Financial Plan

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There’s been a lot of talk about budgeting here at Get Rich Slowly. For instance, Kristin recently wrote about her adventures using the envelope system. I wrote about the reasons your budget might be failing. And, a variety of guest posters and staff writers have touched on the topic with articles like these:

How I kept to my budget and still have everything I want

Budgeting: The Most Important Thing You Can Do With Your Money

How to Build a Better Budget

When One Partner Won’t Budget

However, among the articles on budgeting systems and strategies, there has been very little written on using a zero-sum budget, which happens to be the budget that I use and love. So, I wanted to write about why I’m a zero-sum budget enthusiast, why I think they work so well, and how you can harness the power of the zero-sum budget for your own financial well-being.

Why Should You Use a Zero-Sum Budget?

In my opinion, a zero-sum budget is superior because it forces you to “spend” every dollar that you make. And, no, I don’t mean you should spend it on dinner at Outback or a weekly mani/pedi. Instead, you allocate all of your earnings into the different categories that your finances require. You don’t need an Excel spreadsheet or a complex software program to use a zero-sum budget. In fact, all you really need is a pen, paper, and the desire to begin budgeting for your benefit. So, how do you begin using a zero-sum budget?

Follow these simple steps:

Step 1: Determine how much you make
Whether you’re paid hourly or salary, you need to figure out how much money you make on any given month. So, you need to ask yourself a few questions. For instance, “How many paydays fall within this month?” And, “How much will each paycheck be?” For salaried workers, this should be fairly easy. For those with a fluctuating income, it can be much more difficult. However, one of the easiest ways to make a zero-sum budget work for your family is to get all of your finances “one month ahead.” Easier said than done, I know. But, using that method, a fluctuating income won’t matter as much. Since you’re using this month’s income for next month’s bills, it will be much, much easier to plan.

Step 2: List your bills
Once you determine how much money you’ll make this month, you need to figure out how much money you need to spend next month. Using pen and paper, write out all of your monthly bills, estimating bills that fluctuate, like utilities. You’ll also need to set a reasonable allowance for spending categories that you’re trying to keep under control (like groceries and gas). And, don’t forget about bills that are paid quarterly or seasonal expenses. The best way to make a zero-sum budget work is to include everything.

I’ll use a generic version of one of my old budgets as a real-life example:

  • Mortgage: $1,426
  • Electric: $200 (estimate)
  • Gas: $25 (estimate)
  • Groceries: $500
  • Daycare: $500
  • Internet: $35
  • Fuel/Miscellaneous: $200
  • Cell Phone: $55
  • Health Insurance: $377
  • Life insurance: $77.31 (paid quarterly)
  • Trash: $56.25 (paid quarterly)

Total: $3,451.56

Of course, everyone’s categories will be different. Obviously, you’ll need to include all of your bills including any debt payments that you make on a monthly basis. Make sure to list all of your bills (even the ones that you’re trying to forget!). Confronting them is the first step to making them disappear for good!

Step 3: Compare and contrast
This is where it gets fun, I think, and why using a zero-sum budget can be life-changing for so many people. Once you see your monthly income and your monthly bills on paper, a clear picture of how much money is left over emerges. You might find that thousands of dollars are being spent on “wants” each month. And, you could use that knowledge to begin saving that money instead. Regardless, once you determine how much money is left over after you pay all of your required expenses, you can decide what to do with the rest.

If my husband and I earned a net income of $7,000 for the sample month, we would update our zero-sum budget to reflect the overage:

  • Mortgage: $1,426
  • Electric: $200 (estimate)
  • Gas: $25 (estimate)
  • Groceries: $500
  • Daycare: $500
  • Internet: $35
  • Fuel/Miscellaneous: $200
  • Cell Phone: $55
  • Health Insurance: $377
  • Life insurance: $77.31 (paid quarterly)
  • Trash: $56.25 (paid quarterly)
  • Short-term savings: $1,500
  • Long-term savings: $1,500
  • Vacation Fund: $548.44

Total: $7,000.00

But, what if nothing is left? If you’re spending every penny you earn, it’s probably time to reconsider that strategy. Start by making a list of things you could live without. Some possibilities include cable television, eating out, or excessive entertainment spending. And remember, everyone’s priorities will be different. Although I do just fine without cable television, I have no desire to feed my family on a bare-bones grocery budget. You may feel exactly the opposite. And, as J.D. so eloquently put it, you have to do what works for you, whatever that is.

Step 4: Spend all of your money on paper
Once you determine your own excess cash flow, you can decide where that money will serve you best. For instance, if you’re still in debt, you can decide to pay X number of additional dollars toward those debts. Many people, including me, tackled their debts using the snowball method. Using this method, you focus on one debt at a time, paying over as much as you can until that debt is demolished. Then you can move on to the next.

Or, if you don’t have any debts to contend with, you can allocate all of your extra cash toward your savings or investments. Obviously, it doesn’t have to be all or nothing. You can choose to tackle your debts and continue saving at the same time. It’s up to you. However, the key is to go ahead and transfer the money you have allocated to savings right away. That way it doesn’t get squandered on those dinners at Outback, weekly mani/pedis, or anything else.

Step 5: Track your spending
If you have a preset spending limit for your zero-sum budget categories, you’ll need to check in periodically throughout the month to “see where you’re at.” I’ve found this to be particularly helpful when it comes to grocery and miscellaneous spending. I have a tendency, in fact, to completely blow through my grocery budget if I don’t watch myself. ($8 organic oregano, anyone?) So, to combat my grocery spending weakness, I usually check my spending about once a week. And for the most part, when it’s gone, it’s gone. This often means that we’re eating freezer food and leftovers by the end of the month, which seriously annoys my kids. But, it works!

Step 6: Make adjustments
Your zero-sum budget may be an epic failure for the first few months. And, that’s OK. You’ll probably need to make some adjustments to get it just right. Maybe you need to add a little buffer to your grocery category. Or, add some wiggle room to the entertainment portion of your budget. Whatever it is, making adjustments shouldn’t be seen as a failure. In fact, it’s just part of the budgeting process.

One More Thing

Unless you want to have a specific budget category just for emergencies, an emergency fund is a crucial part of using a zero-sum budget. Having an adequate emergency fund means that a surprise car repair or medical bill won’t knock your entire financial plan off track. And, whenever you have to tap into your emergency fund, it’s important to replace the funds you use. You can do this by budgeting to add to your emergency fund in the following month (or months) until it’s back to its former glory.

Have you ever used a zero-sum budget? If so, did it work? Also, please feel free to share your favorite budgeting strategies below.

Source: getrichslowly.org


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Source: mint.intuit.com

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Working Away From Work

I got my start as an entrepreneur completely by accident. You can read the whole story here, but the short version is that back in 1999, I needed to make some money. The bills were due, my third-shift job wasn’t going so well, and one day I took some photos of random stuff around my apartment and put it up on eBay. I made about $22 an hour right away, so I quit the night job and started building a wholesale business.

I’ve had a lot of different small businesses since those early days, including website design, publishing, and Google Adwords consulting. I’ve also had some crazy experiences along the way, and made a lot of mistakes.

Despite the mistakes and occasional uncertainly of not having a regular paycheck, my ten years of being out of the traditional workplace have made me a passionate believer in working for myself. I don’t have a large business — I work at home, and I don’t employ anyone directly. I have no plans to do that in the future either, because I’m comfortable with the super-small business model I call microbusiness.

Why Microbusiness?

I hear a lot of people say that they do not have the skill set to be entrepreneurs. They don’t like to manage people, they don’t want to borrow money, or they just don’t know how to start.

I completely understand those challenges — and that’s why I think anyone interested in entrepreneurship should start with a microbusiness.

A microbusiness is a very small business, one that you usually run on your own or with a few independent contractors. Some microbusiness owners have the goal of growing the company and employing people, but others of us are just happy to replace the income we could receive from a more traditional job.

What Kind of Business?

When most people set out to build a business, they usually end up building a job instead. With a job, you get paid to exchange your time for other people’s money. If you set up shop as a consultant, for example, you’re essentially doing the same thing. True, it may be better than working for someone else, because you’ll have more freedom — but there’s a flip side to self-employment and freedom. You’re still trading time for money, and with your own business, no one else is responsible if you fail.

While I do know some happy, thriving consultants, in general I think it’s better to create a business with automated products or services that can be sold without you directly trading time for money. Once you create your own products and set up a marketing plan, the products can then be sold 24/7 on your website or other online marketplaces.

Getting up in the morning to discover you have made money while sleeping is a great feeling.

If you have no idea what to sell, I recommend creating high-margin products, especially information products like e-books, multimedia publications, or other teaching materials. The value in these materials has to do with what you help people learn, not from any expensive production costs.

(The books E-Myth Revisited and No B.S. Sales Success are two great resources for thinking more about this.)

If you have a decent job, why should you worry about entrepreneurship and starting a microbusiness? Well, as the next section shows, relying solely on income from a job is the very slow route to wealth. It may work after forty years, but if you’re interested in speeding it up a little, the odds are that you’ll need some kind of business.

Get Rich Somewhere Between Quick and Slowly

I fully understand the motive between Get Rich Slowly as a counterbalance to active stock trading and get-rich-quick schemes, and I know there are millionaires next door who have slowly accumulated wealth through decades of progressive saving, index investing, and compounding interest. I also know that this route is far safer than active stock trading.

However, by working as an employee, only the very slow route will work, because there is really no other way most people can accumulate wealth with average incomes. I believe that anyone who is interested on achieving their own wealth needs to supplement their job income with external business income that they create for themselves.

This is the third way between the decades-long job savings approach as an employee and the risky stock trading approach. Maybe we should create a Get Rich at Faster-than-Average-Speed-but-not-too-Quickly site — but that’s not as catchy as Get Rich Slowly.

The Goal is Financial Independence

Instead of retirement, my ultimate financial goal is to achieve true independence in my finances, to the point where all of the work I do is done out of choice rather than necessity. There are a lot of good resources out there for figuring out what you need for your own financial independence journey—for example, the online forums EarlyRetirement.org and the book Work Less, Live More that J.D. has written about previously.

By choosing to focus on writing and world travel instead of building businesses, I expect that my financial independence goal will be set back at least a couple of years. Although I could certainly enjoy making more money, I’m comfortable with the tradeoff.

One important note about financial independence: Being financially independent doesn’t mean you will stop working.

I enjoy the work I do (most of the time), and I don’t think I could be happy if I sat on the beach all day long. You may also like the work you do, or you may have a desire to help other people by doing a different kind of work. What financial independence means is that you are able to choose what you do with your time. Regardless of any other philosophical differences, I expect that almost everyone would agree that this is truly a goal worth charting a course for.

Making Mistakes

I don’t think this essay would be complete without mentioning a few mistakes I’ve made along the way to creating a financial plan that works for me. If any of the above information sounds self-confident, I assure you that the selection of mistakes I include below is but a brief sample.

  • In my early business days when it was an enormous sum of money, I once lost $3,000 on eBay in a single weekend due to a minor listing error.
  • I forgot to renew at least two domain names that were later converted to passive, regular Adsense income…by the new owner.
  • I regularly gave up hundreds of dollars from 2000-2002 because I didn’t want to return any inbound sales calls.
  • Six years ago, I decided not to go to Cambodia when I was right on the Thai border. The visa would have cost $20, which I thought was a lot then. Now that I spend $500-1000 to go to most new countries, $20 is a true bargain.

I think I’m doing most things right now — at least right for me — but I am not immune to making stupid mistakes.

Putting It All Together

I haven’t been very traditional with anything, and personal finance is no exception. What I do won’t work for everyone, and I am the first to acknowledge that. But I also hope that some of these principles challenge your own beliefs and practices about money in a positive way.

I welcome feedback, questions, or disagreements in the comments below. Thanks to J.D. for letting me share, and thanks to everyone for reading.

Source: getrichslowly.org

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Panic selling is when a large number of investors want to sell their holdings at the same time and it creates a drop in prices. That drop scares other investors into selling, which causes prices to fall still further, which frightens more investors, and so on.

The resulting panic can erase vast amounts of wealth. It can take weeks or even years for the markets to recover from a serious panic-selling event.

For years, the popular advice on panic selling for most investors was simple: Don’t panic. The logic being that over time, and through major financial crises, the equity markets have tended to rebound and rise.

But even if an individual investor resists the urge to sell, a bout of panic selling in the markets could still have an impact on their wealth, and their plans. The more an investor knows about panic selling, the more informed they will be when and if panic sets in.

Panic Selling and Stock Market Crashes

Stock markets — and the market for anything from housing to basic commodities — go down when there are more people selling than buying. And sometimes in the stock markets, the sellers outnumber the buyers to such a degree that sellers panic and are willing to take almost any price to get cash for their investment.

When panic grips enough investors, the markets can crash.

Recommended: What Is Active Investing?

Throughout the history of every kind of market, panic occasionally sets in. Sometimes it’s a major global event that sets it off, like what happened with the stock markets in March of 2020 as the global COVID-19 pandemic picked up speed and countries entered lockdown.

Other times, it’s a matter of a given asset — like housing and real estate in 2008 — being bid up to unrealistic levels, followed by the mass consensus of what it’s worth changing seemingly overnight. The history of U.S. recessions is full of these highly emotional market changes.

What Causes Panic Selling?

While panic is a very human response to the prospect of major financial loss, there are also other factors that can trigger investors to start panic-selling stocks, including: margin calls, stop-loss orders, and algorithms.

Panic Selling and Margin Calls

In the Great Crash of 1929, there were many investors who had borrowed heavily to invest in the stock market. When the markets dropped, they received something known as a margin call, requiring that they pay back the loans they took out to invest.

Those margin calls required that they sell potentially even more stock to pay back the loans, which caused the markets to fall even further.

Panic Selling and Stop-loss Orders

Similarly, there are trading programs that can throw fuel on the fire of a bout of panic selling. These can be as simple as a stop-loss order, a standing order to buy or sell a particular security if it ever reaches a predetermined price, which investors commonly use in their brokerage accounts.

A stop-loss order can be a way to take advantage of price dips to buy a stock at a discount. But during a sudden drop in the markets, stop-loss orders often lead to automatic sales of stocks, as investors try to lock in their gains.

These automatic sales — in large enough numbers, can accelerate the decline in a market, and contribute to the panic.

Panic Selling and Algorithms

There are algorithms employed by major financial institutions and professional investors that will automatically sell if the price of a given stock falls to a certain level. The crash of 1987 was caused in part by some of the first computerized trading programs.

And in 2010, one trader who lost control of his highly sophisticated trading software was responsible for the “flash crash,” which caused roughly a trillion dollars of market capitalization to disappear in under an hour.

The system-wide risk presented by these tools is one reason that most major stock exchanges have installed a series trading curbs and “circuit breakers” in place to slow down panic selling and give the traders who use these programs to recalibrate them before a full-fledged selling spree can run out of control.

The Risks of Panic Selling

When markets drop suddenly, it can be scary for investors. And one of the biggest risks may be to give into that fear, and join in the selling.

But one thing to remember is that markets go up and down, but an investor only loses money when they sell their holdings. By pulling their money out of the stock market, an investor not only accepts a lower price, but also removes the chance of participating in any rebound.

Loss is a big risk of panic selling. People who invest for goals that are years or decades away can likely weather a panic. But if a person is investing for retirement, a sudden panic just before they retire can create a major problem, especially if they were planning to live off those investments.

The danger of sudden, panic-driven drops in the market is one reason it makes sense for investors to review their holdings on a regular basis, and adjust their holdings away from riskier assets like stocks, toward steadier assets like bonds, as they get nearer to retirement.

That risk is also why most professionals recommend people keep 6-12 months of expenses in cash, in case of an emergency. That way, even if a financial crisis causes a person to lose their job, they can stay in the market. It’s a way to protect their long-term plans from being jeopardized by everyday expenses.

Finding Opportunities in Panic Selling

During a panic, there are typically enough scared people making irrational decisions to create valuable buying opportunities. The stock-market crashes in 1987 and in 2008, for instance, were each followed by a decade in which the S&P 500 rewarded investors with double-digit annual returns. (As always, however, past performance is no guarantee of future success.)

The problem is that there’s no way to know when a panic has reached its end, and when the market has fallen to its bottom. Professional traders with complex mathematical models have had mixed results figuring out when a market will rebound. But for most investors — even savvy ones — it’s a guessing game at best.

There are two ways an investor can try to take advantage of a bout of panic selling:

1.    The first is not to panic.

2.    The other is to keep investing when the market is down, while stocks are selling for much lower prices.

Dollar Cost Averaging

One way to take advantage of panic selling is with dollar cost averaging. With this long-term plan, an investor buys a fixed dollar amount of an investment on a regular basis — say, every month. It allows an investor to take advantage of lower purchase prices and limits the amount they invest at when valuations are higher. As such, it’s a strategy for all seasons — not just during a panic. Most investors already employ some form of dollar-cost averaging in their 401(k) plans.

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The Takeaway

Steep drops in the stock market are usually headline news. The causes aren’t always clear or easy to understand. So it makes sense that a sudden drop in the markets can cause even seasoned investors to make mistakes. This is a real risk. But it can also create opportunities.

That’s why it’s important for investors to revisit their financial plan regularly, to make sure they can weather the storm, and still be on track to reach their goals — even if a market decline means they have to take a few steps back.

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Source: sofi.com

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As a renter of a home or apartment, you may be considering whether it’s worth the cost to purchase a renters insurance policy. Renters insurance is a type of coverage that is designed to provide financial protection for your personal property in your rental unit, and it also provides coverage for your liability exposure, should someone become injured on your property. And, the good news is that this type of coverage offers you extra protection, purchasing renters insurance generally won’t cost you a ton of money.


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On average, renters insurance costs about $174 per year as of 2022, according to the Insurance Information Institute (Triple-I). And, much like the right auto insurance policy, renters insurance can be an invaluable part of your financial plan. That said, you may be wondering what is covered under renters insurance, and what may not be covered under this type of policy. By understanding your renters insurance coverage, you may feel more comfortable with your policy and more in control of your finances. Here’s what you should know.

What does renters insurance cover?

Your renters insurance policy provides several areas of coverage and may be able to be customized to fit your unique needs. The coverages discussed here are fairly standard, but all renters insurance companies are different. Checking with your agent regarding the specific coverages included on your policy may be a good idea.

With these coverages, you will first pay a deductible as determined in your policy before your insurance provider helps cover costs.

Liability coverage

Liability coverage is designed to provide financial protection for you if someone is injured on your property. It could also help pay for attorney fees and legal representation. In fact, your liability coverage may even extend to injuries you are found at fault for that occur off of your premises, such as your dog knocking down a neighbor while you are on a walk.

Liability coverage is an integral part of a renters insurance policy. Most companies offer liability coverage starting at $100,000, although $300,000 and even $500,000 are not uncommon coverage levels. These amounts may seem high, but if someone is injured and sues you, the bills can add up quickly.

Personal property coverage

Personal property coverage is the backbone of a renters insurance policy. Because your landlord is responsible for the structure of your rental home or apartment building, a renters insurance policy does not include dwelling coverage like a home insurance policy does. However, you are responsible for your personal belongings, like your clothing, furniture and electronics, and that is where renters insurance comes in.

Renters insurance policies cover your personal belongings on a named peril basis, meaning that your belongings are only covered for certain situations. The named perils most commonly included are:

  • Fire or lightning
  • Windstorm or hail
  • Smoke
  • Vandalism
  • Theft
  • Damage caused by the weight of ice, snow or sleet
  • Damage caused by the accidental discharge of water or steam from a household appliance, or from a plumbing, heating, air conditioning or sprinkler system
  • Damage caused by the sudden and accidental cracking, burning, tearing apart or bulging of a steam or hot water heating system, air conditioner or sprinkler system
  • Damage caused by the freezing of a household appliance or plumbing, heating, air conditioner or sprinkler system
  • Damage caused by a sudden and accidentally generated artificial electrical current

Keep in mind that these perils only refer to your personal property. If your ceiling caves in after a heavy snow, for example, your renters insurance policy will help pay for the damage to your belongings, but your landlord’s policy will pay for the damage to the building itself.

Actual cash value vs replacement cost

Typically, you will have a choice between two types of personal property coverage on a renters insurance policy: actual cash value or replacement cost. You may even have a third option, called guaranteed replacement cost coverage. These will determine how your coverage applies after the deductible is taken into account.

Actual cash value (ACV) coverage will pay to replace your belongings at their depreciated value. For example, if you purchased a TV for $1,000 and it loses 10% of its value each year, after five years it will only be worth $500. If your TV is damaged, your insurance claims adjuster will calculate the depreciation to determine how much to pay you for it. More or less depreciation may be taken out depending on the condition of the TV. ACV policies are typically the least expensive option.

Replacement cost coverage will pay you the amount it will take to replace your damaged or destroyed items with comparable new items. For example, even if the TV in the example above is five years old, a replacement cost policy will give you the $1,000 that it would take to buy a similar new TV. Replacement cost policies are typically more expensive than ACV policies since they agree to pay you a higher amount.

Guaranteed replacement cost takes things a step further. If your damaged or destroyed items cost more than the original value to replace, a guaranteed replacement cost policy will pay the higher amount. If it would take $1,500 to replace your damaged TV, even though you only paid $1,000 for it when you purchased it, a guaranteed replacement cost policy should pay the $1,500. Guaranteed replacement cost typically costs the most of these three options, and may not be available from every company.

What does renters insurance not cover?

Although renters insurance offers a good amount of financial protection for its relatively low cost, not everything is covered. Some common exclusions on renters insurance policies include:

  • Flood damage: If you live in an area prone to flooding and are worried that your personal belongings could be damaged in a flood, you may want to consider a separate flood insurance policy.
  • Earthquake damage: You may be able to add earthquake coverage to your policy by endorsement. If you live in an area of the country where earthquakes are common, you may need a separate policy.
  • Damage caused by pests: Because it is your landlord’s responsibility to maintain your rental home or apartment building, pest damage, even to your personal belongings, is usually excluded from a renter’s insurance policy. If your landlord is found negligible for allowing a pest infestation, the liability on their landlord insurance policy should cover your damages.
  • Damage to or the theft of your vehicle: To get coverage for your vehicle, you need to have auto insurance. Your personal belongings may be covered under your renters policy if they are stolen, but the car itself or any damage to it is never covered under a renters insurance policy.
  • Your roommate’s belongings: Unless you and your roommate have a joint policy where you are both listed as named insureds, your roommate’s belongings are not covered under your renters insurance policy.
  • Damage in excess of your policy limits: If you have a renters insurance policy, you should consider how much coverage you need to replace your belongings. Your liability coverage will also only pay up to the limit you choose. However, damage you cause to the unit or injuries you or your family sustain are not covered by renters insurance.

Every renters insurance company is different, so talking to your agent is the best way to determine what is and is not covered by your policy.

What customizations can you make to a renters insurance policy?

Renters insurance policies often come with endorsements that you can add to customize your coverage. Common endorsement options include:

If you are not sure how much renters insurance you need or what coverages to choose, talking to a licensed agent may help you to decide on policy options that are appropriate for you.

Frequently asked questions

    • Deciding which renters insurance company is right for you can depend on a range of personal factors and preferences. There are numerous renters insurance companies on the market, and one of the best ways to find coverage that fits your needs is to request quotes from several companies. This lets you compare the available coverages, discounts and price before making a decision on a policy.

    • Your renters insurance policy may extend your liability coverage to cover injuries that your pet causes to others, although there are certain dog breeds that are frequently excluded from coverage. Exotic pets may also be excluded. If you are looking for health insurance coverage for your pet, you will need to purchase a pet insurance policy.

    • No, your renters insurance policy will not pay for your medical bills if you hurt yourself. Your renters insurance medical payments coverage only applies to your guests, and your liability coverage only provides financial protection for injuries and damages that you are found at fault for. If you are injured on your property and your landlord is found at fault, their landlord insurance may provide coverage for your medical bills. Otherwise, you would need to have health insurance to cover your injuries.

Source: thesimpledollar.com

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Which Savings Account Will Earn You the Most Money? – SmartAsset

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There are many types of savings accounts. Money market accounts can earn higher interest rates than traditional savings accounts. But CDs can often earn even higher rates. However, there are pros and cons to each type of account that goes beyond interest rates. Here’s what to know before you deposit your money.

If you have questions about how your savings account fits into your overall financial plan, consider working with a financial advisor.

High-Yield Savings Accounts

High-yield savings accounts are similar in many ways to traditional savings accounts and have many of the same advantages, including FDIC insurance on balances up to $250,000.

As their name suggests, high-yield savings accounts pay interest rates higher than traditional savings accounts. Interest rates change frequently, but generally, that equates to 10-20 times higher interest rates.

Other than interest rates, the biggest difference between high-yield savings accounts and traditional savings accounts is the presence of bank branches. Those that offer traditional savings accounts typically have them, while those with high-yield savings accounts don’t.

The latter is generally offered by online-only banks, and their lack of branches allows them to cut costs and offer better rates to their customers. However, the two are otherwise similar in most ways.

High-yield savings accounts, which at time of writing offered annual percentage yields above 4%, usually have a monthly transaction limit (typically six per month), and they often don’t have ATM access or check-writing privileges. Still, customers can access their money whenever they need it by transferring money electronically.

Money Market Accounts

Money market accounts are another type of saving product that offers higher interest rates than checking accounts and traditional savings accounts. The FDIC also insures balances up to $250,000.

In addition, these accounts sometimes have features like mobile check deposits and ATM withdrawals. Like high-yield savings accounts, there may be limits on the number of monthly transactions.

The best money market accounts generally have interest rates 10-20 times higher than traditional savings accounts. While some require a minimum deposit, several allow you to open an account with $0 to start.

However, some money market accounts may charge fees for maintaining a low balance or making too many withdrawals. Check the fine print and make sure you understand the terms before opening an account.

Certificates of Deposit (CDs)

Certificates of deposit (CDs) are another type of savings product that offers higher interest rates than traditional savings accounts. CDs, which are FDIC-insured, lock up your money for a certain period in exchange for a higher interest rate.

You will usually incur penalties if you want to withdraw your money before the end of the CD’s term. This makes CDs better for medium-term savings goals and for money you won’t need in the immediate future.

However, the best CD rates can be higher than rates on money market accounts or high-yield savings accounts, so keeping your money locked up could be worthwhile if you want the best rate. Plus, some CDs have no minimum to get started, so you can deposit as much as you want.

But unlike savings accounts, you often can’t make additional deposits to the account. Thus, they may not be the best choice if you don’t have a lump sum to deposit. Still, the interest rates CDs offer make them a good choice for those with funds to spare.

Comparing and Contrasting Savings Accounts

There are several things to keep in mind when deciding which type of savings account is right for you. Here are something things to keep in mind:

  • Interest rates: If you want to earn a return on your money, interest rates are the first thing to check. High-yield savings accounts, money market accounts and CDs can all offer high-interest rates today, with CDs having some of the highest rates. However, CDs require you to lock up your money for a certain period.
  • Fees: Some banks or credit unions might charge you maintenance fees or a fee if your balance falls below a certain level. These fees can eat into your earnings on the account, so it’s important to keep them in mind.
  • Minimum balance requirements: High-yield savings accounts, money market accounts and CDs can all have a minimum balance requirement to open an account, depending on the bank. Others might require a minimum balance to earn the highest interest rate.
  • Liquidity: The ease of accessing your money may vary depending on the type of account and the bank. For instance, money market accounts and some high-yield savings accounts may allow you to write checks or withdraw money from an ATM. In contrast, CDs usually require you to leave your money alone until the end of the term.

Each type of savings account has its own set of pros and cons. The best choice will depend on your savings goals.

Bottom Line

High-yield savings accounts, money market accounts and CDs can all have competitive interest rates that allow your money to grow. The best CDs offer some of the highest interest rates, but they require you to keep your money locked away to earn the best rate. Thus, it’s important to consider not only the interest rate but also factors like fees, minimum balance requirements and liquidity before deciding which type of savings account is best for you.

Tips for Opening a Savings Account

  • A financial advisor can help you work through your banking needs and put together a plan that works for your unique situation. 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.
  • The best savings accounts pay some of the highest rates and often do away with costly fees. See SmartAsset’s list of the best savings accounts to find one that’s right for you.

Photo credits: ©iStock.com/andresr, ©iStock.com/FilippoBacci,  ©iStock.com/Jinda Noipho

Bob Haegele

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What Is Faith-Based Investing? – SmartAsset

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A foundational religious parable tells of two servants who invested their money in the marketplace and one who buried it in the ground. This story gives Christians lessons about serving God with their money and abilities. More broadly, faith-based investing means applying religious principles to investing. This approach makes it possible to accomplish good in the world and receive excellent investment returns. Here are the details.

SmartAsset can help you find a financial advisor to create a financial plan for your needs and goals.

What Is Faith-Based Investing?

Faith-based investing means investing according to the moral, ethical and social sensibilities that arise from your religious beliefs. As a result, faith-based investors – whether Christian, Muslim, Jewish, Hindu or any other faith – will steer clear of specific investments, even if they are lucrative. And they search for returns with companies aligning with their values.

For example, Catholic investors won’t put money into companies that produce nuclear weapons, firearms or landmines or that profit off embryonic stem cell research or abortifacients. Instead, they invest in companies that practice social responsibility and provide excellent conditions for workers.

How Faith-Based Investing Works?

Faith-based investing seeks high returns, just like other investment approaches. However, it balances this priority with following religious convictions. For instance, companies promoting fair, accessible housing and environmental health will attract faith-based investors. On the other hand, their dollars won’t go towards companies profiting from tobacco or gambling.

Generally, faith-based investing values caring for people and the planet. As a result, religious investors often prefer companies demonstrating concern about economic justice, corporate responsibility and environmental protection. That said, many religious sects have specific way of investing, examples of which are outlined below.

Type of Faith-Based Investing

Catholicism

The Roman Catholic church has a robust history of faith-based investing, starting with social and financial activism against South African apartheid in the 1960s. In addition, leadership developed the Catholic Framework for Economic Life, which consists of ten faith-based principles. For example, the framework promotes all people’s right to life essentials, such as food and shelter, and prioritizes the welfare of vulnerable populations.

In addition, Catholic investors won’t put money into companies that practice discrimination or stem-cell research. Furthermore, they avoid companies that profit from abortion, contraception, weapons sales or adult entertainment. To that end, Catholic Investment Services manages over $1 billion on behalf of the church.

Protestantism

Benjamin Franklin once said, “Remember that time is money.” Protestants have the reputation, at least historically, of taking this message to heart by working hard and living frugally. They see their accumulated wealth as a way to create good in the world. Like Catholics, Protestant investors generally value the environment, justice and human well-being.

For example, GuideStone Funds bases its values on the Bible and manages over $15 billion in assets. The company supports “the sanctity of life, family, stewardship and health and safety.”

Judaism

Jewish values vary widely, from the ultra-Orthodox to the Reform and Reconstructionist. However, there are a number of common elements to Jewish investing.  For example, the Talmud emphasizes giving and diversifying assets. These practices are foundational in the Jewish way of life, including investing.

Although there is no formal guidance for socially responsible investing in Judaism, the faith encourages caring for the poor and being wise with money. As a result, Jewish investors usually put money into environmental health, social justice and the country of Israel. There are also mutual funds that follow Jewish investment strategies, such as the iShares MSCI Israel ETF, which invests in Israeli equities.

Islam

Specific rules in Sharia law, also known as halal, govern the Islamic way of life and investing practices. Sharia law prohibits participation in specific industries, including alcohol, gambling, tobacco, pork products and pornography.

In addition, the religion doesn’t allow speculation, interest and debt. Muslim investors who want to invest according to their faith avoid companies that don’t adhere to these principles, as well as those with high levels of debt.

Sukuk bonds, which represent ownership in future or current assets but do not pay interest, are a popular investment option for Muslim investors. Amana mutual funds, offered by Saturna Capital, avoid interest-bearing securities and prioritize long-term equity investments to safeguard against inflation. The Iman Fund, established by Allied Asset Advisors in 2000, is another mutual fund that follows Sharia principles and invests only in halal investments.

How to Build a Successful Investment Strategy That Aligns with Your Faith

As the examples above demonstrate, it’s possible to follow your religious convictions and invest profitably. Here are the strategies to build a successful investment strategy with your faith as the foundation:

Identify Your Priorities

First, ask yourself what about your faith drives your investment approach. For example, you might be passionate about gun violence, gender equality or affordable housing. Once you know your values, you can tell what kind of assets are appealing.

Determine Your Investment Style

Next, your investment style is crucial to understand. Specifically, you might have a low-risk tolerance. In this case, it’s best to seek safe investments that fit your approach. In addition, you might prefer to manage your investments yourself or hire a trusted professional.

Consider Your Goals

Your investment goals will also shape your approach. For instance, starting a faith-based retirement portfolio at 25 means you’ll be investing for decades. On the other hand, starting a college fund for your 10-year-old means you’ll need to cash out in less than a decade. Therefore, your objectives are critical to remember as you choose investments.

Find a Fund That Fits

As mentioned above, numerous faith-based funds are available for religious investors. From Saturna Capital for Muslims to the Global S&P 500 Catholic Values ETF, a range of investment products can fit your faith preferences. A fund specific to your denomination is an excellent place to start.

Consult With a Financial Advisor

If you’re unsure how to start, a financial advisor can help you clarify your priorities and choose funds that fit your beliefs. For example, their knowledge of the stock market can lead you to a company with environmentally friendly practices or a faith-based stock portfolio.

Bottom Line

Faith-based investing is similar to conventional investing in that it seeks low costs and high yields. However, it also filters out specific investments that violate religious values. Your religious beliefs will drive your individual style of faith-based investing, so understanding your values is key to investing in a way that gives you peace and improves the world.

Tips for Faith-Based Investing

  • Faith-based investors face the same challenges as conventional investors: diversification, tax implications, management costs, etc. Fortunately, a financial advisor can offer valuable insight and guidance. Finding one 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
  • If you’re a Christian who wants to apply your faith to finances, you can learn about biblically responsible investing.

Photo credit: © iStock/Hispanolistic , ©iStock/ FangXiaNuo, ©iStock/Kamonwan Wankaew

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.

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In most cases, a financial plan is not entirely complete without life insurance. This is because the proceeds from a life insurance policy can help to ensure that your survivors can carry on financially in case the unexpected occurs. These funds can be used – income tax-free – for any number of things, such as paying off massive debts, paying for the funeral and other final expenses, ensuring future college education funds, and making sure that monthly bills can continue to be paid.

When you are searching for the best life insurance policy for your needs, it is important to make sure that you are going with the right type and amount of coverage. It is also important that you review the insurance company you are considering buying your policy through to determine whether it is financially stable, and that it has a positive reputation for paying out its policy holder claims. One company that meets these criteria is Nationwide Insurance Company.

The History of Nationwide Life Insurance Company

Nationwide Mutual Insurance Company and its affiliated companies make up a group of large U.S. insurance and financial services companies. The company was initially founded more than 90 years ago, and it has grown and expanded throughout the years.

This financial and insurance entity offers a broad range of products and services that can help clients with growing and protect wealth, as well as the people and things that are important to them.

The company not only has a focus on assisting its clients but is also charity minded. Just some of the entities that have been helped by Nationwide’s donations, as well as employee volunteerism, include Feeding America, and the American Red Cross. Nationwide is headquartered in Columbus, Ohio.

Nationwide Life Insurance Review

Nationwide has become a familiar name across the U.S., due in part to its famous advertising jingle, “Nationwide is on your side.” The company has featured various celebrities in its ad campaigns, such as Peyton Manning.

The long term financial goals of Nationwide have remained the same since the company’s inception – to create value for its members and its business partners. As of year-end 2015, Nationwide had approximately $26 billion in operating revenue. It is listed as a Fortune 100 company, and it consistently receives high ratings and rankings from the major ratings agencies.

Insurer Ratings and Better Business Bureau (BBB) Grade

Due to its stable financial footing, Nationwide has obtained high ratings from the insurer ratings agencies. These include an A+ from A.M. Best Company, an A+ from Standard & Poor’s, and an A1 from Moody’s Investor Services.

Also, Nationwide has been an accredited company through the Better Business Bureau (BBB) ever since September 1, 1955. The company has received a grade of A+ from the BBB (on an overall grade scale of A+ to F).

Within the last three years, Nationwide Insurance has cleared a total of 377 customer complaints via the Better Business Bureau, of which 98 were closed within the past 12 months. Of these total 377 complaints, 258 had to do with problems with the company’s products and/or services, 102 were in regard to billing and/or collection issues, 13 were in relation to advertising and/or sales issues, 3 had to do with delivery issues, and the remaining one was with regard to guaranteeing / warranty issues.

Life Insurance Coverage Offered Through Nationwide Life Insurance Company

Nationwide offers an extensive list of different life insurance policies and options to choose from. This can be extremely beneficial to the company’s customers, as they can determine which plan works the best for them – and they may also be able to change that plan as their needs change over time.

Life insurance policies from Nationwide include term and permanent options. With term life insurance, there is death benefit only protection, without any cash value or savings build up. Because of this, term life insurance can often be much more affordable than a comparable permanent insurance policy.

Term life insurance protects for a set period, such as ten years, 15 years, 20 years, or even 30 years. Nationwide offers the YourLife Guaranteed Level Term plan. With this policy, the death benefit and the premium due will remain level throughout the entire policy period.

There are also several free riders that may be added to this policy to more closely “customize” the coverage to meet an insured’s needs. These include the following:

  • Accelerated Death Benefit Rider
  • Children’s Term Insurance Rider
  • Premium Waiver Rider
  • Spouse Rider

Nationwide also offers a full line of permanent life insurance policy options. With permanent life insurance, there is a death benefit, as well as a cash value or investment component that is attached to the policy. Often, permanent life insurance is used for other financial goals that are in addition to protecting loved ones through the death benefit proceeds.

For example, because the funds that are in the cash component are allowed to grow tax deferred, this money can increase exponentially over time. It can then be either withdrawn or borrowed against for any reason, such as paying off debts, supplementing retirement income, or even for buying a new car or taking a vacation.

Several types of permanent life insurance coverage are offered by Nationwide. These include whole life, universal life, and variable life insurance. Whole life is the most basic form of permanent life insurance. Here, the death benefit and the premium will typically remain fixed – and the policy will stay in force for the remainder of the insured’s lifetime – provided that the premium is paid.

Nationwide offers the YourLife Whole Life insurance policy. This plan provides numerous benefits, including:

  • Permanent life insurance protection
  • Predictable fixed premium amount
  • The ability to further customize the plan with riders (for an additional amount of premium)
  • Guaranteed cash value
  • Guaranteed death benefit
  • Access to the funds in the cash value component
  • Income tax-free death benefits

There are two premium payment options on this plan. With the WL-100 option, the premium will be paid on a regular basis and will stop when the insured turns age 100. Alternatively, with the 20-pay WL, the premium will remain the same until the policy is paid-up after 20 years.

This policy also has the following riders:

  • Accelerated Death Benefit Rider
  • Children’s Term Insurance Rider
  • Accidental Death Benefit Rider
  • Premium Waiver Rider

Nationwide offers other permanent forms of life insurance, too, including Universal Life Insurance. Universal life insurance is more flexible than whole life, as the policy holder can alter the premium (based on certain guidelines) regarding due date and the amount.

Universal life insurance could be a good option for either individuals or business owners, depending on their needs. For instance, this type of coverage can be a viable option for those who wish to leave a legacy to loved ones. It can also help small business owners with their continuation planning.

There are some universal life insurance policies offered through Nationwide. These include both regular universal life insurance coverage, as well as indexed universal life. With an indexed universal life insurance policy, the return on the cash value is based on an underlying market index, such as the S&P 500. When the underlying index performs well, the policy’s cash value is credited with a return – typically up to a set cap. But, if the underlying index shows negatively in each period, then the policy holder’s principal does not lose value. Rather, it is just simply credited with a 0%.

The universal life insurance policies that are offered through Nationwide include the following:

  • Nationwide YourLife Indexed UL Accumulator
  • Nationwide YourLife Indexed UL Protector
  • Nationwide YourLife Indexed UL
  • Nationwide YourLife SUL ll
  • Nationwide YourLife Current Assumption UL
  • Nationwide YourLife No-Lapse Guarantee Ul

The company also offers several options for variable universal life insurance. With this type of life insurance policy, there is death benefit protection, as well as an investment component where the funds can grow, based on the performance of underlying investments. With variable universal life, the policy may be used for providing coverage, as well as for many other financial planning needs, such as supplementing retirement planning solutions and business planning solutions, education funding, or long-term care payment requirements.

It is important to note that with variable universal life insurance, the underlying investments may move up or down. So, while there is the opportunity for substantial gains, there may also be risk involved.

With Nationwide, there are three variable universal life insurance policy options to choose from, including the:

  • Nationwide YourLife Protection VUL
  • Nationwide YourLife Accumulation
  • Nationwide YourLife Survivorship VUL

Other Products and Services Available

In addition to life insurance coverage, Nationwide also offers many goods and services. These include retirement annuities, mutual funds, and retirement plans that can help businesses and their employees to save for the future and protect their investments.

Today, with life expectancies getting longer, one of the key worries that is on the minds of retirees and those who are preparing for retirement is that of running out of money. An annuity can help to reduce these fears, as it can offer a guaranteed lifetime income – regardless of how long you need it. Nationwide offers a full suite of annuity products, including fixed and variable, as well as market value adjusted. Clients may also choose to purchase an immediate annuity – where income can start right away – or a deferred annuity, where income is paid out at a time in the future.

Mutual funds can help clients to achieve their financial goals via a diverse set of investment options. Nationwide offers many of their mutual funds, which are focused on a variety of objectives, such as growth, aggressive growth, growth and income, and conservative.

For businesses, Nationwide provides some different retirement savings options. These include 401(k) plans, 403(b) plans, and 457 plans. So, depending on the type of business, a plan can be set up that most closely fits the goals of the company and its employees.

Also, provided by Nationwide for businesses is key person insurance, also commonly referred to as key man insurance and keyman life insurance, it is an important form of business insurance. … An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company.

How to Get the Best Premium Rates on Life Insurance Coverage

If you are seeking the best premium rates on life insurance coverage through Nationwide – or through any top rated life insurance company – it is recommended that rather than searching with just one, single company, you instead work with an independent life insurance agency or brokerage that can provide you with details on many different policies, companies, and prices. That way, you can determine which will be the best for you.

When you are ready to shop and compare the right life insurance for you, we can help. We work with many of the top life insurers in the industry today, providing you with the information that you require for making a sound buying decision. We can do this all from your computer, and without you having to meet in person with a live insurance agent. If you are ready to proceed, then all you have to do is just simply fill out our quote form.

We understand that choosing the very best life insurance option for you can be somewhat challenging. There are many different options to pick from, and you want to be sure that you are moving in the right direction. But we can walk you through the entire process. So, contact us today – we’re here to help.

Source: goodfinancialcents.com