacy and data security. Review the privacy policy and data security measures of the rent-reporting service. Ensure they have appropriate safeguards in place to protect your personal and financial information.
Check for customer support. Consider the availability and quality of customer support provided by the rent-reporting service. Determine whether they offer multiple channels of communication, such as phone, email, or live chat, and whether they have a reputation for responsiveness and helpfulness.

It can help to make a chart or spreadsheet and tick off or jot down the features each service has so you can compare them all at once. Once you’ve decided which one’s best for you, all you have to do is sign up.

Final Word

If you’re balking at the idea of paying a company to report your rent payments to credit bureaus, that’s totally fine. Really, this isn’t a service you should waste money on unless it helps you.

But they do have benefits. For example, when you increase your credit score, you receive lower interest rates on loans and credit cards. That alone could help justify the cost.

But as awesome as these services are, that doesn’t mean you need one. If you have stellar credit and your report shows on-time monthly payments for obligations like your car or credit cards, you don’t need to report your rent payments. The service is best-suited to those who are trying to build credit or repair bad credit.

Heather Barnett has been an editor and writer for over 20 years, with over a decade committed to the financial services industry. She joined the Money Crashers team in 2020, covering banking and credit content for banking- and credit-weary readers. In her off time, she enjoys baking, binge-watching crime dramas, and doting on her beloved pets.

Source: moneycrashers.com

Apache is functioning normally

June 8, 2023 by Brett Tams

After finding holes in our second set of seven-year-old sheets, I decided it was time to go sheet shopping. With quality ranging from my elastic-only-in-the-corners polyester blend to sheets created by Italian artisans and prices to match, I wanted to get the best, most durable set for my money.

The Cotton Tale

After inspecting the labels of all my sheet sets, I found my favorites were made of 100% cotton.

And I’m in good company, because cotton makes up the majority of bedding options. But not all cottons are equal. The length of cotton fibers (called the “staple”) differs and, in general, the longer the fiber length, the softer and more durable the fabric.

If you’re looking for less pilling and greater durability, Pima cotton, Supima cotton, and Egyptian cotton are reputed to be high-quality cottons. Egyptian cotton, in particular, has fine, silky, extra-long staple fibers, and Egyptian cotton venders claim their sheets last decades. My set of Egyptian cotton sheets were the first to develop holes, but they felt awesome.

How will you know which cotton is used in your sheets? If the label does not specify the type of cotton, you can assume it is lower quality cotton (most cotton grown in the U.S. is upland cotton, a shorter staple variety).

Cotton is popular because it resists stains and wicks moisture away from your body as you sleep. Though far less common, sheets made of silk and linen also have these moisture-wicking characteristics.

As I read many top-performing sheet reviews, I discovered the main complaint for cotton sheets was wrinkles. No big surprise there.

What did surprise me was that some cotton sheets are treated to resist wrinkles, but these sheets may have formaldehyde on them. Plus, wrinkle-resistant treatments often result in sheets that are less comfortable. A natural solution for fewer wrinkles is to take sheets out of the dryer while they’re still slightly damp and put them immediately on your bed. Or you can iron them, of course. Another less-wrinkly, but less moisture-wicking (how many times can I put “moisture-wicking” in one article?) option is a cotton/polyester blend.

Though cotton bedding is the most popular, other fabric options exist. Silk, while hypoallergenic, is pricey. Some people love the eco-friendly linen bedding, though it’s also more expensive than cotton. Some people even like satin sheets to cry on. Synthetic fabrics, like polyester, are inexpensive alternatives, but pill more easily.

Threads Up!

Thread count is the number of fibers per square inch of fabric, and I thought more is better. And it does matter…to a point.

Most people agree that good quality sheets have a thread count of at least 200, while the best thread count is 300-400. Beyond 400, though, manufacturers are probably using multi-ply fibers to increase the thread count which may slightly increase durability at the expense of stiffer fabric.

Note: During this research, I did find a website that claimed their 1500 thread count used single-ply thread. However, most sources said that manufacturers would find it difficult to put 1500 single-ply threads in a square inch. I found other sites that admitted using two-ply thread for a thread count of 800.

Other Quality Indicators

So more $$$ doesn’t necessarily equal more Zzzzzzs, as my holey Egyptian sheets demonstrate. Type of fiber and thread count do matter. But don’t forget about weave type and stitching.

Weave type
If you like crisp sheets, go with percale weave. If you like soft, go with sateen.

Standard weave is strong and even, one stitch over and one under
Percale weave, used at thread counts of at least 200, is tighter and more crisp than standard
Sateen sheets have more vertical than horizontal fibers, resulting in a very soft sheen, but is more likely to pill or tear
Patterned weaves, like jacquard or damask, are very expensive but very durable

Craftsmanship
My set of sheets with elastic only at the corners pops off the mattress after a restless night, so my next set of sheets will have elastic all the way around. Also, look for double-stitched hems and pillowcases. With pillow top mattresses, especially, the sheets should have a pocket depth deep enough (add at least two inches to your mattress depth) to cover your mattress.

Finishing touch
Mercerizing strengthens the fabric and adds luster. Wrinkle resistance and shrinkage control have their advantages, but may result in less comfortable fabrics. If you select sheets with a pure-finish label, it ensures that chemicals were not used in the manufacturing process or all traces of chemicals have been removed.

The Bottom Line

Although everyone’s preferences are different from mine, I decided I wanted high-quality (but not organic) cotton, percale weave, and a thread count of at least 200. In the end, I picked the “best cotton percale sheets” from one vendor because I am not sure if I will like the crispness of percale. I am glad L.L. Bean offers such a great guarantee if I like sateen weave better after all.

At $150 per set, I’ll admit my choice doesn’t seem incredibly frugal. If they last 10 years though, they’ll cost less than a nickel for each good night’s sleep.

On the other hand, I feel crazy for spending that much money on sheets when Walmart has a microfiber sheet set for less than $22. Decent reviews, but 100% polyester. Sure, I prefer 100% cotton, but do I prefer it enough to spend $128 more to get it? Which set would last longer?
I’ll have to sleep on this decision.

Do your sheets help you get a good night’s sleep? Has anyone tried linen? Did I miss any other important factors?

Source: getrichslowly.org

What Are Student Loans?

Types of Student Loans

How Do Federal Student Loans Work?

Direct Subsidized Loans

Direct Unsubsidized Loans

Direct PLUS Loans

Direct Consolidation Loans

Some Facts About Federal Loans:

How Do Private Student Loans Work?

Some Facts About Private Loans:

How Do You Apply for Student Loans?

Applying for Federal Student Loans

Applying for Private Student Loans

What Is the Maximum Student Loan Amount?

Undergrads

Direct Subsidized Loans and Direct Unsubsidized Loans

Grad Students

Direct Unsubsidized Loans

Direct PLUS Loans

What’s the Maximum Amount You Should Actually Borrow?

What Can Student Loans Be Used For?

How Does Student Loan Interest Work?

Federal Student Loan Interest Rates

Private Student Loan Interest Rates

How to Calculate Student Loan Interest

When Does Student Loan Repayment Start?

Paying Back Federal Student Loans

Standard Repayment Plan

Graduated Repayment Plan

Extended Repayment Plan

Revised Pay As You Earn Plan (REPAYE)

Income-Based Repayment Plan (IBR)

Income-Contingent Repayment Plan

Income-Sensitive Repayment Plan

Paying Back Private Student Loans

Immediate Repayment Plans

Deferred Repayment Plans

Refinancing Student Loans

Summary

Read more:

What does PITI stand for?

What is PITI? The four components

1) Principal

2) Interest

3) Taxes

4) Insurance

Private mortgage insurance (PMI)

Homeowners insurance

How to calculate PITI

PITI and the 28% Rule

How PITI impacts loan approval

How DTI factors in

Don’t overlook other housing costs

The bottom line on PITI

What is a cosigner?

Cosigning a loan may prevent you from being approved for future loans.

Being a cosigner isn’t something you can easily get rid of.

Cosigning a loan can ruin relationships.

Cosigning a loan is up to you.

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