Editor’s Note: This story was written byLauren Toms from partner site MoneyCrashers.
If you’ve been following the news this year, you might have heard about bank runs: Silicon Valley Bank, Signature Bank and First Republic in the U.S. and Credit Suisse internationally. And it’s understandable if you’re spooked.
A bank run happens when many — if not most — of a bank’s customers try to withdraw their money all at once, either because they’re worried the bank might go out of business or they’ve heard rumors about the bank’s financial health. Bank runs can be very stressful for both the bank and its customers and can have big effects on the economy as a whole.
Fortunately, there are things you can do to protect your money now so a bank run doesn’t ruin your day or your net worth.
Keep your money in a federally insured bank
One of the best ways to protect your money during uncertain times is to keep it in a federally insured bank. That means your deposits are insured up to $250,000 per depositor by the Federal Deposit Insurance Corporation (aka FDIC) or National Credit Union Administration (for credit unions).
If the bank fails, you won’t lose your money so long as you don’t have more than the insured amount in all your accounts with that bank.
To find out if your bank is federally insured, you can look for the FDIC or NCUA sign at your bank or credit union or ask a representative. You can also check the FDIC’s online database, BankFind, to verify if your bank is insured.
Don’t make assumptions. Some banks are uninsured, so it’s important to do your research and ensure your money is protected. Some banks or credit unions may also have private insurance. But it’s not backed by the U.S. government and is subject to the rules of the bank’s underwriter.
In addition to providing insurance for your deposits, using a federally insured bank also comes with other benefits. For example, federally insured banks must comply with certain regulations that protect consumers and promote stability in the financial system. Theoretically, that means that your money is more secure and less likely to be at risk in the event of a bank failure.
Diversify your wealth
Diversifying across different banks and credit unions is an important step to protect your money during uncertain times. That means spreading your money across different FDIC- and NCUA-insured institutions, with no more than $250,000 in each account.
That serves two purposes. One, the more banks you have, the more likely you are to have at least one unaffected by bank runs. They tend to spread, meaning that if one bank starts to fail people start worrying about others, which results in a run on others.
Two, it ensures that if the worst does happen and the bank becomes insolvent, you have a better shot of having at least one bank remain unscathed — meaning you still have money in at least one account to keep paying bills and living life.
And diversification doesn’t just apply to the rich and powerful. Even if you only have a few thousand dollars in the bank, keep it in at least two different institutions. Otherwise, you could temporarily lose access to all your cash between the moment the bank stops processing withdrawals and the moment the FDIC steps in — which can take a few days.
For example, maybe keep half in a longstanding bank like Chase and the other in a neobank like Chime (which importantly has no connection to Chase). By diversifying across different banks, you reduce the risk of losing access to all your money at once.
Stay informed and be prepared
Staying informed about your bank’s financial health is a key part of protecting your money during uncertain times. Regularly check your bank’s financial statements and reports, which are usually available online or in-branch. These reports can give you insight into your bank’s financial performance and stability.
Another way to stay informed is to pay attention to the news and any announcements your bank makes. That can help you stay up to date on any changes or developments that may affect your bank’s stability. But if you hear any rumors or concerns about your bank’s financial health, it’s important to verify them before taking any action.
In addition to staying informed, it’s important to be prepared in case of a bank run. That means creating a plan to protect your money and ensure you have access to funds when you need them.
One way to do that is to keep a small amount of emergency cash on hand at all times. How much you keep depends on what you think you might need, how big an emergency you’re planning for, and whether you have a safe place to keep it.
Some people, especially those with several banks, may just want a few hundred dollars on hand in case there’s an immediate issue. Others may want an entire month’s worth of money in case the worst happens.
But neither of those is a good idea if you don’t have a safe place to store it. Technically, you could use a safe deposit box. But bank branches might close if the bank goes under, severing your access to those funds.
In lieu of that, think of a safe place in your home where you can keep it away from the prying eyes of houseguests and burglars alike. Ideally, it would be inside a fireproof, waterproof safe in case of natural disaster.
Keep calm and don’t panic
During a bank run, it’s natural to feel scared and uncertain. However, panicking can actually make the situation worse and put you at greater financial risk.
One danger of panicking is that you may withdraw too much money too quickly, leaving you without enough funds to cover your expenses and causing any automatic payments to bounce. Additionally, withdrawing large amounts of money can contribute to the bank’s instability and potentially make the situation worse for everyone involved.
To stay calm and make rational decisions during uncertain times, go back to your plan — and maybe even have a backup plan in case it’s worse than you thought or happens faster than you predicted.
One way to stay calm is to focus on the things you can control, such as your own finances and your own actions. That means avoiding rumors and speculation, and instead relying on verifiable facts and information.
Another way to stay calm is to remember the importance of having a long-term financial plan. By focusing on your goals and priorities, you can avoid making hasty decisions.
Final word
Bank runs can be a scary and uncertain time for both banks and their customers. However, by taking proactive steps to protect your money, you can minimize your risk and safeguard your finances.
By taking action now, you can protect yourself and ensure you have access to funds when you need them. Remember, it’s always better to be safe than sorry when it comes to your money.
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Many Americans have income that fluctuates from week to week. When incomes are unsteady, any unexpected expense can leave you coming up short. If you don’t have a fully funded emergency fund, you may find yourself looking around for loans to bridge the gap and get you to your next paycheck. Payday loans are out there, but at a high cost to borrowers. Before taking out a payday loan you may want to first make a budget. You can work with a financial advisor who can help you make a long-term financial plan that you can budget your finances to meet.
Payday Loans: Short-Term Loans with a High Price
What are payday loans? Say you’re still 12 days away from your next paycheck but you need $400 for emergency car repairs. Without the $400 your car won’t run, you won’t make it to work, you’ll lose your job and possibly lose your housing too. High stakes.
If you go to a payday lender, they’ll ask you to write a future-dated check for an amount equal to $400 plus a financing fee. In exchange, you’ll get $400. You’ll generally have two weeks or until your next paycheck to pay that money back. Say the financing fee is $40. You’ve paid $40 to borrow $400 for two weeks.
If you pay back the money within the loan term, you’re out $40 but you’re not responsible for paying interest. But the thing is, many people can’t pay back their loans. When that happens, the money they borrowed is subject to double-digit, triple-digit or even quadruple-digit interest rates. It’s easy to see how a payday loan can lead to a debt spiral. That’s why payday loans are illegal in some places and their interest rates are regulated in others.
When your loan term ends, you can ask your payday loan lender to cash the check you wrote when you agreed to the loan. Or, you can roll that debt into a new debt, paying a new set of financing fees in the process. Rolling over debt is what leads to a debt spiral, but it’s often people’s only choice if they don’t have enough money in their account to cover the check they wrote.
Are Payday Loans a Good Idea?
Not all debt is created equal. An affordable mortgage on a home that’s rising in value is different from a private student loan with a high-interest rate that you’re struggling to pay off. With payday loans, you pay a lot of money for the privilege of taking out a small short-term loan. Payday loans can easily get out of control, leading borrowers deeper and deeper into debt.
And with their high-interest rates, payday loans put borrowers in the position of making interest-only payments, never able to chip away at the principal they borrowed or get out of debt for good.
Payday Loans and Your Credit
Payday loans don’t require a credit check. If you pay back your payday loan on time, that loan generally won’t show up on your credit reports with any of the three credit reporting agencies (Experian, TransUnion and Equifax). Paying back a payday loan within your loan term won’t boost your credit score or help you build credit.
But what about if you’re unable to repay your payday loan? Will that payday loan hurt your credit? It could. If your payday lender sells your debt to a collection agency, that debt collector could report your unpaid loan to the credit reporting agencies. It would then appear as a negative entry on your credit report and lower your credit score. Remember that it takes seven years for negative entries to cycle off your credit report.
Having a debt that goes to collections is not just a blow to your credit score. It can put you on the radar of some unsavory characters. In some cases, debt collectors may threaten to press charges. Because borrowers write a check when they take out a payday loan, debt collectors may try to press charges using laws designed to punish those who commit fraud by writing checks for accounts with non-sufficient funds (these are known as NSF checks).
However, future-dated checks written to payday lenders are generally exempt from these laws. Debt collectors may threaten to bring charges as a way to get people to pay up, even though judges generally would dismiss any such charges.
Alternatives to Payday Loans
If you’re having a liquidity crisis but you want to avoid payday lenders, there are alternatives to consider. You could borrow from friends or family. You could seek a small personal loan from a bank, credit union or online peer-to-peer lending site.
Many sites now offer instant or same-day loans that rival the speed of payday lenders, but with lower fees and lower interest rates. You could also ask for an extension from your creditors, or for an advance from your employers.
Even forms of lending we don’t generally love, like credit card cash advances, tend to have lower interest rates than payday loans do. In short, it’s usually a good idea to avoid payday loans if you can. Instead, consider working on a budget that can help you get to your next paycheck with some breathing room, and make sure you have a rainy day fund.
The Bottom Line
When considering a short-term loan, it’s important to not just look for low-interest rates. Between fees and insurance policies, lenders sometimes find ways to bump effective interest rates to triple-digit levels even if they cap their APRs. The risks of taking a payday loan bring home the importance of working hard to build up an emergency fund that you can draw on.
Tips for Retirement Planning
If you’re not already preparing for retirement then it’s a good idea to create a retirement plan and make sure you’re contributing to it regularly. If you’re overwhelmed or don’t know where to begin, a financial advisor can help you map it all out. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Not sure how much you need to save for retirement? Consider using our free retirement calculator to get the number you need so that you can start making the right progress.
Amelia Josephson
Amelia Josephson is a writer passionate about covering financial literacy topics. Her areas of expertise include retirement and home buying. Amelia’s work has appeared across the web, including on AOL, CBS News and The Simple Dollar. She holds degrees from Columbia and Oxford. Originally from Alaska, Amelia now calls Brooklyn home.
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Real estate offers myriad investment choices, from single-family homes to data centers. The ideal asset for you depends on factors such as your investment size and strategy. Over the past several decades, investors have diversified their portfolios by capitalizing on emerging market opportunities like self-storage.
Self-storage facilities serve as secure storage solutions for individuals and businesses, accommodating various products, materials and more. Given the high demand for spaces to store household belongings and business equipment, self-storage facilities have become indispensable nationwide.
For help figuring out your personal investing strategy, consider working with a financial advisor.
Self-Storage Investing Basics
Self-storage investing means investing in storage units that individuals and businesses use to stow their spare belongings and assets. For example, a homeowner might need room for seasonal lawn equipment. For businesses, storage units can be used for surplus inventory instead of throwing it away. In either case, they’ll pay a storage facility a monthly fee to place their items in a secure unit. As an investor, you can own and operate a storage facility or purchase shares in a facility.
Self-storage is a solid investment for several reasons investors find attractive. First, the asset has high earning potential. Storage units cost less than residential real estate and other forms of commercial buildings, meaning more money in your pocket. For example, IBISWorld reported that the profit margin for storage units is 41%. In addition, storage revenue has increased by 2.1% over the past five years, making the industry worth over $29 billion.
Second, demand for self-storage continues to grow as baby boomers downsize and businesses shrink their workspaces.
Resultingly, the risk of investing in self-storage is low because of high profit margins and continuous demand. Customers need storage whether the economy is strong or a market downturn occurs. Therefore, the industry is a viable way to diversify your portfolio.
The Self-Storage Market
Here’s how the self-storage business works: the storage property owner (you) charges customers to use the space for storing their belongings. These storage spaces are available for rent every month and come in different sizes according to the customers’ needs.
The specific type of storage unit you will promote depends on your client base. For example, if your ideal customers are sports enthusiasts, they may prefer padding, shelving and slat walls to store their equipment. On the other hand, a family moving across town might only need a bare unit to store their belongings temporarily. Therefore, understanding your target customers is vital in determining the type of units you purchase or build.
In addition, the lease contract terms are the backbone of the business, and you can adjust them monthly. This feature allows you to adjust prices from one month to another, unlike traditional real estate contracts, which do not apply to the self-storage market. As a result, you can change with the market and cater to your customers’ needs.
Fortunately, investors of all scopes and financial backgrounds can invest in storage units. For example, suppose you want to experiment with a modest investment in the self-storage industry. In that case, you can purchase shares in self-storage facilities. So, you can actively invest in self-storage (through ownership of a facility) or take the route of less commitment and risk through passive investment (shares in a company).
Types of Self-Storage Facilities
Self-storage facilities can be classified based on their purpose and capacity. Each type of facility has its advantages and disadvantages.
Climate-Controlled Storage
Certain items and materials are susceptible to damage from heat, cold or extreme humidity. For example, art, furniture and musical instruments benefit from climate control. To safeguard these items, climate-controlled storage units are available.
As a result, a regulated environment and security are top priorities when storing fragile possessions. Because climate-controlled storage units cater to various market needs, they are more expensive, and investors can charge higher prices for their specialized services.
Drive-Up & Outdoor Storage
Outdoor or drive-up storage is the most widespread type. It consists of rows of units resembling garages. By pulling up the door, the customer has complete access to their storage unit. These facilities are the most affordable option available.
One of the benefits of outdoor storage facilities is that they require minimal maintenance and employees. In addition, they are user-friendly, making them popular among individuals needing storage space. Lastly, these storage centers can bolster their security through cameras, electronic gates and security guards.
Mixed-Use Storage
The self-storage industry serves a diverse range of customers with varying needs. To meet these niche demands, many storage facilities combine different services, resulting in mixed-use storage facilities.
A significant advantage of mixed-use storage facilities is the ability to cater to various needs. For example, a self-storage facility strategically located in an urban setting can help nearby residents with extra belongings while serving local businesses. As a result, mixed-use storage facilities are flexible assets, offering solutions to a wide customer base.
Vehicle Storage
Self-storage facilities also help customers with vehicles such as cars, boats or RVs. Vehicle storage is an ideal solution for those seeking a sheltered, locked parking spot.
Vehicle storage often offers additional services, such as temperature-controlled units to ensure the preservation of classic cars. As a result, customers turn to these facilities annually to protect their vehicles, especially near high-demand spots such as airports and harbors.
How to Invest In Self-Storage
There are four primary ways you can get involved in a self-storage venture:
1. Purchase Shares in a Real Estate Investment Trust (REIT)
If you aren’t comfortable owning and operating an entire facility, you can invest in a real estate investment trust (REIT) instead. These companies spread investors’ money across various sectors and can have a particular focus. So, finding a REIT specializing in storage units can give you exposure to this profitable industry.
2. Invest in a Publicly Traded Storage Business
Similarly, you can buy shares in corporate storage companies on the stock market. If the company does well and the stock price increases, you can sell your shares for a profit.
3. Buy an Existing Facility
You can get more involved by purchasing a self-storage facility of your own. This option means running the business (or hiring workers to do so) and collecting monthly payments from your customers. As a result, you have higher earning potential than investing in a REIT.
4. Develop Your Own Facility
If there aren’t any facilities for sale near you, building one yourself is another option. Remember, you must purchase a suitable plot of land and manage the facility’s construction. While doing so takes additional time and money, it’s a way into owning a storage facility and enjoying the profits.
Drawbacks of Investing in Self Storage
Despite the advantages of investing in self-storage, it’s essential to understand the potential challenges in this type of venture. Depending on your business model, financial circumstances and location, you’ll face different obstacles. Fortunately, you can adjust your approach as needed to overcome such hurdles.
First, clients can be demanding, requiring a composed demeanor and a focused strategy. For instance, a customer who just lost their job and housing can come in, desperate for help and lacking the resources for a monthly payment. As the owner, you’ll have to decide how to go about the situation and risk losing money.
Furthermore, when competing against rivals who offer affordable storage spaces in prime locations like the city center, it’s best to research the local market. Then, you can evaluate your position compared to the competition and modify your approach to enhance your business.
Is Investing in Self-Storage Right For You?
With all the preceding information in mind, you can decide how self-storage would fit into your portfolio. If you’re interested in real estate, self-storage is an excellent method because it is less expensive than typical commercial real estate. In addition, it requires less upkeep than residential buildings and can provide a steady cash flow every month.
Remember, a lump sum (usually tens or hundreds of thousands of dollars) is needed up front to invest in self-storage. You’ll purchase partial or full ownership of a facility or construct a facility from scratch. So, you must save up the required money or borrow it from a lender. Either way, these startup costs can be prohibitive to investors without the cash.
Lastly, you can take a less intense approach by investing in a REIT. If you like the self-storage business but don’t want to run a company, you can still enjoy the industry’s robust profit margin by putting money into shares in a self-storage business.
The Bottom Line
Investing in self-storage means purchasing a business or shares in a business that protects people’s possessions. Because this industry has a low overhead and charges monthly rent, investors can make substantial gains. To get a foothold in the business, you’ll need to select which type of storage you want to invest in, analyze your local market and find a need unmet by the competition. On the other hand, a self-storage REIT is a solid choice for those who prefer a less hands-on approach.
Tips for Investing in Storage Units
Self-storage units are excellent assets for a financial plan. However, it can be challenging to know how much cash to allocate toward it versus your other investments and priorities. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Self-storage is just one method for real estate investing. To explore the topic more deeply, here are three more ways to add real estate to your portfolio.
Ashley Kilroy
Ashley Chorpenning is an experienced financial writer currently serving as an investment and insurance expert at SmartAsset. In addition to being a contributing writer at SmartAsset, she writes for solo entrepreneurs as well as for Fortune 500 companies. Ashley is a finance graduate of the University of Cincinnati. When she isn’t helping people understand their finances, you may find Ashley cage diving with great whites or on safari in South Africa.
This Personal Capital review goes over the Personal Capital app, which is something that you need! This free financial app will allow you to manage your money better.
Do you understand your money? Are you properly managing it? Today, in this Personal Capital review, I am going to go over my favorite personal finance tool, and explain how it will help you improve your financial life.
Over 3,400,000 people use Personal Capital, and I am one of those people!
Personal Capital provides free personal finance software that is somewhat similar to Mint.com, but better. If you like using Mint, I highly recommend checking out Personal Capital.
I recommend that everyone sign up for Personal Capital, whether you’ve been investing for years or if you haven’t even started yet. There is something for everyone when it comes to this free financial software, and it is extremely beneficial. Plus, it is free, so there is nothing to lose.
Quick summary of what Personal Capital is – their free personal finance software allows anyone to better manage their finances by allowing users to aggregate their financial accounts. You can connect accounts, such as your mortgage, bank, credit cards, investment portfolio, retirement, and more, and it is all FREE. You can track your cash flow, your spending, how much you’re saving, how your investments are doing, and more. With their free financial software, you can easily see all of your accounts in one place so that you can manage everything efficiently.
I’ll say it again. It’s free, and there’s no catch!
As you know, I’m all about making your finances as simple as possible so that you can focus on other areas of your life. Personal Capital allows you to manage all areas of your financial situation in one convenient place.
You can use Personal Capital via your computer, tablet, cell phone, and even a smart watch, which makes it great because you can stay up to date on your finances no matter where you are.
Personal Capital review.
Background information before we get into this Personal Capital review.
Personal Capital is growing in popularity, so I thought it was a great time to publish a Personal Capital review just in case any of you are interested in trying out their free personal finance software.
Personal Capital currently has over 3,400,000 registered users and over $20.5 billion assets under management.
If you’re interested in signing up for Personal Capital for free, please click here.
What can you do with Personal Capital?
With the Personal Capital app, there are many tools such as:
Net worth calculator
To protect my privacy, these images are not mine – they were all provided by Personal Capital.
You can track your net worth and measure your progress. This will help you reach your financial goals and see how you are doing. This allows you to track changes, make educated decisions, and monitor and reduce your debt.
Cash flow
You can manage your cash flow, view your income, analyze your spending, view your bills, and more with the free Personal Capital app. You can also view your transactions so that you can see where your money is going, which helps you see what areas you need to work on when it comes to your spending.
Retirement planner
You can track your investment portfolio all in one place so that you can easily track your performance, see your investment allocations, and easily analyze everything related to your investments. The Personal Capital Retirement Planner will also tell you if you have saved enough for retirement.
401k Fee analyzer
Do you know how much you are paying in fees for your various investments, such as with your 401k? There are often many fees that people pay for with portfolio management, but there are much cheaper options when it comes to investing your money.
With Personal Capital, you can easily see what fees you are paying, and Personal Capital shows you how this may be impacting your retirement plan.
Free investment checkup
You can receive a free investment checkup as well. You can see how your investments are performing, receive a free examination of your portfolio, and hear great advice so that you can improve your investment and retirement situation.
Their Investment Checkup tool creates a personal financial plan so that you can analyze your risk assessment and see how prepared you are for retirement.
How does Personal Capital make money?
So, after reading about all of the benefits in my Personal Capital review, I’m sure you’re probably wondering what the catch is and what the Personal Capital fees are.
Their core service, which is the Personal Capital platform, is free. If you choose to use their personalized investment strategy, they earn an income from their management fees, which are less than 1%. However, you don’t have to enroll in that service if you don’t want to. The free Personal Capital platform is all that I use, and it is a great service!
Again, you don’t have to pay for Personal Capital if you do not want to. All of the services I mentioned above are completely free. However, they are hoping that if you enjoy their services, you will eventually go a little further and let them manage your investments.
I just use their free version, and you can do the same to have access to all of their amazing free personal finance software. There’s no catch at all, it’s seriously free, and there are no hidden fees.
You can sign up for the free Personal Capital here.
Personal Capital security – Is Personal Capital safe?
The security of your financial information is very important, so, of course, I want to talk about this topic in my Personal Capital review.
Your information is very safe with Personal Capital. Here’s what Personal Capital says about their security:
“Data is encrypted with AES-256 with multi-layer key management, including rotating user-specific keys and salts. Strict internal access controls – no individual at Personal Capital has access to your credentials.”
Also, with Personal Capital, you can’t actually move any of your money through their system, and no one else can, so your information and money are safe in this way as well.
What’s my opinion on Personal Capital?
There are many pros of Personal Capital, which is why I decided to create this Personal Capital review. Some of the positives include:
It’s free. What’s better than free?
They have high-quality financial tools. Not only is it free, but the tools included with the free version of Personal Capital help you manage your money.
Personal Capital is easy to use. You simply link your accounts, and Personal Capital does all of the analyzing for you. Personal Capital helps in so many different areas, and anyone can benefit from its easy to use platform.
The variety of platforms makes it easy to use anywhere. You can access Personal Capital from your laptop, cell phone, or smart watch, which makes it easy to check in on your financial situation.
Personal Capital is a great service that I definitely recommend signing up for, and I wouldn’t write a Personal Capital review if I didn’t think so. Like I said, it’s free, and the financial tools are great.
You can sign up for Personal Capital here.
How do I use Personal Capital?
Signing up and using Personal Capital is very easy. After you create your account, you will be asked to link various financial accounts. Then, you can start using their free personal finance software right away. It’s really that easy!
Click here to sign up for Personal Capital.
Is Personal Capital worth using?
Yes, I think that Personal Capital is worth using. There are many investors, households, and people all over who enjoy using this tool.
The dashboard and platform are so very easy to use, and they also have advisory services that you can take advantage of. If you have investment accounts or are interested in starting to save for retirement, Personal Capital is a no-brainer tool.
Personal Capital works well for so many different types of people, whether you are brand new to saving or if you have been saving and investing for years.
The free financial tools that Personal Capital provides make it very easy to see how you are doing. They even have a mobile app so that you can check in whenever you’d like.
I hope you enjoyed my Personal Capital review! Please let me know if you have any questions about their money management tool.
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.
Empower Personal Wealth, LLC (“EPW”) compensates Money Bliss for new leads. Money Bliss is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.
You are looking for the best investment app to help you save money, but all of them seem too complicated. You want something that is simple, easy to use, helpful, and even better if the app is free.
Empower is an online service for tracking your finances. Before a merger, the company began in 2009, and to this day it has been growing exponentially with a user base of over two million people.
Personal Capital is now Empower.
The app works on desktop as well as mobile devices, giving users the ability to track their spending easily wherever they go.
Empower also offers a suite of tools that help you get out more information about how you are using your money so that you can make better financial decisions.
On this Empower review, we will focus on what they do well, how it works for those who use it, and where Empower could improve.
Don’t forget… here is a list of all of the budgeting apps on the market.
If you are looking for an easier way to monitor your financials and see how healthy your finances really are, then you may want to check out what Empower has to offer.
What is Empower?
Empower is an online tool for tracking your finances.
It has been called the best financial app out there, and I agree with that statement. But, I personally use it as one of the money management tools to help guide our financial decisions.
I have used Empower to track my investments for over six years now, which probably makes me a bit of an expert on this topic because I use it on a regular basis.
Overall, Empower is a financial planning and wealth management tool that users can use to manage their net worth. The product offers tools for managing investments, retirement, debt payoff, and other personal finance goals.
How does it work?
First of all, Empower is a FREE app that helps you keep track of all your accounts. It can help you to invest better and did we mention… it is free to use!
To get the most out of this app, you’ll have to link each of your financial accounts one by one so that Empower can learn how you spend money.
It takes a couple of minutes to create an account and verify your identity.
The longest step is linking accounts to the Empower app. Just make sure you do this step within 7 days to get the most out of the app.
Features of Empower
The features of Empower include the ability to visualize your overall financial picture, keep track of your investments in a dashboard, and see which companies you are invested in.
Most people associate Empower as one of the best tools to help with investing, like a stock screener and an investment calculator.
But, there are many great features available for free including:
Net Worth Planner
Retirement Planner
Fee Analyzer
Cash Flow Management
Savings Planner
Budgeting
College Savings Planner
Investment Checkup
Pros and Cons of Empower
First of all, Empower is free to use. So, you might as well test drive the system and check out if the Empower app fits what you are looking for.
Just like any of the Empower reviews will tell you, there are positives and negatives with every type of money management app available.
You just have to decide the most important features for you. As well as what you are willing to pay.
Pros of Empower:
Free portfolio management tool.
Good for new investors who want a free-to-use tool with minimal features.
Easy to use and can be accessed on multiple platforms.
Can track investments across multiple accounts.
Tracks over 23,000 securities and over 1,000 mutual funds. – check
Offers a free app for on-the-go access.
Offers in-depth analysis and investment research on stocks, bonds, and ETFs.
Cloud-based platform
Free to use!
Cons of Empower:
Sales call from staff
Wealth management service is more expensive than a traditional advisor or simply investing in index funds.
High wealth management fee
Unable to reconcile your bank statements with Empower, but since they are coming from your bank directly, they should already be in sync.
No credit health information
Budgeting Tool needs improvement
Limited transaction management and budgeting
No import option for transactions from any platform including YNAB, Quicken or Mint
Cloud-based platform
Many people report that the Empower app requires $100,000 in investment assets to be eligible. That is untrue. In fact, it works best for those who have at least $100k in some form of investments – 401k, IRA, brokerage accounts, or even cash!
Empoweris incredibly easy to use and has helpful financial planning tools.
Overall, it is one of the many great tools to help further push you to financial freedom.
Empower Pricing
While Empower is free to access personal finance tools, it does come at a small price of annoyance.
Empower is free
Empower is a free online portfolio platform that helps people save and invest their money. It offers tools to track net worth, create investment plans, compare retirement accounts, view savings goals and cash flow, and more.
This is the great part of using this app!
The downside is to make these dashboards free is they are trying to entice you to move to their wealth management services.
You do not need to invest your money with Empower to use this platform.
It is best to keep everything invested where it currently is and use their free tools to analyze and make the necessary changes.
As such, once you sign up, you will receive calls on a reoccurring basis offering you a free analysis. There is no pressure to do this. Once you have said no enough times, they will stop calling you.
For those under $1 million in investable assets, their fee is 0.89%.
As you can read in this book, there are many ways to invest yourself without paying that fee.
In fact, this is my favorite book explaining how much harder and longer you have to work by paying someone a 1% wealth management fee.
However, for a small percentage of people, this may be a more cost-effective way of receiving professional advice, as it eliminates hidden costs from this type of service.
Empower Tools
Empower is a financial management platform that provides tools to help individuals manage their personal finances. The platform offers tools for portfolio tracking, performance analysis, and retirement planning. The company also provides its users with educational resources on financial topics.
Under their free dashboard, these are the tools you can use for free.
Net Worth Calculator
This simple tool will keep track of your net worth. Very simple and always available.
Know where you stand, by downloading the free app to see your true net worth in real-time.
Understanding your personal financial statement is important.
Savings Planner
One of the most asked questions is how much I need to save for:
Retirement
Emergency Fund
To Pay Down Debt
Calculate how much to save each year with a 70% chance of reaching your retirement goals. Learn how much you are currently savings and how much you need to start saving.
Cash Flow
Cash flow is the amount of cash available for expenses at a certain time. This term used in personal finance describes the rate at which one’s income and expenses change over time.
The Cash Flow tool is easy to use because Empower automatically tracks deposits and spending. The time saver feature allows users to see their cash flow, balance sheet, net worth, asset allocation over a period of time.
Cash flow is a budgeting tool that offers limited information on spending. It provides a second check when using another program that gives you more details like Quicken or Simplfi.
Retirement Planner
This is the #1 reason I recommend Empower especially if you are looking to stay away from a financial planner.
Trying to figure out how much you need for retirement by yourself seems like picking a random number from the sky.
The retirement planner is used by millions of people to figure out how on track they are for retirement. Plus get tips on what they can do to improve their chances of success.
Budgeting
Budgeting is a method of allocating financial resources by identifying and evaluating needs, prioritizing them in order to meet goals, and monitoring the achievement of those goals.
Empower includes a budgeting section to help you set monthly spending targets and track your spending. They automatically import the information from linked accounts such as checking, savings, and credit card statements.
Using their free online financial dashboard, allows you to track your spending and investments. There are interactive charts, graphs, pie-charts, and even widgets. All to make sure your budgeting is on track.
Investment Checkup
This portfolio analysis is the process of measuring performance and risk in order to develop a strategy for capital allocation. The goal of portfolio analysis is to improve return on investment, which can be achieved by increasing return on assets, decreasing the risk of losses, or reducing the variance.
The Empower app lets you explore your entire portfolio visually. It also provides asset allocation tools and tax optimization tools to help manage a person’s financial life.
Fee Analyzer
A fee analyzer helps people to determine the annual fees they are paying in their retirement plan.
401K Analyzer also calculates how much your retirement is costing you and provides a breakdown of any hidden fees that may be present within mutual funds with which it has been linked. This Retirement Planner tool uses assumptions about account holdings and investment behavior for calculating expenses against an estimated portfolio value.
Consequently, these fees add up over time and will drastically put a drag on your portfolio and reduce your retirement savings.
Empower Dashboard is Free
Just remember, you do not need to hire an advisor to use the platform.
Empower is a free tool for individual investors.
Empower provides users with access to all of the above-mentioned advanced tools for free. In addition, they offer free financial advice through their blog and social media pages.
It allows users to track their investments and get a personalized financial plan. The service also offers apps for iOS and Android devices, which makes it easy to manage finances on the go.
Empower Wealth Management Review of Services
In addition to offering free financial tools, Empower provides wealth management services.
You get to work one-on-one with an advisor who will give you personalized advice based on your situation.
They help you to invest, save money and track your financial goals.
Their advisors start by determining your risk tolerance and goals in order to construct the best personal financial plan for you.
If you are interested in getting a better understanding of your financial situation, Empower is an excellent option. It gives users the tools to understand their investments, budgets, and cash flow all with one app.
All it requires is that you sign up for free without any obligations or commitments from them whatsoever. You do not have to agree to use their wealth management program.
Personally, I cannot comment on an Empower advisor review as I have not used this service personally.
Empower Investment Strategy
The Empower investment strategy is a simple way to invest your money for the long-term.
This means that you will be able to retire and live a comfortable life without any concern about how you will be able to live.
They employ the tactic called Smart Weighting because they invest equally across all sectors and industries, which can provide diverse returns with minimal risk. The best part of this strategy is it’s easy to use as Empower has created an interface that makes portfolio management simple for users on any device or platform.
Empower’s software is able to identify tax-loss harvesting opportunities (opportunities where the investor sells an investment after it has fallen in value and pays fewer taxes than if the sale had occurred earlier) than investing on their own.
In addition, Empower invests passively for cost efficiency which means that they don’t take any active management into account.
The best part about Empower and one of the key areas I prefer, is they include socially responsible investments as well as an investment strategy to fit any budget.
They identify which companies are doing good work for society and invest in them accordingly. This feature makes personal finance much more interesting and easier than ever before!
Wealth Management Tiers
Many people invest in various financial services and products, such as mutual funds or stocks. They are promised that these investments will generate a good return, but they do not always make the best choice. Wealth management services are a way to help people manage their personal investments. They may charge fees for their service, but that is not always the case.
Depending on your level of assets, will determine the amount of services you will receive.
Investment Services:
This is the most basic level to receive financial and retirement planning guidance from their team of experts.
$100K in investment assets
Unlimited advice from any of the available financial advisors
Managed ETF portfolio
Wealth Management:
This is where you can receive more personalized services and dedicated support to manage your money as you move through new financial challenges.
$200K minimum in investment assets
Two dedicated financial advisors
Access to specialists in real estate, stock options, and more
Regular reviews on your customized portfolio
Tax optimization
Private Client :
This is the most exclusive level at Empower to help you receive comprehensive financial planning. They will help build a customized investment plan to reach your lifestyle goals.
over $1 million in investment assets
Two dedicated financial advisors
Priority access to specialists
In-depth retirement and wealth planning
Wealth Management Fee Structure
Empower charges only an all-inclusive annual management fee at a fraction of the cost of traditional financial institutions. In addition, they do not charge hidden fees, trailing fees, or trade commissions.
First $1 million = .89%
First $3 million = .79%
Next $2 million = .69%
Next $5 million = .59%
Over $10 million = .49%
Overall, if you want a financial advisor or a second opinion, using Empower wealth management services may be for you.
Even if you don’t join, you can still use the tools for free, no questions asked.
My Empower Review from Experience
I have had a lot of experience using Empower in the past. They provide snapshot financial pictures of your personal situation that are very informative.
Plus it is a free tool to use, which is always a bonus.
Empower is one of my favorite online tools to see all your finances in one place.
It is eye-opening to see the overall picture. Also, tracking investments across multiple accounts can be overwhelming, but they make the process seamless and help you stay on top of things.
Personally, my favorite tools are the net worth, fee analyzer, and retirement planner.
I use Empower in conjunction with Quicken. Read my Quicken review.
My Empower dashboard is my overall financial picture whereas Quicken tracks all of my day-to-day spending and helps me remember when we purchased something for a return.
The app has a convenient interface that makes managing your personal financial situation easy, even if you’re not familiar with finance jargon or investing terminology. With this tool at hand, keeping track of where everything stands financially becomes easier than ever before!
Just to note… to get the best financial picture, you must include all of your accounts. The more time you spend in the Empower dashboard, the more helpful analysis you will get from the tool.
Empower Alternatives
In addition to Empower, there are other financial apps that can help you allocate your portfolio.
These include Betterment with Wealthfront also being a viable option for those who want the best of both worlds by tracking their investments in stocks and bonds. However, these alternatives have much higher fees than what is charged by Empower which makes it an appealing alternative if the fee does not bother you.
Also, if you are looking for budgeting capabilities you may want to look at Quicken, Mint, YNAB, or Simplifi.
At the end of the day, you have to decide what your goals are and what you are looking for.
From all of the free and paid budgeting apps, here are our top budgeting apps to check out!
This section may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. Please read the full disclosure below.
Personal Capital Advisors Corporation (“PCAC”) compensates Money Bliss (“Company”) for new leads. (“Company”) is not an investment client of PCAC.
Personal finance and money management software allows you to manage spending, create monthly budgets, track investments, retirement and more.
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Personal Capital is wealth management for the Internet Age. The online platform combines digital technology with highly personalized service to provide a holistic view of a unique financial picture (AKA your net worth).
Make sure to connect all of your accounts within 7 days to set up your Personal Financial dashboard.
Tiller is the only tool that automatically updates Google Sheets and Microsoft Excel with your spending, transactions, and balances each day.
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Automate your financial plan with set-and-forget money tools that fit right into your daily life.
That’s why Qapital puts your goals front and center, then helps you plan your spending, saving, and investing around them.
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Stay on top of your spending, easily track bills, cancel unwanted subscriptions, and find ways to improve!
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HoneyMoney increases your awareness about your money habits. Being fully aware of your money naturally changes how you spend it.
Great way to use cash flow budgeting. Plus uses “envelopes” to budget.
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Moneyspire is user-friendly personal finance and small business accounting software that brings your entire finances together in one place.
Have total control over your financial life in one click.
Is Empower right for you?
Empower is a company that offers tools for personal finance management. This app has more than one hundred different tools to help you with your finances, including monthly budgeting and investing tracking.
Empower also helps people manage their credit card debt, establish emergency funds, track retirement savings progressions, calculate their net worth, and much more!
The smartphone app integrates locations, bank accounts, and credit scores which allows users to access current information on their financial situation.
The online portal allows for comparing available investment options.
This tool allows people to plan out the future of their money as well as provides them with valuable financial information in an easy-to-read format so they can make informed decisions.
As stated before, Empower is a financial app that can help you manage your investment assets. It has many features and it’s not perfect, but it’s the best out there in terms of value for money.
You can always test drive it and see what you learn about your personal finance situation.
Now you can try it free (no credit card required!)
Know someone else that needs this, too? Then, please share!!
As part of back to basics month, let’s use today to explore how you can get out of debt without gimmicks or games.
After twelve years of reading and writing about money, I’ve come to believe that debt reduction ought to be a side effect and not a goal. Getting out of debt is a target, not a habit. And, as we’ve been discussing recently, good goals are built around actions instead of numbers. If you restructure your life so that you’re spending less than you earn, you will get out of debt. It’s a natural side effect.
Having said that, I realize that a lot of GRS readers are struggling to get to square one. Getting out of debt is their goal and primary obsession. That’s okay.
Before you can begin repaying your debt, you must be earning a profit. Unless your income exceeds your expenses, your debt is actually increasing. If you’re continuing to add debt, or if you’re only able to make minimum payments, you must first find ways to spend less and earn more until you have a positive “saving rate”. (Both businesses and people earn profits. But when individuals earn a personal profit, we call it “savings”.)
After you’re earning a personal profit, you can (and should) make debt elimination a priority.
Why You Should Pay Off Your Debt
Debt repayment can improve your credit score, meaning you’ll pay less on everything from rent to car insurance to future borrowing needs. Plus, debt reduction is one of the best returns you can earn on your money.
Investing in the stock market provides an average annual return of about 10% — but that return isn’t guaranteed. Some years the market is up 30%, but other years it drops by 40%. When you pay down a credit card, you earn a guaranteed return of 20% (or whatever your interest rate is). That’s tough to beat.
There are also non-financial benefits to paying off debt, including:
Simplicity. The more debt you have, the more bills you have. It’s easier to manage your money when you have a simple, efficient financial infrastructure. Each time you pay off a debt, you move one step closer to this ideal.
Cash flow. Whenever you eliminate a debt, the money formerly used for that monthly payment becomes available to pursue other goals – including fun stuff like ski trips and knitting supplies.
Freedom. When you have monthly payments to meet, you’re chained to your job. You’re unable to take risks. Once your debt is gone, a wider range of options becomes available to you.
Peace of mind. Best of all, once you’re debt-free, you can sleep easier at night. You’ll put less pressure on yourself, and you’ll have fewer fights about money with your partner.
When I first tried to get out of debt, I lacked a system. Without a plan, I sent extra money to one credit card and then another. As a result, I never seemed to make any progress.
After deciding to become boss of my own life, however, I researched how to get out of debt. Many books recommended a strategy called the “debt snowball”. Although I was skeptical, I gave it a try. The method worked. Using it, I managed to eliminate my debt and begin saving for the future.
Stop Acquiring New Debt
This may seem self-evident, but the reason your debt is out of control is that you keep adding to it. Stop using credit. Don’t finance anything. Cut up your credit cards.
That last one can be tough. Don’t make excuses. I don’t care that other personal finance sites say that you shouldn’t cut them up. Destroy them. Stop rationalizing that you need them.
You don’t need credit cards for a safety net.
You don’t need credit cards for convenience.
You don’t need credit cards for cash-back bonuses.
You don’t need credit cards at all. If you’re in debt, credit cards are a trap. They only put you deeper in debt. Later, when your debts are gone and your finances are under control, maybe then you can get a credit card. (I don’t carry a personal credit card. I don’t miss having one.)
After you destroy your cards, halt any recurring payments. If you have a gym membership, cancel it. If you automatically renew your World of Warcraft account, cancel it. Cancel anything that automatically charges your credit card. Stop using credit.
Once you’ve done this, call each credit card company in turn. Do not cancel your credit cards (except for those with a zero balance). Instead, ask for a better deal. Find a low interest credit offer online and use it as a bargaining wedge. Your bank may not agree to match competing offers, but it probably will. It never hurts to ask.
Establish an Emergency Fund
For some, this is counter-intuitive. Why save for an emergency fund before paying off debt? Because if you don’t save first, you’re not going to be able to cope with unexpected expenses. Do not tell yourself that you can keep a credit card for emergencies. Destroy your credit cards; save cash for emergencies.
How much should you save? Ideally, you’d save $1,000 to start. (College students may be able to get by with $500.) This money is for emergencies only. It is not for beer. It is not for shoes. It is not for a Playstation 3. It is to be used when your car dies, or when you break your arm in a touch football game.
Keep this money liquid, but not immediately accessible. Don’t tie your emergency fund to a debit card. Don’t sabotage your efforts by making it easy to spend the money on non-essentials. Consider opening an online savings account. When an emergency arises, you can easily transfer the money to your regular checking account. It’ll be there when you need it, but you won’t be able to spend it spontaneously.
The Debt Snowball
With the debt snowball, you set aside a specific amount of cash each month to pay off the money you owe. At first, progress is slow. In time, however, you begin to make rapid progress, picking up speed like a snowball rolling downhill.
Step One
The first step is to make a list of your debts. For each obligation, include the balance you owe, the interest rate, and the minimum payment. Arrange the list so that the debt with the highest interest rate is on top. Next comes the debt with the second-highest interest rate, and so on, until you reach the final debt on the list, which will be the one with the lowest interest rate.
For instance, here’s the actual list of my debts from October 2004, ordered by interest rate:
Computer Loan: $1116 @ 15% ($48 min)
Business Loan $2800 @ 11% ($30 min)
Home Equity Loan $21000 @ 6% ($100 min)
Car Loan $2250 @ 5% ($170 min)
Personal Loan $1600 @ 3% ($100 min)
Personal Loan $6430 @ 0% ($60 min)
I had $35,196 in debt and my minimum payments totaled $508 per month.
Step Two
Once you’ve listed your debts, decide how much you can afford to pay toward them each month in total. This should be at least the total of your minimum payments ($508 in the example above), and preferably more. In my case, I started by allocating $700 every month toward debt reduction.
Step Three
Now, for all of your debts except the debt with the highest interest rate, make minimum payments every month. Use the rest of the money you’ve allocated for debt reduction to pay down the debt with the highest interest rate.
The computer loan topped my list of debts with an interest rate of 15%. The minimum payments for the other debts combined to $460 per month. Under this plan, I’d then take the remainder of the $700 I’d allocated toward monthly debt reduction and apply it to the computer loan. Instead of making the $48 minimum payment, I’d pay $240.
Step Four
Repeat this process every month until the debt at the top of the list has been eliminated.
Step Five
Here’s where this method gets powerful. With your first debt defeated, you don’t use your improved cash flow to buy new things. Instead, you use the extra cash to attack the next debt on your list.
If I start by applying $700 toward debt each month, for example, I continue to apply $700 toward debt each month until all of the debt is gone. After the computer loan is retired, I focus on the business loan. Because the minimum payment on my other debts would be $430, I could funnel $270 to pay off the business debt every month.
When the business debt is gone, I’d then throw $370 per month at the home equity loan, and so on. Ultimately, I’d be left with a single loan: the $6430 personal loan at 0% interest. Every month, I’d apply all $700 to get rid of this debt.
Pros and Cons
The debt snowball is powerful and effective. Mathematically, it’s the best way to get rid of your debt. There’s just one problem.
When you attack your debts from highest interest rate to lowest, you’ll pay less money in the long run. Unfortunately, many folks – including me – find the going difficult. In my case, I hit a wall when I reached the third debt on the list, my home equity loan. That $21,000 balance was going to take years to repay. I didn’t have that kind of patience.
Fortunately, I learned there were other ways to order your debts. You don’t have to tackle the high interest rates first.
Building a Better Snowball
Humans are complex psychological creatures. They’re not adding machines. Many of us know what we ought to do but find it difficult to actually make the best choices. (If we were adding machines, we wouldn’t accumulate consumer debt in the first place!) It’s misguided to tell somebody so deep in debt that they must follow the repayment plan that minimizes interest payments. The important thing to do is to set up a system of positive reinforcement.
Because of this, many people prefer slight variations on the debt snowball method. These methods ignore math in favor of psychology.
Dave Ramsey’s Debt Snowball
Financial guru Dave Ramsey has popularized one variation of the debt snowball. Instead of ordering your debts by interest rate, he suggests you attack those with the lowest balances first.
Using Ramsey’s method, my debts from 2004 would be ordered like this:
Computer Loan: $1116 @ 15% ($48 min)
Personal Loan $1600 @ 3% ($100 min)
Car Loan $2250 @ 5% ($170 min)
Business Loan $2800 @ 11% ($30 min)
Personal Loan $6430 @ 0% ($60 min)
Home Equity Loan $21000 @ 6% ($100 min)
As with the standard debt snowball method, I’d make minimum payments on each debt except the top one on the list. At it, I’d throw everything else I’ve allocated for debt reduction each month. When the top debt was eliminated, I’d move on to the one with the next smallest balance.
Ramsey’s variation isn’t as quick as paying high-interest debt first, and in the long-run, you’ll lose slightly more to interest payments. (In my own case, the projections showed it’d take an extra month to repay my debt and I’d pay and extra $841.15 in interest.) However, there’s a psychological advantage to doing things this way.
By attacking your smallest debts first, you get some quick wins, which provide a mental boost. This psychological lift provides extra motivation to keep attacking that debt. Every few months, you get the satisfaction of crossing another debt off the list! Ramsey says this is “behavior modification over math”, and he’s right. In fact, I opted to use this variation of the debt snowball when I repaid my own $35,000 of debt in 39 months.
Adam Baker’s Debt Tsunami
Other experts, including my buddy Adam Baker from Man vs. Debt, suggest yet a third alternative they call the debt tsunami. They argue it’s best to pay off your debts in order of their emotional impact. Attack your debts from smallest balance to highest, they say, but for added psychological boost, prioritize any debt that particularly bugs you.
“I used to be addicted to gambling,” Baker says, “and I had debt that was specifically associated with gambling. To pay that off first changed me as a person. To pay off the $600 I owed on a credit card was great, but it didn’t change me. It didn’t signify that my life was going to be different and that I was going to live in a different way.”
But paying off his gambling debt did mean something to him, so Baker attacked that first.
Here’s another example: Many people borrow money from their parents. These loans may carry interest rates of only two or three percent (or maybe they’re interest free), but they come with a lot of psychological baggage. This is another instance where it might make sense to pay down low-interest debt first because the non-financial rewards are so great.
The most important thing when paying off your debts is to pay off your debts; the order in which you do so is ultimately irrelevant. Find a system that works for you and develop the discipline to stick with it.
Note: It’s less imperative to repay low-interest debt. Businesses use “leverage” to borrow money cheaply so that they can earn higher returns elsewhere. You do the same when taking out a mortgage at low rate (like three percent) or using school loans to improve your education (which will, in theory, provide high future returns). It’s good to repay all of your debt, of course, but it’s okay to make repaying the mortgage a long-term goal instead of lumping it in with your debt snowball.
Supplementary Solutions
You can do other things to improve your money situation while you’re working on these three steps.
First, focus on the fundamental personal finance equation: to pay off debt, or to save money, or to accumulate wealth, you must spend less than you earn.
Curb your spending. Re-learn frugal habits. (Frugality is something with which most college students are all too familiar.) You can find some great ideas in the archives of this site. Also check Frugal for Life.
While you work to spend less, do what you can to increase your income. If possible, sell some of the stuff you bought when you got into debt. Get an extra job. (But don’t neglect your studies for the sake of earning more. Your studies are most important.)
Finally, go to your local public library and borrow Dave Ramsey’s The Total Money Makeover. Don’t be put off by the title — this is a fantastic guide to getting out of debt and developing good money habits. I rave about it often, but that’s because it has done so much to help my own personal finances. After you’ve finished, return it and borrow another book about money.
Simple, Not Easy
Human beings are complex creatures. Some of us are highly logical. Some of us are emotional. Most of us fall someplace in between. We rarely make decisions based on optimal paths; more often, we choose what makes us happy in the short term. I’m not saying that this is the right thing to do — it’s just what happens. For those who routinely make financial decisions based on emotion, it can be difficult to turn things around.
Complaining that personal finance is easy and “why doesn’t everyone do what they ought” is like saying that running a marathon is easy so why can’t everybody run one? Most of us understand how to prepare for a marathon — eat right and run a hell of a lot — but few of us have the dedication and mental fortitude to complete one. However, with a little discipline and some hard work, most people can complete a 10k race.
It’s the same with personal finance. It’s easy to say, “To build wealth, you must spend less than you earn”, but it’s another thing to do it, especially over the long term. In some ways, building wealth is more difficult than running a marathon. Training for and completing a marathon takes months. Dedicating yourself to a sensible financial plan is a lifetime process.
If personal finance were really as simple as understanding the math, we would all be rich. But it’s not. And we’re not. That’s why I think any small financial victory is important. That’s why I run this web site, and why I share whatever tips I can find.
I always say “do what works for you”“. Some people are able to succeed by paying high-interest debt first. But some people — myself included — have only been able to succeed by trying another approach. The approach may not be best from a mathematical viewpoint, but I believe that any method that actually helps you meet your goals is better than one that doesn’t.
Personal finance concepts might be simple, but that doesn’t mean they’re easy. I don’t mean to imply that they are. It took a lot of hard work (and a little luck) for me to get out of debt. It didn’t happen quickly, and it wasn’t easy.
The Bottom Line
As I mentioned at the start, I’ve come to believe that debt repayment is a side effect and not a goal. You shouldn’t make it your primary purpose.
If you do the other things I recommend, such as creating a personal mission statement and boosting your profit margin, you’ll naturally pay off debt as a matter of course. But you’ll enjoy a benefit many people don’t have once their debts are gone.
You see, a lot of people feel lost once they’ve dug out of debt. Search online and you’ll find tons of questions and conversations about what to do next. Debt repayment had given them purpose, and now that purpose is gone. As a result, they lose financial direction. And like a dieter who had aimed for a weight instead of a lifestyle change, an unfortunate few of the newly debt-free find themselves resuming bad habits.
If you’re pursuing other goals and intentionally building good habits, you’ll get out of debt. And once you get out of debt, the good times will continue: That debt snowball you’ve been building will transform itself into a wealth snowball.
Congratulations! You’re on your way to financial freedom!
Have you ever had to dig out of debt? What methods did you use? Were some more successful than others? If you had to do it over again, would you have done anything differently? What advice would you give to others who have just taken on the role of money boss in their lives?
Save more, spend smarter, and make your money go further
So far in our home buying series, we’ve covered some of the basics that you need to know if you want to buy a home. In Chapter 2, we went over important resources for first time home buyers. In this third chapter, we’ll go over the basics of how to save for a house.
Buying a home can be a long and arduous journey, but having a stable place to live that’s all yours will make it all worth it. But before you can make an offer on a house, you need to learn how to start saving for a house.
When you buy a home, you’re making an investment in yourself and your future. You’re building financial stability, equity, and experience. You have a place to call your own and you can customize the space just how you want. Yet, you might be wondering how to get to that point
This is why saving up is so important.
There are some upfront costs to owning a home—primarily making a down payment. Find out how much you should budget using a home loan affordability calculator and figure out how to save the amount you need. After all, the best way to save for a house is to formulate a budget that helps you work towards your saving goals step by step. Soon enough, you’ll be turning the key and stepping into a home you love.
Step 1: Calculate Your Down Payment and Timeline
When figuring out how to save for a house, you may already have a savings goal and deadline in mind. For instance, you may want to save 20 percent of your home jumbo loan cost by the end of the year. If you haven’t given this much thought, sit down and crunch the numbers. Ask yourself the following questions:
What is your ideal home cost?
What percentage would you like to contribute as a down payment?
What are your ideal monthly payments?
When would you like to purchase your home?
How long would you like your mortgage term to be?
Asking yourself these questions will reveal a realistic budget, timeline, and savings goal to work towards. For instance, say you want to buy a $250,000 house with a 20 percent down payment at a 30-year loan term length. You would need to save $50,000 as a down payment and, at a 3.5 percent interest rate, your monthly payments would come out to be $898.
How much you need to save also depends on the type of loan that you use to purchase your home. For example, conventional loans and FHA loans require you to make a down payment, but some government sponsored loans do not. Before you can buy a house, it’s important to educate yourself on the differences between FHA vs. conventional loans. FHA loan requirements are different from conventional loan requirements, so you need to figure out which is a better option for you.
Step 2: Budget for the Extra Expenses
Just like a new rental, your home will have fees, taxes, and utilities that need to be budgeted for. Homeowners insurance, closing costs, and property taxes are a few examples of cash expenses. Not to mention the cost of utilities, repairs, renovation work, and furniture. Here are a few more expenses you may have to save for:
Appraisal costs: Appraisals assess the home’s value and are usually ordered by your mortgage lender. They can cost anywhere from $312 to $405 for a single-family home.
Home inspection: A home inspection typically costs $279 to $399 for a single-family home. Prices vary depending on what you need inspected and how thorough you want the report to be. For instance, if you want an expert to look at your foundation, there will likely be an additional cost.
Realtor fees: In some states, the realtor fee is 5.45 percent of the home’s purchase price. Depending on the market, the seller might pay for your realtor fee. In other places, it might be more common to contract a lawyer to look over your purchase agreement, which is usually cheaper than a realtor.
Closing costs: Closing costs are typically about 3% to 6% of the house’s price. Some closing costs may be negotiable with the seller but others will fall solely on your shoulders as the buyer.
Step 3: Maximize Your Savings Contributions
Saving for a new home is easier said than done. To stay on track, consider creating a savings account that has a high yield if possible. Then, check in on your monthly savings goal to set up automatic contributions. By setting up automatic savings payments, you may treat this payment as a regular monthly expense.
In addition to saving more, spend less. Evaluate your budget to see what areas you could cut down or live without. For instance, creating your own workout studio at home could save you $200 a month on a gym class membership.
Step 4: Work Hard for a Raise
One of the simplest ways to boost your savings is to increase your earnings. If you already have a job you love, put in the extra time and effort to earn a raise. Learning new skills by attending in-person or virtual training seminars or learning a new language could increase your earning potential. Not only could you land a raise, but you could add these skills to your resume.
Sometimes, putting in the extra effort doesn’t always land you a raise, and that’s okay! When getting a raise is out of the question, consider looking at other opportunities. Figure out which industry suits you and your skillset and start applying. You may end up finding your dream job, along with your desired pay.
Step 5: Create More Streams of Income
Establishing different income streams could help your house savings budget. If one source of income unexpectedly goes dry, having other sources to cut the slack is helpful. You won’t have to worry about the sudden income change when paying your monthly mortgage.
For example, creating an online course as a passive income project may earn you only $5 this month. As traffic picks up, your monthly earnings from this project could surpass your regular monthly income. To create an abundant financial portfolio, there are a few different steps you can take:
Create an online course: Write about something you’re passionate about and share your skills online. Sell your digital products on Etsy or Shopify to earn supplemental income.
Grow a YouTube channel: Start a YouTube channel and share your skills to help others within your industry of expertise. For instance, “How to start a YouTube channel” could be its own hit.
Explore low-risk investments: From CD’s to money market funds, there are a few types of investments that could grow your cash with minimal risk.
Step 6: Pay Off Your Biggest Debts
Another way that you can start saving for a home is by paying off your debts. Before taking on more debt like a mortgage, it’s important to free up your credit usage. Credit utilization is the percentage of available credit you have open compared to what you have used. If you have $200 in debt, but $1,000 available on your credit card, you’re only using 20 percent of your credit utilization.
A higher credit utilization could potentially hinder your credit score over time. Not only can paying off debt feel satisfying, but it could also increase your credit score and prepare you for this next big purchase.
To pay off your debts, create an action plan. Write out all your debt accounts, how much you still owe, and their payment due dates. From there, consider increasing your payments on your smallest debt. Once you pay off your smallest debt in full, you may feel more motivated to pay off your next debt account.
Keep up with these good habits as you take on your mortgage account.
Another factor that mortgage lenders will look at when determining your eligibility for a loan is your debt-to-income ratio. Your debt-to-income ratio measures your gross monthly income compared to your total monthly debt payments. This number will affect how lenders determine how much house you can afford because it will tell them whether you have enough income to cover your new mortgage payments and any existing debts.
So before you consider buying a home, make sure you calculate your debt-to-income ratio.
In addition to your debt-to-income ratio, lenders will also look at your residential mortgage credit report, which is a comprehensive study of all your credit reports. You should look at your credit report before you apply for a mortgage so you can figure out if you need to increase your credit score.
Step 7: Don’t Be Afraid to Ask for Help
Whether you’re touring homes or want help adjusting your budget, don’t hesitate to ask for help. If you’re trying to figure out what your budget should look like, research budgeting apps like Mint to build a successful financial plan.
If you’re curious about additional mortgage expenses, your budget, or investment opportunities, reach out to a trusted professional or utilize government resources. Not only are they able to help you prepare for your next big step, but they could also help you and your finances in the long term.
Getting help, whether it’s from a realtor or a financial professional, can help you secure your dream home at a price you’re comfortable with. Realtors can help with everything from finding you a home to negotiating the price of the home, so don’t be afraid to ask for help. You probably need it more than you think.
Saving for a house can be an intimidating process, so you also shouldn’t be afraid to ask questions. There are many important questions to ask your mortgage lender, like the difference between pre-qualified and pre-approved or the credit score you need to buy a house. Asking the right questions could end up saving you thousands of dollars with your mortgage, so go ahead and ask away.
Step 8: Store Your Savings in a High Yield Saving Account
While you may have a perfect budget and a home savings goal, it’s time to make every dollar count. Before you add to your account, research different savings accounts and their monthly yields. The higher the yield, the more your savings could grow as long as your account is open.
Also consider the effects of inflation on home prices, home appreciation, and interest rates. As inflation rises, so do home prices. This means it’s even more important to have a sufficient amount of money saved up so you can manage a bigger down payment and pay less in interest over time.
In Summary: Set Your Goals and Get Started
When saving for a house, you may want to consider having a plan in place. By following the above tips for saving for a house, you can be more prepared to buy your dream home. To summarize, here are some of the key elements to remember when it comes to saving for a home:
First, set a savings goal to match your estimated down payment and mortgage monthly payments. Then consider adding your contributions to a high yield savings account to grow your money over time.
Don’t forget to budget for extra mortgage expenses like appraisal costs, home inspections, realtor fees, or closing costs. Keep in mind, your monthly utilities and fees may also be more expensive than your current living situation.
Prepare for the additional costs by increasing your earning potential and optimizing additional income stream opportunities.
Free up your credit utilization by paying off as much debt as possible before buying a house. Keep up these good habits throughout the length of your mortgage term.
When you purchase a home, you’re building a piggy bank for your future. Every month you pay your mortgage, you pay part of it to yourself because you own the home. Instead of paying rent to someone else, you reap your own investment when you sell. Most importantly, though, you’ll have a place that’s truly your own.
So now that we’ve covered various tips for saving for a house, you hopefully feel more prepared going into your home buying journey. In this series, we’ll be going over first time home buying resources, steps to buying a house, and more. If you’re interested in learning more about the home buying process, continue reading on to Chapter 4 in the series, which covers what credit score is needed to buy a house.
Save more, spend smarter, and make your money go further
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How are you doing on your New Year’s resolutions and goals? Are you still on track? Many take no action and expect different results. Why do we keep doing the same things over and over and “hope” things will mysteriously “change”? Hope and change are more than words. They can win elections, but the proof is in the results. Are you getting the financial results you desire?
As finances affect almost every area of our lives, stewardship should be one of the areas that capture our greatest attention in the New Year. Yet as a portfolio manager and financial advisor for the past 16 years, I am finding this is the area most people neglect. They get “too busy” or “uninterested” or even “unsure” how to plan ahead.
With the troubled economy, many financial problems that were covered over during the prosperous times have now been exposed. It’s not difficult to survive when jobs are plentiful and credit is easy! However in today’s economy smart money moves are a hot commodity!
Now as important as it is to make wise decisions with your money, it is just as important to avoid the bad money mistakes. These money mistakes are what cause people to go deeper in debt, not save enough for retirement, and lose money in the stock market to name a few.
In 2011, this is your year to make things right! Out with the old and in with the new. If you’ve already started saving for your future, this is the year to supercharge your savings. If you haven’t started, well this is the year to start! In order to plan ahead, we have to make sure we have a plan to combat the four deadly forces that wreak havoc in our finances.
To Win The Battle, We Need A Game Plan!
To win at the money game, you will need to be aware of the dangers that lie ahead. You can never be bullet proof, but having plans in place can soften the blows that are sure to come. Let’s look at four problem areas that have the potential to blow up a financial plan.
Problem Area # 1: Ignoring Inflation
Inflation erodes your future purchasing power over time. $100,000 in 2011 will not buy less products and services in 2012, never mind twenty years from now Are equities the best investment choice during inflationary periods of the market? Quite often, the answer is “no.”
What about bonds? Think again! These usually do not do well either. So what’s the magic answer? When inflation appears, the assets that tend to perform the best are alternative investments such as private equity funds, real estate investment trusts and commodities. These may not only help you diversify your portfolio, but also help you fight the effects of inflation on your invested assets.
Interest rates are starting to rise and I believe hyper-inflation (high inflation) is right around the corner. As you invest, you’ve got to recognize the impact that inflation can have on your investments and plan accordingly.
We Are Planning Ahead Right Now!
At FaithBasedInvestor.com, we are loading up on investments that do well during inflationary periods:
• Precious metals: We will continue to hold investments that have inflation protection. Gold and silver should continue to be hot commodities. • Agriculture: We will continue holding companies and investments that have exposure to the food industries. • Energy: We will continue to hold and look for opportunities in the energy sector: coal, oil, and alternative energy solutions. • Foreign Currencies: We will diversify our domestic exposure (US Dollars) by using foreign currencies like the Yen, Swiss Franc, and Aussie Dollar. • Dividend Stocks: We will look to hold and seek out companies paying dividends. This will help us with cash flow and outpacing inflation. • Inflation-Protected Bonds: We will continue to hold U.S. and foreign bonds that have inflation protection.
Problem Area # 2: Ignoring Investment Fees
Investment fees represent the second wealth killer. These fees can add up to thousands or even millions of dollars over decades of compounding. 401(k) management and administration fees, mutual fund fees, and annuity expenses wipe out investor’s wealth each and every year. The Department of Labor recently showed that even a 1% increase in your fees can wipe out as much as 28% of the value of your 401(k) over time. Also look at your mutual funds. The average cost of most funds is north of 3% annually! (1.6% average expense ratio and 1.4% SAI Fees) For more on fees check out this article on 4 reasons why mutual funds are lousy investments.
Problem Area #3: Ignoring Taxes
The big appeal of 401(k)’s and IRAs is the ability to defer taxes, right? However, with the United States’ $14 trillion worth of debt, which likely direction do you anticipate future tax rates will go? 401(k)s, IRAs, and annuities are ticking tax bombs! The biggest problem with deferring taxes is this:
Let’s say you are successful managing your investments and grow a HUGE nest egg. Congratulations, right? Yes, it’s great to have more money! However, at retirement age when you pull this money out, all that growth and your tax deferred contributions now become fully taxable ordinary income when withdrawn. Say you save $5,000 and it grows to $100,000. The entire $100,000 is fully taxable. At a 40% tax rate, that’s $40,000 in taxes! The government allowed you the initial tax deduction of $5,000 for $40,000 or more in the future. Not a bad deal FOR THEM!
Now don’t hear we wrong. I’m not saving you shouldn’t have any tax-deferred investments. I just wouldn’t put all your savings here. I would have a combination of tax-deferred, tax-free, and taxable savings. It’s simply hedging your tax exposure.
Problem Area #4: Taking Far Too Much Risk For Too Little Of A Return
Many people tell you to buy an index fund and hold it forever… Or take a look at mutual funds with good five and ten year track records and you will do great! Good in theory, bad in practice for most investors. If you put $100,000 into an S&P 500 index back in 2000, that would be worth about $114,000 – a gain of nearly 14% in the S&P 500 fund from January, 2000 to January of 2011. Wow! 14% for 11 years worth of a roller coaster! Was this little return worth all of those sleepless nights?
Instead choose investments that are in line with your faith and values and you know inside and out. Most investors hand off their money to “someone else”, be it a mutual fund, advisor, broker, or money manager, without understanding what they are investing in, how much risk they are taking, what values they are supporting, and how liquid or illiquid the investment is.
Make This The Year To Get Educated
Don’t just take my word for it. Do the research, do your homework! Make this the year you will read up on finance and start making wiser decisions. What are your thoughts?
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A key component of any financial plan includes securing and protecting your credit scores by minimizing the threat of identity theft. It can often take dozens or hundreds of hours to clean up your credit after your identity has been stolen. However, the real financial threat is much greater. Take an example of a mortgage refinance.
Let’s say your credit has been badly damaged by identity theft and during the process of cleaning up the mess, mortgage rates move to historic lows (much like we’ve seen during the first quarter of 2010).
However, you can’t refinance to the lower rate because of your damaged credit. In this scenario, you could lose tens of thousands of dollars in the missed opportunity to lower your mortgage rate.
The vast majority of identity theft still happens the old-fashioned way:
People You Know
Theft of a Wallet or Purse
Mail Theft and Dumpster Divers
People You Know
Unfortunately, victims of identity theft are most likely to have their identity stolen by somebody that they know. Roommates are the most common culprits. Roommates often will not have a personal connection to you and will not have any compunction about stealing your identity. While they live with you they have access to your mail, will learn where you keep personal documents, and may even have access to a wallet or purse you might accidentally leave out.
However, even homeowners are not immune to identity theft from people they know, including children, grandchildren, and friends of children and grandchildren. These family members do not start off intending to hurt you, but if they get into drugs, start hanging out with bad friends, or get into other trouble they often times will try to get money the easiest possible way; from you.
Keep Your Info Private
Whether you live with roommates, or if you have teenage or adult children or grandchildren staying with you, invest in a locking file cabinet and a safe. Even if you trust your children or grandchildren, you can’t always trust their friends. Any documents that have your Social Security number on them should go in your safe. Other critical papers like passports and birth certificates should also go in the safe. Use the safe to store credit cards you don’t often use. Finally, if you have written down any pin numbers or passwords, these should go in your safe. Documents with account numbers (bank statements and brokerage statements) can go into your locking file cabinet. Account numbers by themselves are not enough to steal you identity so these documents can have a slightly lower level of protection.
Theft of a Wallet or Purse
This is harder to control since most often these types of thefts happen when you inadvertently leave your purse somewhere, or when a professional criminal lifts the contents out of your purse or lifts your wallet in a crowded area. The main vulnerability in these situations is that the criminal has your ID and most likely your credit cards. Precious hours can pass before you realize that your purse or wallet is missing. During these times, sophisticated criminals will have already stolen hundreds or thousands of dollars on your credit cards. The long term vulnerability is the possibility that the criminal will use your ID and credit cards to apply for other credit cards. However, this will be difficult if they don’t have your Social Security number (however, they will have your date of birth from your ID).
Simple to Ways to Protect Yourself
Never carry your Social Security card in your wallet or purse. Always leave it at home in your safe.
Make sure your Social Security number is not on your driver’s license or other ID.
Also, never carry more than one or two credit cards with you. If you have more than two credit cards, leave the rest at home in your safe. That way, if your wallet or purse is stolen, when you call and cancel the stolen credit cards you still have other credit cards in your safe that you can use.
Once you realize your wallet has been stolen, immediately call and cancel the stolen credit cards.
Next, call the police and file a report. Do this before you even get home if you can. As soon as you get home, notify the three credit bureaus (Equifax, Experian, and Transunion) that your wallet has been stolen and give them the information from the police report. This will enable them to add a 90 day freeze to your credit. You can extend this freeze later, but the main thing is you want to do is contain any damage that may happen on the day of the theft.
Mail Theft and Dumpster Divers
Many homeowners have a standard unlocked style mailbox in front of their home. These mailboxes make it easy for criminals to steal your mail. The main things criminals are looking for are boxes of checks being mailed to you from your bank, prescription medications, and credit cards mailed to you. Checks are the biggest vulnerability since criminals can start using these right away. Criminals who steal mail usually have the ability to make a passable fake ID to use when they try to use your checks.
Less common are criminals who go through your trash to find valuable information since going through your trash is pretty distasteful, even for identity criminals. Most criminals will only go through your trash if they already have other information about you.
Protection From Identity Theft
If you currently have an unlocked mailbox in front of your home, replace it with a locking mailbox. It is best to look for a mailbox with a capacity to take small packages like boxes of checks and prescription medication. Next, invest in a heavy duty cross-cut type shredder. I recommend shredding any credit card offers you get in the mail before throwing them in the trash. Basically, anything you get in the mail that has a form you can fill out to apply for something, shred it before throwing it away.
Check your credit regularly
Federal law requires that the three credit bureaus provide you one free credit report every year. The website the credit bureaus have created to meet the requirements of the law is www.annualcreditreport.com. I recommend checking your credit there each year. There are lots of advertisements for companies supposedly offering free credit reports but most of these are misleading and require you to sign up for some service before they give you your credit report. Stay away from these offers and keep with the government required service at www.annualcreditreport.com.
I also recommend signing up for a credit monitoring service. These services charge every month (usually between $10 and $15 per month). Sign up for these services directly with one of the credit bureaus. Credit monitoring services will notify you by e-mail whenever somebody has made a credit inquiry, or whenever a new account is opened. Also, they will e-mail you every month with a status report, even if there has been no activity.
Taking these simple steps will help safeguard your good name and will protect the things you have worked so hard for! Make sure to protect my ID.
Matt Prestwich is a freelance writer and an expert on identity theft. You can find more of Matt’s writing on his Fightclub Blog. Matt is not endorsed or affiliated with LPL Financial.
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If someone leaves you money in their will but you don’t want to wait until probate ends to claim it, you might consider getting an inheritance advance. An advance against an inheritance allows you to collect money that’s set to come to you in exchange for a fee. How much does an inheritance advance cost? The amount you’ll pay to access an inheritance early can depend on which advance company you’re working with.
Talking to your financial advisor can help you decide if taking an advance against your inheritance makes sense.
Understanding Inheritance Advances
An inheritance advance is an advance against money that you stand to inherit from someone else. When someone passes away, they can leave money or other assets to you in a will. That will is then subject to probate, which is a legal process in which assets are inventoried, outstanding debts are paid, and inheritances are distributed to heirs.
All of that is handled by the executor of the will and depending on the size of the estate, probate can take months or even years to complete. Should someone decide to contest the terms of the deceased person’s will, that can drag the probate out even longer. An inheritance advance allows you to bypass all of that and get your inheritance sooner.
How Does an Inheritance Advance Work?
Inheritance advances work by allowing you to get some of the money that’s been earmarked for you in a will before probate ends. The exact process can vary from company to company but generally, it works like this.
You tell the advance company how much you stand to inherit.
The advance company verifies the amount and offers you a percentage of the inheritance up front, in exchange for a fee.
If you agree to the amount, cash is paid out to you.
When probate is finalized, the advance company collects its fee and any remaining inheritance funds are turned over to you.
An inheritance advance is not the same as a probate loan. With a probate loan, you’re borrowing money against a future inheritance, which you must pay back to a lender with interest. There’s usually a credit check involved, and you may need to make payments while probate is ongoing.
With an inheritance advance, the advance company pays money to you and gets a cut of the inheritance for their services. There are no credit checks required and funding can be delivered in a matter of days once you’re approved. When probate ends, any money that’s left after the advance company gets paid to you and there’s nothing you have to pay back.
How Much Does an Inheritance Advance Cost?
The cost of an inheritance advance will depend on the company that you’re working with. A typical fee structure involves paying a percentage of the inheritance to the advance company which can range from 10% to 50%. Again, this money comes directly out of the inheritance itself, rather than from your pocket.
Here’s an example of how an inheritance advance might work and what it can cost. Say that you’re going to inherit $100,000 from a distant relative and it’s going to take six months for probate to wrap up. You need $30,000 right now to fund a major home renovation project.
You approach an inheritance advance company that agrees to give you 30% of your inheritance, or $30,000, in cash. Meanwhile, the advance company wants 40% of the inheritance. You agree and get the cash.
Six months later when probate ends, the advance company is able to collect $40,000, its share of the inheritance. You, meanwhile, get the remaining $30,000 for a total inheritance of $60,000.
Is an Inheritance Advance Worth It?
Getting an advance against an inheritance could be worth it if you need money fast and you don’t want to take out a loan. Again, there are no credit check requirements for inheritance advances and nothing to pay back since you’re not actually borrowing anything. You’re just getting a portion of the money you’ll inherit a little early.
Of course, you’re making a trade-off since you’re not getting the full inheritance at the end of the day. The advance company will want its cut, which again, may be anywhere from 10% to 50% of what you’ll inherit.
What you have to decide is how much the convenience of getting an inheritance advance is worth to you. If you need money for something critical, like a life-saving operation or medical treatment that insurance won’t cover, for instance, then forgoing some of your inheritance money to get cash right now could be a no-brainer.
On the other hand, missing out on a chunk of your inheritance may be the best move if your need for cash is less urgent. For example, if you need money to pay for home renovations then you might get a home equity loan instead. Once the inheritance comes through, you can take part of it to pay back the loan and you’re not stuck paying a high fee to an advance company.
How to Get an Inheritance Advance
If you’re interested in getting an advance against an inheritance, the first step is finding a company to work with. That’s fairly easy to do since you can search for inheritance advance companies online. Keep in mind that you typically won’t find inheritance advances offered by traditional banks or credit unions.
Once you choose an advance company, you’ll need to give them some information about the inheritance, including:
The estimated amount
The name of the executor who’s handling the estate
A copy of the deceased person’s death certificate
The advance company will verify the amount of the inheritance and make you an offer. That offer should specify how much money you’ll be able to get up front and what percentage of the inheritance will go to the advance company.
If you’re satisfied with the offer, you can sign off on the paperwork and then wait for the advance company to deposit money to your bank account. Depending on the company, you might be able to get the funds as quickly as the next business day.
The Bottom Line
How much does an inheritance advance cost? There’s no simple answer, as it can depend on how much you stand to inherit and which advance company you decide to work with. A better question to ask might be how much you are willing to pay to access your inheritance early. That can help you to decide if an advance is right for you.
Estate Planning Tips
Consider talking to your financial advisor about the pros and cons of an inheritance advance. Your advisor can also offer tips on how to manage a large inheritance and where it might fit in to your overall financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
You might consider a probate loan instead of an inheritance advance if you don’t want to sacrifice fees to an advance company. With a probate loan, you’ll have to pay interest on the amount of your inheritance that you borrow but it may be much less than what an advance might cost. Keep in mind that a probate loan may take longer to get approved, so there might be a wait to get the cash. You’ll also need a good credit score to qualify for the lowest interest rates.
Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.