Most people want to save for the future, whether that means a short-term goal like a vacation in Bali next year or a longer-term aspiration, such as retiring by age 50. To fund these dreams, many experts recommend putting aside at least 20% of your paycheck.
However, each person’s financial situation is of course different. One person might have student loans they are paying off on a lower income while another might be earning a lofty salary with minimal debt. And yet a third might have a moderate income, some student loans, and they just closed on a home and are spending on major renovations.
So exactly how much you should save will depend on a variety of factors, such as your goals, your current income and debt, and your cost of living. Here, some guidelines to help you know exactly how much of your paycheck to save.
What Percentage of My Paycheck Should I Save?
Most of us know that saving money is important, but how much should you regularly whisk out of your checking account and into a savings vehicle? When it comes to what percentage of income to save for future expenses, financial advice can vary depending on where you look. Some experts suggest saving as little as 10% of each paycheck, while others might suggest 30% or more. A figure of 20% often seems a comfortable compromise.
The 50 20 30 Rule
According to the 50/30/20 rule of budgeting, 50% of your take-home income should go to essentials, 30% to nonessentials, and 20% to saving for future goals (including debt repayment beyond the minimum).
The right amount for you to save from each paycheck will depend on your income, your fixed expenses, as well as your short- and long-term financial goals.
For example, if the cost of living is high in your area, you may need to spend more than half of your take-home pay on living expenses, making it hard to put 20% of each paycheck into savings.
On the other hand, If your goal is to buy a home in two years, you may need to put more than 20% percent of your paycheck into savings in order to have your down payment in that timeline. If you want to retire early, you may need to put more of your income towards retirement every month than the average worker.
💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.50% APY, with no minimum balance required.
The Pros and Cons of Saving More or Less
While 20% is a good guideline, how much of each paycheck to save is a personal decision.
If you are trying to decide just how much of your paycheck to save, consider these points. Being aggressive with savings can have its benefits. You might also consider these the advantages that you miss out on if you save less.
• By saving more, you reach your goal faster.
• By maximizing the money you put away, you may rein in your spending and manage your money better in general.
• If your company offers a match for retirement savings, you can basically get free money by saving at the stipulated rate.
• Some savings vehicles offer tax advantages.
However, there are also downsides to saving as much as possible. You could avoid these by saving less. In other words, these are the benefits of saving less.
• By saving less, you might avoid living paycheck to paycheck, which is stressful.
• You can put more money towards paying down high-interest debt which can enhance your financial situation.
• You have more money for discretionary spending and enjoying your life.
Here’s how this stacks up in chart form:
Pros of Saving More/Cons of Saving Less
Cons of Saving More/Pros of Saving Less
Saving more means reaching financial goals faster
Saving aggressively can lead to money stress
Saving more can rein in spending and lead to better money management
Saving more can mean less money free to pay down debt
Saving more can potentially reap a company match via employee savings plan
The more you save, the less you may have for discretionary or “fun” spending
Saving more can mean tax advantages
Recommended: Cost of Living Index by State
4 Potential Savings Goals to Work Toward
Socking away money can be a good idea, but it is undoubtedly difficult to save. It can be helpful to really think about what it is you are saving for. Having a few specific goals in mind can help you determine how much you need to save each month and also help keep you motivated to maintain the discipline it takes to save.
Here are some common savings goals that can help you build financial wellness.
1. An Emergency Fund
Do you have a healthy reserve of cash you could tap to get through a difficult time or cover a large, unexpected expense?
If not, you may want to start saving up for an emergency fund that could help you handle a financial curveball, such as a job loss, medical emergency, or big ticket car or home repair.
Having this back-up fund in place can help ensure that you never have to rely on high-interest credit cards to make ends meet.
Ideally, an emergency fund will contain enough money to cover your living expenses for three to six months, but how much you’ll want to put aside will depend on your situation.
If you are married with no children, for example, you may only need to cover three months of expenses. If you have kids or you’re single, you may want to have an emergency fund that could cover at least six months’ worth of expenses.
It can help to keep the money in an account that earns more interest than a standard savings account, but allows you to easily access your money.
Some good options include: a high-yield savings account (online banks tend to offer good rates) or money market account.
2. Paying Off High-Interest Debt
Another important thing you could consider doing with your savings is paying off any “bad” or high-interest debt you may have. Some ideas for a debt management plan:
• A debt payoff strategy you may want to consider is the debt snowball method. With this approach, you start by paying off the debt with the smallest balance and put all your extra payments towards that until it’s paid off (while continuing to pay the minimum on your other debts).
You then put extra payments toward the debt with the next highest balance, and so on. This can give you a sense of accomplishment which can help motivate you to continue your aggressive repayment.
• Another approach is the debt avalanche method. This Involves putting all your extra payments towards the debt with the highest interest rate, while paying the minimum on the others.
When that debt is paid off, you then focus on the debt with the next-highest interest rate. Since you are concentrating on the debt with the highest interest rate, this strategy can end up being the most cost-effective.
3. Saving for Retirement
One of the key things to save for each month is your future. Exactly how much of your paycheck should go to retirement savings will depend on your age and when you want to retire.
If your company offers a 401(k) with matching contributions, it can make sense to put aside at least as much of your paycheck as your company will match (since this is essentially free money).
If you don’t have access to a 401(k) or want to contribute beyond that fund, you may want to open a Roth or Traditional IRA. Both types of IRAs have different tax benefits.
When you invest in a Roth IRA the money is taxed at the time of contribution but then in retirement, you can withdraw it tax free. Contributions made to a traditional IRA might not be taxed at the time they are made but are taxed when they are withdrawn in retirement.
When choosing how much of your paycheck to put into retirement savings, you may want to keep in mind that the IRS sets restrictions on how much you can contribute to your retirement funds each year.
4. Saving for Other Goals
After establishing plans for debt repayment, an emergency fund, and retirement savings, you may also want to consider working toward your other financial goals, like buying a house, saving for your kids’ future education, or going on a great vacation.
How much of your paycheck you should save for these goals will depend on what you want to accomplish and when you want to accomplish it.
When you’re saving for a big purchase, for example, you may want to start by determining how much money you’ll need and when you want to have the money.
You can then break that dollar amount down into the amount you need to save each year and month. This can help you determine how much of each paycheck you may want to put aside to help you achieve that goal.
• For savings goals you want to accomplish in the next three to five years, you may want to consider putting the money in a safe account that earns higher-than-average interest (such as a high-yield savings account or a CD).
• Longer-term savings goals, such as your children’s college education, can be invested more aggressively, since you’ll have more time to ride out the ups and downs of the securities markets. For college savings, you may want to consider opening a 529 savings plan.
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Saving a Percentage vs. an Amount
There are different ways to look at saving: Some people follow the percentage method, while others prefer to think in terms of a dollar amount that gets socked away.
For many people, a percentage is a good way to go.
• That percentage can be “set it and forget it.” It can help guide you if, say, you get a raise. The amount you are saving will automatically rise with your salary.
• Similarly, if you are a seasonal worker, the amount you are saving will go down during your slow season. Say you earn $15,000 a month during the busy season and save 20%. That would be $3,000 a month. If your pay dips to $5,000 during the quiet season, only $1,000 per month would go into savings.
However, other people may find that putting aside a set amount, perhaps $1,000 a month, is a good way to save.
• That might make it easier for them to calculate and track their savings. It can be a way that people feel they are in control of their money.
• When their income rises or falls, they would have the opportunity to be hands-on with their money and determine whether to adjust the amount or not.
Here’s a look in chart form:
Saving a Percentage
Saving an Amount
“Set it and forget it” convenience
Can be simpler to remember and track
Automatically adjusts savings when your income changes
Can get you to check in with your money and adjust your savings amount regularly
💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.
Starting to Save With SoFi
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FAQ
Is it good to save 50% of your salary?
If you can afford to save 50% of your salary, that can be a habit that can help you reach financial stability quickly. However, many people will save less than that, with 20% of one’s take-home pay being a solid figure to aim for.
Is saving 10% of your paycheck enough?
Saving 10% of your paycheck is a good start and is certainly better than not saving at all. If you are just starting out, have a high cost of living, or have considerable debt, it can be a good move to start with 10% as your savings goal. However, many financial experts encourage people to save at least 20% of their take-home pay.
What is the 50 20 30 rule?
The 50/30/20 budget rule is a formula to help people manage their finances. It says that, of your take-home pay, 50% should go towards basic living expenses (the needs in your life); 30% should go to spending (the wants in life); and 20% should go towards saving for the future (including debt repayment beyond the bare minimum).
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Are you interested in financial independence and/or early retirement? Today, I’ve asked some of the top personal finance experts to share their personal and best early retirement tips. Early retirement may sound like a dream, but there are more and more people who are trying to retire early as part of the FIRE movement. FIRE…
Are you interested in financial independence and/or early retirement? Today, I’ve asked some of the top personal finance experts to share their personal and best early retirement tips.
Early retirement may sound like a dream, but there are more and more people who are trying to retire early as part of the FIRE movement. FIRE stands for financial independence, retire early.
There is a lot of debate around financial independence and early retirement, especially about what it really means and how to achieve it.
It doesn’t necessarily mean you have millions of dollars in the bank and never work again. If that’s your goal, then great, go for it! But the idea is more about living your best possible life and no longer being controlled by money.
For some people that means completely getting rid of their debt — no credit card debt, mortgage, car loans, student loans, etc. Other people have an exact number in mind that they want to reach, like $1 to $2 million in savings.
And, something that’s surprising for many people is that early retirement doesn’t have to mean you stop working forever. Early retirement can be quitting a job you hate to pursue a job you’re passionate about.
There are many reasons for why a person may want to reach early retirement or financial independence, such as:
To be able to pursue a passion without worrying about making an income
To have more time to travel
To have freedom
To spend more time with family and those that you love
The people I’ve asked to share their early retirement tips are bloggers, authors, and business owners who have been working towards financial independence and/or early retirement. These people are experts on finding ways to make more money and save money.
For example, you’ll learn early retirement tips that include geographical arbitrage (being able to become location independent so you can save money by living in a lower cost of living area). There are also early retirement planning tips to help you figure out how the math of FIRE works — it might surprise you!
One of the biggest things you’ll learn from these experts is that reaching FIRE is about changing your mindset.
You have to really find a reason for wanting out of the normal 9-5 job path. You have to be driven and goal-oriented. Some people will have to be willing to completely change their lifestyle to make early retirement happen.
Being financially independent is an incredible feeling, and I love that I can travel more, live on my own terms, and retire whenever I want (not that I plan to anytime soon — I love what I do!).
Even though it’s an amazing feeling, becoming financially independent won’t be easy for everyone. That’s why I’m sharing these actionable early retirement tips with you today.
You will learn the early retirement tips that helped these experts get started, how they stay motivated, that it’s never too late to start working towards FIRE, and more.
More than anything, you will learn that there isn’t one straight path towards reaching financial independence or early retirement.
Related content to financial independence, retire early tips:
Here are the best early retirement tips.
1. Go for FIRE.
“After reaching financial independence and retiring at 30, I have three main pieces of advice for anyone who might be interested in FIRE:
1. Go For It
When I talk to friends and family about my journey to FIRE several of them respond that that’s great, but they love their job or enjoy working for their company. And while I am so happy for them, I also gently remind them that nothing lasts forever. The job you love could change, your company could be acquired, your industry could experience massive layoffs. Change is the only constant in life.
Pursuing financial independence is a great goal for anyone simply because it provides financial stability to weather the inevitable changes the world will throw at you. So I suggest everyone go for it even if early retirement isn’t their goal and even if they have no intention to stop working. Having a safety net is never a bad thing.
2. Figure Out What You Want
Inertia is a powerful force. When I was living in NYC and just trying to survive I didn’t take the time to pause and think about what I actually wanted. I had recently gotten a new position that included a promotion and a 37% raise and I was told that the way to enjoy life was to spend money – so I did.
I was told by my friends that I should buy heels (that I couldn’t walk in comfortably) and purses (that I rarely used). And after I spent money like a wild woman, I sat back and realized that the way I had spent it didn’t make me any happier.
So I figured out what actually made me happy. It turns out it’s spending time with the people I love and traveling the world in first class. So I put my money towards those things and even figured out how to do the latter without breaking the bank by getting into travel hacking. Based on my experience, I would suggest not listening to other people about what will make you happy and to figure that out for yourself – and then spend accordingly.
3. Don’t Wait
After you figure out what you want in life I would suggest starting down this path NOW. My partner introduced me to the idea of FIRE in 2013 – and then I ignored it for 2 years. Doing so is the biggest financial regret in my life.
Time in the market matters and I don’t want to calculate how much more I would have or when I could have exited the rat race if I had listened in 2013 instead of shutting down the idea.
Similarly, when talking about FIRE so many of my friends have told me over the years “oh I should look into that” and now that I’ve completed my journey to retirement after 5 years they suddenly ask “HOW?!” They could have been on this path with me the whole time. Just start and before you know it the time will have passed anyway.” “Purple” from A Purple Life, she/her
2. Grow the gap.
“There’s a lot of debate within the personal finance and FIRE communities about whether to earn more or spend less. Ignore that debate and think about growing the gap between the two. To spend less, pick the low-hanging fruit and plug the obvious leaks in your budget. Don’t get caught up in penny pinching – 80/20 your expenses and move on. Use your valuable mental bandwidth to figure out how to earn more instead. Michelle is great for that; she has a lot of recommendations for side hustles on this blog. Once you grow the gap between your income and expenses, then invest the gap. How? Invest in index funds, rental properties, or reinvest funds in your own business or side hustle.” – Paula Pant, Founder of Afford Anything
3. Start investing now.
“1) Invest as soon as possible. Too many people have heard the “you must have absolutely no debt” in order to invest, but that’s not true — especially if you get an employer match through your 401(k). Investing as soon as you can, even if it’s with a small amount of money, means less heavy lifting over time.
For example, I hit my goal of investing $100K at 25. Even if I never contributed another penny, I’ll have over $1.5 million by the time I’m 65 (retirement age.)
2) Don’t be afraid to job-hop. Company loyalty is a thing of the past, and you never have more sway than you do when you’re first negotiating your pay. I always tell clients: companies aren’t loyal to you, why be loyal to them? They’ll let you go, they’ll cut your hours, they’ll replace you — don’t let “loyalty” blind you from moving on to a higher-paying job.” – Tori Dunlap, Founder, Her First $100K
4. Know your why.
“I’ve been writing about financial independence and early retirement for over a decade now. In that time, I’ve come to believe that there are only two things you need to know about the subject.
First, there’s the math. Fundamentally, FIRE is all about creating a gap between what you earn and what you spend. The larger that gap, the quicker you’ll achieve financial independence (or any other money goal you might set for yourself). Folks who are serious about FIRE generally try to save half of their income — or more. But don’t sweat it if you can’t save half. Start where you are. Save what you can. Stick with it.
Second, there’s the psychology. Yes, the math of early retirement is important, but from my experience it’s the mental side of things that’s most difficult. Achieving this goal isn’t like running a sprint. It’s like running a marathon. It takes a long time. You’ll encounter obstacles along the way. And it’s a lot easier to overcome these obstacles if you have a REASON to overcome them, if you have a REASON for achieving financial independence. It’s not enough to want the money for its own sake. So, get clear on your purpose, on why it is you want to retire early.
So, that’s it. Before you jump in, know why you want to pursue financial independence. Then, once you make the leap, do whatever you can to increase the gap between your earning and spending. Those are the two keys to financial independence.” J.D. Roth at Get Rich Slowly
5. Design your ideal life.
“Oftentimes, I see people overemphasizing the financial aspects of FIRE (while simultaneously undervaluing their quality of life along the way).
The whole point of financial independence or early retirement is to live your absolute best life (which doesn’t necessarily require you to retire early). This is why I recommend ensuring that you focus on designing your ideal lifestyle alongside the savings and investments that will get you to FIRE.
First, start creating your vision of what your ideal life looks like. There are a number of steps you can take to create and refine your vision. You can reflect on your ideal day and week, think through your life’s peak experiences so far, start trying out new things, educate yourself on different flexible career options, and so many more.
Most lifestyle design options are available long before early retirement. So, once you’ve started to create your vision, you can figure out how to incorporate elements of your ideal life now and work toward making your vision a reality in the longer-term.
For example, our vision is to be location independent with a home base. We want to slow travel the country and the world, doing meaningful work, and sustaining strong friendships. Our goal is to make so many small shifts toward this ideal lifestyle so that when we finally hit our full FI number, we won’t need to change anything. We’ll already be living our ideal lifestyle.
Over the last two years, we’ve made small and steady shifts to make this a reality. I took a part-time job that would provide me with more free time to build my business. I built my business to a point where I felt comfortable quitting my job. Now, I’m focused on generating enough income in my business, so that Mr. Fioneer can quit his job and join me as a location independent entrepreneur.
We’ll be living our ideal lives years before reaching full FIRE.” – Jessica from The Fioneers
6. Calculate your FI number.
“Finding your FI (Financial Independence) number is the best place to start on a FIRE journey. Once you know your number, you have a concrete place to start creating a retirement plan. You can find your FI number by calculating your annual expense and multiplying that number by 25. This calculation doesn’t control variables like inflation or what your investments make, but it at least gives you an idea of what you’ll need. My FI number is $900,000, but I want to have a bit more than that because of inflation and medical expenses since I have a chronic illness. It’s important to account for things that may arise in your retirement years. Although you may not have a mortgage payment, you may have an expensive prescription you need to fill. I talk more about my top 10 investing for retirement tips here.” – Alexis at FITnancials.com
7. Review your financial numbers.
“One of the best ways to make progress with your money is to set aside an hour every month to review your financial numbers. Make it a fun date (even by yourself) to go over your money plan and goals, review last month and make adjustments. One of my favorite financial numbers to track is your “GAP” number. That is the difference between your monthly income and your monthly spending. Then each month come up with a way to slowly grow that GAP number by either reducing some expenses, doing a 30-day spending challenge (like no eating out for a month), or finding ways to increase your income or add new income. This monthly GAP number review will help you be more creative and intentional about growing that GAP number. You can put that money towards debt pay off, starting to save for retirement, or another big goal. Once you get your GAP number up to 30-60% of your income, you are well on your way to financial independence!” – Jillian Johnsrud at www.jillianjohnsrud.com
8. Our Wealth = Income + investments – lifestyle
“To reach FIRE, first understand the wealth-building equation. It looks something like this:
Our Wealth = Income + investments – lifestyle.
Building wealth is how we reach financial independence, and financial independence is an implicit requirement we need to hit before retiring early. FI means that we no longer need to earn an income to fully fund our lifestyle.
Our income is the first step in the process, but it doesn’t stop there. When our income is invested in appreciating assets (like the stock market or real estate), we build wealth quicker through the power of compounding interest.
But, the element that a lot of people forget about is lifestyle. The cost of our lifestyle (aka: our spending) reduces our wealth. The more that we spend, and the more debts that we hold, the lower our wealth and, therefore, the further we are from achieving FIRE.
The goal: maximize income + investments and minimize lifestyle spending. When combined, you will build wealth quickly, form healthy habits that won’t drain your pocketbook, and set you up to spend many decades of your life basking in the freedom of early retirement.” – Steve Adcock at SteveAdcock.us
9. Grow your income.
“Work to grow your income. For most people, this means to concentrate on their careers. Your career is a multi-million dollar asset (over the 30-40 years most people work) and if you nurture it, you can make it worth significantly more, which then fast-tracks your path to FIRE. From my experience there are seven proven steps to growing career income which, if implemented consistently over time, will result in substantial, extra earnings. After that, simply control your spending, bank the ever-growing difference, and you’re on a rocket ship to early retirement!” – ESI Money
10. Figure out what you really want out of life.
“My top tip for reaching FIRE is figuring out what you really want out of life. That doesn’t seem like financial advice on the surface, but when you dive into it, you can see how vital it is to your journey to financial freedom. How are you going to know what your FIRE number is if you don’t even know what you want? Instead of limiting yourself and sacrificing everything you enjoy on your quest for financial independence, figure out what your life goals are, and calculate your Fire number based on those goals. You may even come to realize that you need far less money than you originally thought, or that your FIRE lifestyle will include additional sources of income that you didn’t take into account. There’s another great reason for determining your life goals as well. If you just focus on the money goals without intentionally designing your post-work life, you will end up just as unhappy as you were when you were working. So instead, explore your passions and make sure you’re ready to live your life to the fullest upon reaching financial independence.” – Melanie from Partners in Fire
11. Cut back on your top three expenses.
“For those seeking financial independence and/or early retirement, my main advice is to figure out your top three expenses and cut back as much as you can on those. If you’re like most, your top three expenses will be housing, transportation, and food. If you can bring these expenses down and keep them down while still living a fulfilling life, you’ll save far more money than skipping $5 lattes and cutting coupons.
Most Americans have too much house, with rooms left unused or relegated to storing stuff. The average car purchase in America is now over $37,000, when a decent $10,000 used vehicle would meet the needs of most. And most people eat out way too much, draining their budget and compromising their health.
Get these “big three” expenses down, invest the savings in a broad low-cost index fund that tracks the overall stock market, and let compounding interest do its thing.” – Dave at Accidental FIRE
12. Geographic arbitrage.
“One of the most underreported strategies that help people achieve Financial Independence is Geographic Arbitrage. Basically, if people are able to work remotely and they physically move to a low-cost area (or even low-cost country), they can super-charge their savings rate because their cost of living goes down while their earnings do not.
Prior to the pandemic, this was a relatively rare situation as most jobs require you to be in the office by default, but now that companies have been forced to adopt a work-from-home policy, the potential for geographic arbitrage has opened up for a lot more people.
Working remotely may not be for everyone, but if you can, try to make it permanent once this pandemic is over, especially if your job was located in an expensive city like San Francisco or New York City. By relocating to a low-cost country like Mexico or Thailand, you may find yourself changing from just barely scraping by financially to saving so much money you don’t know what to do with it all!” – Kristy Shen and Bryce Leung are authors of the best-selling book Quit Like a Millionaire and founders of the blog Millennial Revolution
13. Think about your why and how.
“Financial independence and philosophy are closely related. So, to achieve financial independence, the first actionable tip I would recommend is to think about why you want to reach FIRE. Then, think about how you want to spend your time once you reach financial freedom.
By thinking about why you want to retire early and how you want to spend your time, you can properly build the framework for your own version of financial independence. Because there isn’t just one way to FIRE.
For example, if you save 50% of your income, you can afford to take one year off for every two years you work. Alternatively, you could consider the slow FI route if you prefer a more balanced journey. Or, you could consider Barista FIRE and work a part-time job to have more time now.
Personally, I’ve tested out a one year mini-retirement and Barista FIRE. I prefer Barista FIRE because it allows me to gain more time now but I still enjoy the lifestyle I want.
On average, I work 17 hours per week now at my part-time job and I am fortunate to work this job from home. During the rest of the week, I invest, blog, and work on building other income streams. Based on my experience, Barista FIRE is the perfect alternative solution to financial independence.
Keep in mind, though, that financial independence begins with putting yourself in the right financial position. To put yourself in position, simply keep your expenses low and start paying yourself first.
If you are diligent enough with your savings and if you keep your expenses low, you will begin to open up other options. Suddenly, taking on a part-time job won’t seem so intimidating.
Moreover, I would recommend that you build additional income streams by side hustling or investing. My side income streams are blogging and dividend investing.
If you keep your expenses as low as possible, pay yourself first, and build additional income streams, you will be well on your way to financial independence in no time.” – Graham at Reverse the Crush
14. Calculate your net worth.
“FIRE isn’t just for the young ones! There is a community of late starters, those of us who start on our FI path in our 40s and 50s and hope to retire early(ish).
Retiring earlier than the traditional retirement age of 65-67 is a bonus!
Start by calculating your net worth – this will tell you your financial position. For example, I discovered that the majority of my net worth was tied up in my house and superannuation (Australian retirement account).
Unfortunately, I can’t access my retirement account until aged 60. Therefore, if I aim to retire at 55, I need to start investing outside my superannuation.
The way ahead is simple, but not easy. We need to come up with extra money to invest and/or pay off our debt. The ‘formula’ is the same for everyone, regardless of age. And compound interest still works, even in our 40s and 50s.
Increase the difference between your expenses and income and invest this difference wisely.
Increasing income may be a bit difficult at our stage of life. Many of us are earning our peak incomes now. And burnout is a real concern. Negotiating a pay rise may mean more responsibilities. Taking on side hustles may not be palatable either, especially when free time is already scarce.
Reducing expenses is something we can start doing immediately – no, there is no need to eat rice and beans at every meal 🙂 But most of us have succumbed to lifestyle creep over the years. As our incomes have risen, so has our taste and lifestyle improved to match our higher incomes. Therefore, the good news is we may have a lot of expenses that we can trim.
I am a spender at heart. For me, tracking my expenses and learning to spend mindfully have made a huge difference. Learning what I value in life and what I don’t also means I am happy to spend on what brings me joy such as travel, but not on what I don’t care about such as clothes.
Taking action consistently is the most important step to reaching FI.
It is never too late to start.” – Latestarterfire
15. Look at financial independence as a journey not just the goal.
“I think that everyone should work towards financial independence, because you can’t reach the ultimate goal of financial independence without becoming more financially aware, confident, consumer debt-free, etc. When you begin to look at Financial Independence as a journey not just the goal, you’ll be able to experience financial freedom while on the journey.
You also don’t have to wait to experience joy and freedom in your life until reaching complete Financial Independence. You can decide to slow down or accelerate the time it takes to reach your goals based on the things you value, how you want to spend your money & time. If you value certain experiences and/or things, make room for it in your budget. It’s ok to spend or rather invest in the things that matter to you and investing doesn’t have to be limited to investing in the stock market or real estate market. You can reframe investing to mean you are investing in your happiness, saving time and skills. You are your best asset.” – Jamila Souffrant from Journey To Launch
16. FIRE is not a race.
“First of all, Financial independence Retire Early (FIRE) is not a race. Don’t compare your FIRE journey with other people, because everyone has different circumstances. Don’t put FIRE on a pedestal and don’t see FIRE as the end goal.
To be specific, early retirement isn’t all about travelling around the world, leaving the 9-5 rat race, saying FU to the employers, and sipping pina colada on the beach. No matter what you do and where you go in retirement, you are still you. So, if you’re not happy about your life now, reaching FIRE won’t magically make you happy. It is vitally important to work on yourself while you’re on the FIRE journey.
For FIRE, the concept is quite simple. It is all about spending less than you earn, invest the money you saved, and let that money grow. You want your money to grow and create a passive income stream. Once the passive income stream exceeds your expenses, you are financially independent and can retire early if you choose to.
Now there’s a misunderstanding that FIRE is all about penny-pinching and reduce your expenses to as low as humanly possible. But that is not true and completely unsustainable. Rather than penny-pinching, I believe in a more balanced approach. It’s OK to spend money on things that you enjoy and cut your spending on things that you do not enjoy. For example, if you like making nutritious food yourself, spend money on high-quality food. If you enjoy travelling, spend money on trips and enjoy the experience. If you don’t enjoy shopping, then cut that expense!
Again, please don’t see FIRE as a race. See FIRE as a life journey. Enjoy this journey!” – Bob from Tawcan.com
17. Focus on all aspects of your FIRE journey, not just on money.
“The nuts and bolts of financial independence include more than numbers and calculators. There are just as many personal and emotional things to figure out. So here’s our advice: Focus on all aspects of your FIRE journey, not just on money.
1. Don’t assume 4% is a safe withdrawal rate, or that someone else’s FIRE number will work for you. Build your own numbers based on your circumstances and life plans.
2. Create a personal plan for your FIRE journey and life after retirement. Think about where you’ll live, who and what your life will include, and what it will take to get there.
3. The FIRE path can be isolating. Find a community to talk to about your finances, plans, hopes and dreams, and all of your fears and concerns too. You’re going to need support and encouragement along the way.
4. Keep an open mind… All Options Considered!” – Ali & Alison Walker from All Options Considered
18. Increase your income as much as possible.
“All the frugality in the world can’t make up for an inadequate income. It’s just math: A person bringing home $25K a year is going to take longer to reach FIRE than someone making $100K a year. Even if they’re using the same hyper-frugal savings tactics to live on $15K a year! The person with the higher income is going to be able to sock away more money and benefit from compound interest on a much faster scale. So if financial independence is your goal, focus your energies on increasing your income as much as possible as quickly as possible. This isn’t to say you shouldn’t be frugal–because you absolutely should, ya filthy animal!–but you can only reduce your spending so much. Your earning potential is virtually unlimited. This is the magical truth hidden between the lines of every “How I Saved $100K in One Year” article on the interwebz.” – Kitty and Piggy, Bitches Get Riches
19. Have a goal that is not related to money.
“Set a goal that’s not money-related. Figure out what you want to retire TO and start working toward that lifestyle. Yes, you need to focus on your finances, but without a clear destination, years of saving and investing can start to feel like a slog. Having a FIRE dollar number is important, but it’s not the only thing you need to focus on. After you reach your FIRE number, you need to know what you want to do with your other precious resource: your time. Plus, putting energy into planning for, and researching, your new life is a great way to productively pass the time while you’re working toward FIRE. When you know what you want to do with your time, it becomes a lot easier to figure out what to do with your money.” Mrs. Frugalwoods, www.frugalwoods.com
20. Think about what you want your life to look like.
“Reaching FIRE looks a little different for each person, but the basics are the same. The first step is to figure out what you’d like your life to look like. Spend a little time daydreaming and what-if-ing.. Then estimate the future costs involved with the life you’d like, including healthcare. It’s smart to add in extra for uncertainty.
The more you want to spend, the bigger your FIRE number will be.
Once you have a spending number in mind, you’ll need to find a way to generate that amount each year so that Future You doesn’t need to work. You can use the Rule of 25 and the 4% Rule to get an idea of how much you might need invested and what could be a safe withdrawal rate. You can also use other types of passive income (such as rental income) to bring in money each year, which is the route I’ve gone.
If you aren’t sure how you’ll ever have enough invested, it’s ok to start small and build from there. For example, you could start by increasing the amount you send to your 401k until you’re maxing it out. Or you could make a goal to own your first rental property, and focus on setting aside money for that. Paying down debt can help as well, because it can dramatically reduce your expenses. Every little bit is a step in the right direction.” Jackie, owner of CampFIREFinance.com
21. Focus on earning more money from the start.
“The biggest piece of advice I can offer anyone working toward FIRE is that you need to focus on earning more money from the start. This is how you affect some serious change in your financial life.
Think about it like this: what expenses cost you the most money? It’s debt for a lot of people — credit cards, student loans, a mortgage, etc. Making more money is the fastest way towards paying off that debt, and once your debt is paid off, you can start putting more towards your FIRE number.
The other great thing about finding ways to make more money is that you don’t have to choose between paying off debt and investing — you can do both. So you start growing that long-term stream of wealth (investing) while also making short-term changes to save money. You’re basically attacking your finances from both ends.
I’m not against doing things that cut your weekly budget, like eating out less or cutting cable. That money adds up, but most of the people who have reached FIRE have also earned significant salaries as well. Making more money by side hustling, starting an online business, asking for a raise, etc. — those are tools to help you reach your financial goals faster.” – Bobby at Millennial Money Man
Are you interested in financial independence, retire early? What are your best early retirement tips?
Creating YouTube content is a great way to generate new clients, especially in real estate. Today’s guest, Sam Caudle, started his channel in 2021. Now, just two years later, he gets 99 percent of his business from YouTube with minimal effort and extremely low expenses. Listen and learn everything you need to know in order to start generating real estate leads from YouTube now. In addition to content ideas, Shelby and Sam discuss titles, thumbnails, video length, editing options, and more!
Listen to today’s show and learn:
About Sam Caudle [1:53]
Sam Caudle’s start in real estate [2:41]
Creating a YouTube channel for real estate leads [5:18]
How to get better with content creation [9:44]
The difference between paid leads and YouTube leads [11:22]
Tips for getting started on YouTube [13:23]
A simple formula for success with YouTube videos [14:49]
What to research before recording a real estate video [16:36]
How long your YouTube videos should be [18:32]
Two things not to do when creating YouTube content [20:07]
Why you should not edit your own videos [23:24]
Ideas for creating video thumbnails and titles [24:27]
Topics and tools for getting more views [25:46]
Time blocking video tasks to save you time and more on thumbnails [28:41]
Tips on where and how to shoot videos [32:10]
Why it’s not too late to get started with YouTube now [34:03]
How to convert viewers into subscribers and clients [36:04]
Easy ways to collaborate with editors [38:45]
Expenses to expect when starting a YouTube channel [40:15]
A mistake new YouTubers make that kills channel growth [42:31]
Sam’s plans for his YouTube channel in the future [44:03]
Doing a video series on areas in your market [47:25]
Sam’s final advice on starting a real estate YouTube channel [49:29]
Why agents should improve their skills as a storyteller [50:54]
Where to find and follow Sam Caudle [53:02]
Sam Caudle
Sam Caudle is a creative business developer, investor, and consultant. His primary focus is attracting real estate clients through a YouTube channel called, Living in Tampa, FL. Same visited 30 countries and had more than 30 jobs before he turned 30. All of these experiences are at work now as he builds his business through YouTube. Sam has many things in the works at all times. Follow Sam on YouTube and IG @thesamcaudle to see what he is up to.
Related Links and Resources:
It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email.
Demand for housing was strong in early 2020, before the COVID-19 crisis hit. Mandated shut-down measures and the fear of what COVID would do to our economy temporarily immobilized the housing market, evinced by nine weeks of declines in the weekly purchase applications data on a year-over-year basis. Then it was as if the Housing Demographic God exerted her chronokinetic powers to snap demand back to pre-COVID levels of growth. The frozen market thawed and resumed its steady pace of growth, even making up for lost time.
Instead of a housing crash, as many others predicted would be the lasting consequence of shut-down policies and massive job losses across the nation, the opposite happened as the 2020 U.S. housing market has been the most out-performing economic sector in the world.
However, we now have another issue to worry about — that home prices will accelerate too quickly, unrestrained by an increase in mortgage rates. As you can see below, we have deviated from the normal price growth that had been the trend in recent years.
My biggest fear for the housing market in years 2020-2024 was never a lack of demand, as the housing bubble boys have been trolling about the last eight years — it was an unhealthy rate of price growth due to demographics and low mortgage rates.
When demographics are good for housing, meaning we have a large number of our populace at home-buying age, demand — and thus home prices — can be moderated by higher interest rates. We were witness to this in 2018 when mortgage rates increased to 4.75%-5%, demand fell and the rate of growth of real home prices went negative, year over year.
That was then and we can clearly see this isn’t the case anymore.
Today, we have the best housing demographic patch ever recorded in U.S. history with a huge number of Americans ages 26-32 on the brink of 33 years, the median age for first-time homebuyers. I think of this group as our built-in replacement buyers. Add to this homeowners buying up and downsizing and our continuing higher-than-average number of cash buyers as a percentage of sales, and you can see how housing demand should remain stable in years 2020-2024.
We can add a new segment to this group, as some Americans are taking advantage of living in cheaper areas of the country and working from home.
The second mighty force of housing economics, mortgage rates, will likely stay low for the next several years. By “low,” I mean under 5% during the period from 2020-2024. I can’t see the 10-year yield getting above 3% for any duration during this period, unless a massive fiscal stimulus plan is implemented when people can operate freely without COVID-19 concerns. With the split House and Senate, this seems unlikely.
Lastly, I would be remiss not to mention housing tenure as a factor that can influence home prices. Longer housing tenure can facilitate lower inventory, which can drive home prices up. From 1985 to 2007, housing tenure was running at five years. Today, it is double that.
On a bright note, I do believe in years 2020-2024 we should get more move-up buyers when their current homes are not big enough for their growing families. We can add the COVID-19 variable of people wanting a bigger home to add an office space or make room for an elderly relative.
In 2020, we had a deflationary crisis here and around the world that kept bond yields and mortgage rates lower for longer than what would have happened in a typical year. When the economy improves, bond yields should rise. When rates go up, we should see a cool down in housing demand and in the rate of growth of home prices. The 10-year yield did get to 0.98% a few weeks ago after the vaccine news came out, but based on the previous cycle this yield is nowhere near the level needed to dampen demand.
When the 10-year yield went above 2.62% and reached 3.24% in the previous cycle, demand became so soft that builders paused construction until the excess inventory was sold off in 2019. Housing starts were roughly flat in 2019.
I wrote earlier this year that I would keep a watchful eye on whether the 10-year yield goes over 1.94%. Right now the 10-year is at 0.84% as I write this because we still have an economy that is hampered by COVID-19. The economy overall is not functioning anywhere near full capacity, certainly not enough to warrant a much higher 10-year yield.
This mismatch in the COVID deflationary impact toward the economy overall and the strength of the 2020 housing market due to demographics makes for a troubling formula for home price growth, which we are seeing. The recent National Association of Realtors existing home sales report showed 15.5% year-over-year growth in prices.
I am wishing for higher mortgage rates next year because this will mean the economy is improving as we finally defeat COVID-19 and we can start working to get those last 10 million unemployed Americans back to work. Higher rates will also mean cooling in the rate of growth in home prices, which we desperately need now. It isn’t good for the housing market to have real home price growth take off in an unhealthy way, ever.
The housing market is about demographics and mortgage rates. When both demographics and mortgage rates are at the best levels ever, demand is not the problem, but unhealthy home price growth can be. During this period of strong housing demographics, only two things can dampen price growth: higher rates or applying stricter lending guidelines, such as increasing the down payment to buy a home.
The chances of increasing down payment requirements are close to zero. If anything, look for the housing industry to try pass a first-time home-buyer tax credit (adding more fuel to the fire) if the 10-year yield stays below 1%. Also, look for a push to cancel student loan debt, another fiscal policy that would likely stimulate housing demand.
There is no easy fix to the recent housing price growth outside of defeating COVID-19 and getting the economy back to normal. Housing inflation is sticky and hard to get rid of when you don’t have speculation demand in the mix. We had a lot room left for home prices to catch up to per-capita income in the past few years but that is over now, as Len Kiefer, deputy chief economist at Freddie Mac so elegantly shows here.
Appropriate lending standards will prevent credit speculation from swamping the housing market, but King Demographics may make pricing too hot for many homebuyers if mortgage rates stay too low for too long. Hopefully, if I am right, once the vaccine can be distributed to more and more Americans, then bond yields will rise for the right reason as America is back and free from COVID-19.
a new study on the phenomenon, in an interview with the Washington Post.
But prioritizing the perceived preferences of the general public over personal décor desires, it turns out, is a formula for anxiety, detachment and feeling out of place in a place meant to be yours.
“It really makes people feel quite uneasy about the decisions that they make in their home, and so they’re always kind of fearful about getting it wrong,” Grant added.
Yet, the takeaway message from hit renovation shows seems clear: Unique, cluttered and unconventional spaces have less mass appeal and a lower resale value, so consider the next homeowner first when making renovations.
(HGTV did not return The Post’s request for comment.)
Of the 17 individuals who were involved in the study’s research, the majority said they wanted to be seen as a “smart homeowner who has invested in my home” and avoid distinct, potentially polarizing design choices, Grant said.
One individual told the study authors she believed the reason she’d gotten so much positive feedback on her renovated bathroom was because it looked “like a hotel.”
In another era, or to a less-conformist homeowner, this would certainly have been taken as something of a diss, a comment on the bathroom’s generic sameness.
In a world that apparently believes standardization is superior, though, it’s now a compliment.
Real estate data from Homes.com revealed Turkey and Greece as two of the most economical markets for owning a 2nd home. Analysts scoured variables from 36 developed (OECD) countries calculating the best places to get a choice home for the least money. I found the analyst’s data to be a bit deceiving. Here’s another look at what we perceive as value and affordability.
The data showed Turkey as the most affordable country for 2nd home buyers, with an average cost of $69 per square foot. Mexico placed second for affordability, with $90.10 per square foot. Russia and Latvia placed 3rd and 4th, and Greece came in 5th with an average cost per square foot of $149 dollars. Naturally, Switzerland was the costliest place for a 2nd home, with an average cost of $967 dollars per square foot.
In order to demonstrate the affordability of world properties, Homes.com factored in the cost per square foot of homes with median annual household income in each, and then applying a 3x salary multiplier to determine affordability. However, this formula is a bit overbalanced since living in places like Turkey or Greece is far cheaper than in the United States or Central European countries. Homes.com seems to have used local average incomes to determine affordability, rather than factoring in the average American’s income.
To make my point, let’s say the average income is $60,000 annually. In Greece, for instance, the average adjusted income is only about $17,000 per annum. Depending on what your idea of the perfect 2nd home is, and how long you intend to stay in the home, Greece represents a substantial value compared to anywhere in the U.S. The Homes.com report leans toward the “value” of home ownership in America, but affordability wise somebody making on a U.S. pension from a good company is better off staying in Greece, for several reasons. Factoring in relative security, Greece is a far better choice than either Latvia, Russia, or Turkey, and this is especially true here on Crete where I live. But let’s just look at income, cost of living, and the media cost of a sample property.
Let’s say your idea of a retirement or vacation home is a village house a few kilometers from the sea. The average cost of such a home across Greece is in between $57,000 and $230,000 dollars U.S. To prove my point, however, I can do a property search from here in Heraklion and find your perfect 2nd home for half of what the same home would cost in America. Let’s begin.
I assumed anyone moving to the land of the Minoans would want something a tad rustic but with all the conveniences. So, within 2 minutes on Rightmove I found this wonderful property in an area I actually am familiar with. I let the reader pan over the landscaping and the views of amazing Crete, and focus on the village Gavalohori.
Located at Cape Drapan in the Vamos municipality of the Apokoronas region, this quint village is named after the Gavalas family who lived here during the reign of the Venetians. It sits in a kind of lofty paradise within a couple of minutes of at least two of Europe’s best beaches, and just outside famous Chania. The village has about 350 full-time residents, and the history of the place is amazing. The list of the house shown is $137,500 (€120,000 euro) for about 645 square feet situated on about a tenth of an acre.
Next, I tried to find a comparable area in the United States, and I chose Yorktown, VA since I had lived there in the past. In all honesty, I could not find a comparable property at all using Homes.com. The closest thing was a little cracker box, mostly garage, in a cul-de-sac for $204,000. So, I decided to look for other areas where there might be a comparable listing. Next, I tried James Island outside of my hometown of Charleston, SC. Opps! One house on Trulia with 2 bedrooms there is $200,000 dollars. I did find a foreclosure with a muddy swamp for a front yard for $124,000 though. Sorry, I am being real here, the image is above. Moving on, I finally found something comparable. Well, at least interesting in the same way. In Fairhope, Alabama waterfront living comes at a premium, even if water moccasins roam free there. For $169,000 somebody interested in modular living with a boat slip on a canal can buy a two bedroom near Weeks Bay.
Of course, my methods here are not as scientific as the Homes.com analysis. I guess my point is that there are exceptions to all these analyses. Anyone looking for economy in a 1st or 2nd home is well advised to burn a few hours of research. I spent 20 minutes, 15 of which was in trying to find a match to an overseas property, which should tell you something. In my opinion, American homebuyers are now “conditioned” to appreciate a different visual and a separate value. Most of the homes I looked at, now that I’ve lived in Europe for some time, seem like stick houses for the three little pigs. Our housing situation in America is about curb-appeal and square footage. We want 4 bathrooms in a 2 bedroom house and a garage big enough to park two Hum Vs. If you’re looking for affordability to match your 2nd home fantasy, energy efficiency, and the fact coffee is delivered everywhere on Crete might matter.
Average rent in an exclusive area: U.S. – $3000 Greece $750 mo.
Average utilities for one person: U.S. $150 – Greece $108
Public transport (monthly pass): U.S. $70 – Greece $35
A kilogram of fresh tomatoes: U.S. $3.98 – Greece $1.64
Overall, the cost of living in the United States is 23.01% higher than in Greece. Rent, as a prime indicator, is 259.77% higher in American than in Greece (average data for all cities). In fairness, I should point out that some commodities are higher in Greece. For instance, a liter of fresh milk is about $1.64 in Greece compared to $84 cents in America. But, here on Crete, a slight alteration of lifestyle can turn a social security pension into a windfall. I know, because most of my income is from my SS.
Analysis is always tilted by the perspective of the scientists performing it. If you are looking for a 2nd home in America, you can certainly rationalize your way into that dream. But if you truly want that affordable vision of vacation paradise living, I sincerely recommend looking at markets like Costa Rica, Belize, Greece, and other relatively safe destinations where economics make sense.
Phil Butler is a former engineer, contractor, and telecommunications professional who is editor of several influential online media outlets including part owner of Pamil Visions with wife Mihaela. Phil began his digital ramblings via several of the world’s most noted tech blogs, at the advent of blogging as a form of journalistic license. Phil is currently top interviewer, and journalist at Realty Biz News.
Anxiety can be considered a disability. If you have severe anxiety symptoms that prevent you from working and you meet certain criteria, it’s possible to qualify for Social Security Disability Insurance (SSDI) benefits.
Applying for disability benefits takes time, though, and most claims are denied. To increase your chances of getting approved, you’ll need to show robust medical documentation. Consider getting an experienced disability lawyer to help you put together a strong case.
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Work accommodations for anxiety
The Americans with Disabilities Act (ADA) requires that reasonable accommodations be made in the workplace (assuming the employer is able to do so) for employees with disabilities, including mental health conditions and anxieties
. Common accommodations for workers with anxiety might include:
Quieter workplace environments.
The ability to work from home.
Flexible scheduling to allow for medical appointments.
If your employer refuses to provide reasonable accommodations for anxiety, this could be considered discrimination. If you believe you’re being discriminated against on the basis of disability, you can file a complaint with the U.S. Equal Employment Opportunity Commission within 180 days of when the discrimination occurred. You might be entitled to a remedy such as a reassignment, promotion or back pay.
What type of anxiety qualifies for disability benefits?
Your anxiety needs to be found to be a medically determinable impairment of your daily life in order to qualify as a disability for SSDI, says Amanda J. Bonnesen, an attorney with Berger and Green Attorneys at Law, an injury and disability law firm based in Pittsburgh.
The Social Security Administration’s definitions
The Social Security Administration (SSA) will first consider whether your supporting medical documentation aligns with the adult medical listing for anxiety in the SSA Blue Book
, the guide that lists medical specifications to qualify for disability.
For anxiety disorders: Patients must display several overlapping symptoms, starting with three or more of the following:
Irritability.
Difficulty concentrating.
Restlessness.
Easily fatigued.
Muscle tension.
Sleep disturbance.
For anxiety that’s medically diagnosed as agoraphobia or a panic disorder: The condition must cause a person to have a disproportionate fear or anxiety about two separate situations (like interacting with other people and using public transportation) and/or cause persistent panic attacks.
Along with those indicators, you’ll also have to show either
:
Certain functional limitations.
Or a history of having a serious or persistent anxiety disorder for at least two years and receiving treatment for it.
Your work history
If your medical records don’t exactly match the criteria in the Blue Book, the SSA will move on to analyze your work history. That usually includes consulting with vocational experts, physicians and/or therapists to formulate what they see to be a person’s functional limitations, and whether or not the condition is impacting the ability of a person to do their job.
A disability attorney will typically try to get a claim approved “by showing that even though a client is in treatment, the best functionality this person is going to have still prevents this person from attending work regularly,” Bonnesen says. “Or, if they do attend, they’re not able to stay on task, maybe requiring moments to leave work to gather themselves, or to leave altogether because of their symptoms.”
How likely is it that the SSA will approve my SSDI application?
The likelihood of your SSDI application being approved depends greatly on the details of your specific case.
For claims filed from 2010 through 2019, 31% of disabled-worker applications were granted benefits
. As of December 2021, about 4% of SSDI recipients received benefits due to “other mental disorders,” a category that includes anxiety.
“The problem is, at every stage of the game there’s a human being on the other end making that decision,” Bonnesen says. “So unfortunately, as much as they try to make it objective with rulings, laws and federal codes, there’s still a human being interpreting it. There’s no way to take the subjectivity completely out of it.”
Julie Burkett, an attorney who serves on the board of directors for the National Organization of Social Security Claimants’ Representatives (NOSSCR), says she recently had two decisions handed down regarding anxiety disorders in the same week, one that was approved and one that was denied.
The likelihood of getting a claim for anxiety approved? “It’s possible, but not a given,” she says.
SSDI benefits for anxiety
How much income a person can bring in through SSDI is dependent on several factors.
“What Social Security will do is analyze your earnings history pooled through the IRS,” Bonnesen says. Social Security then uses its own formula to calculate a monthly benefit.
Of those awarded benefits, payments typically amount to more than part-time wages but not as high as a full-time salary, Bonnesen says. In June 2023, Social Security paid approximately $1,483 per month to disabled workers
. This, it’s worth noting, is barely above the federal poverty level.
How to improve your chances of qualifying for SSDI
Applying for SSDI can be a challenging task. There are a few things you can do to help improve your chances of qualifying.
Try every recommended treatment
The SSA is looking for medical conditions where the person is doing everything medically recommended to get better and the treatments are just not helping them stabilize, says Bonnesen. Someone who drops out of treatment or only sees a primary care physician — as opposed to therapists and specialists — won’t be considered, she notes.
Communicate clearly and frequently with your medical team
Be sure to communicate all of your symptoms with your doctors and therapists.
“Don’t assume or take for granted that the first time you tell them something, that will carry through,” Bonnesen says. “Be vocal the whole time, or your records won’t reflect what you’re suffering with.”
Follow your doctor’s orders
If your doctor recommends a course of action or treatment for your condition, you’ll want it documented that you’re doing what they recommended, says Burkett.
Avoid alcohol and recreational drugs
If you drink or use recreational drugs and have anxiety, the SSA will need to determine whether you’d still suffer from anxiety without the interference of those substances. This makes the process more difficult.
Get to know the parameters for continuing to work
Anyone looking to apply for SSDI should understand the rules regarding working and receiving benefits.
“A person cannot be working full time. That’s the whole standard,” Bonnesen says. “Social Security compensates individuals who are unable to work full time, on a consistent and ongoing basis, due to a condition lasting or expected to last 12 months or longer.”
Since the application process can take a while, people can work part time, within certain limits, while waiting on their decision. That’s typically under 40 hours a week, with gross monthly earnings that are less than a certain amount. For 2023, someone earning over $1,470 per month (or $2,460 if they’re blind) won’t be considered for SSDI
.
Once your application has been accepted, there is a trial period of nine months allowed for someone to receive full benefits and test their ability to work, regardless of how much they make.
Get a lawyer
If it seems like qualifying for SSDI requires jumping through a lot of hoops, that’s because it does.
“Representation can help so much, because it allows an individual to focus on what they need to do with their health team, rather than worrying about paperwork with the administration or deadlines or gathering records,” Bonnesen says.
Look for a disability lawyer with experience working on claims like yours, with a high rate of successful outcomes. Disability lawyers work on contingency, meaning they won’t be paid unless your claim is approved. The SSA also sharply limits how much disability lawyers can charge in fees.
Frequently asked questions
If I’m denied SSDI once, can I reapply?
There are four ways to appeal an SSDI denial:
A reconsideration of your original claim by a person who was not involved with the original claim.
A hearing by an administrative law judge.
A review by the appeals council.
A federal court review, which can only take place if you disagree with the appeals council or your request was denied by them.
If you do plan to appeal a denial, you have 60 days from when you receive notification of your denial to do so.
What records do I need to share with the SSA to qualify for SSDI?
The more information you can gather to file your SSDI request, the better your chances are of succeeding.
The SSA recommends getting together a “substantial” history of treatment from your physician and qualified mental health professionals. That includes therapy notes, hospitalization records, psychological tests, reports from your doctors and, if relevant, work history reports.
What if my anxiety keeps me from being able to handle everything I need to do to apply?
Look for an experienced disability lawyer who has worked on anxiety claims in the past. They can help with meeting deadlines and completing the application process.
The Jefferson Avenue commercial district in Buffalo, New York, is anchored by a supermarket.
There are dozens of other businesses and services along the 12-block corridor — a couple of bank branches, a library, a coffee shop, gas stations, a small plaza with a dollar store and a primary care clinic and a business incubator for entrepreneurs of color.
But Tops Friendly Markets, the only grocery store on Buffalo’s vast East Side, is the center of activity. More than just a place to buy food, pick up medications and use an ATM, the store is a communal gathering space in a predominantly Black neighborhood that, for generations, has been segregated, isolated and disenfranchised from the wealthier — and whiter — parts of the city.
Which explains how it came to be the site of a mass shooting on a spring day in May of last year. On that Saturday, a gunman, who lived 200 miles away in another part of the state, drove to Jefferson Avenue and went into Tops, and in just a few minutes killed 10 people, injured three and inflicted mass trauma across the community.
It is a scenario that has sadly, and repeatedly, played out in other parts of the country that have experienced mass shootings. But this one came with a twist: The gunman’s intention was to kill as many Black people as possible.
To achieve that, he specifically targeted a ZIP code with one of the highest percentages of Black residents in New York state. All 10 who died that day were Black.
“The mere fact that someone can research, ‘Where will the greatest number of Black people be … on a Saturday morning,’ that’s not by chance,” said Franchelle Parker, a community organizer and executive director of Open Buffalo, a nonprofit focused on racial, economic and ecological justice. “That’s not a mistake. It’s a community that’s been deeply segregated for decades.”
The day of the shooting, Parker, who grew up in nearby Niagara Falls, was driving to Tops, where she planned to buy a donut and an unsweetened iced tea before heading into the Open Buffalo office, which is located a block away from Tops. The mother of two had intended to complete the mundane task of cleaning up her desk — “old coffee cups and stuff” — after a busy week.
She saw the news on Twitter and didn’t know if she should keep driving to Jefferson Avenue or turn around and go back home. She eventually picked the latter.
When she showed up the next day, there were thousands of people grieving in the streets. “The only way that I could explain my feeling, it was almost like watching an old war movie when a bomb had gone off and someone’s in, like, shell shock. That’s how it felt,” said Parker, vividly recounting the community’s collective trauma in a meeting room tucked inside of Open Buffalo’s second-story office on Jefferson Avenue.
Almost immediately following the May 14, 2022, massacre, which was the second-deadliest mass shooting in the United States last year, conversations locally and nationally turned to the harsh realities of the East Side and how long-standing factors that affect the daily life of residents — racism, poverty and inequity — made the community an ideal target for a white supremacist.
Now, more than a year after the tragedy, there is growing concern that not enough is being done fast enough to begin to dismantle those factors. And amid those conversations, there are mounting calls for the banking industry — whose historical policies and practices helped cement the racial segregation and disinvestment that ultimately shaped the East Side — to leverage its collective power and influence to band together in an effort to create systemic change.
The ideas about how banks should support the East Side and better embed themselves in the neighborhood vary by people and organizations. But the basic argument is the same: Banks, in their role as financiers and because of the industry’s history of lending discrimination, are obligated to bring forth economic prosperity in disinvested communities like the East Side.
I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.
Chiwuike Owunwanne, corporate responsibility officer at KeyBank
“Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that,” said The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity, a four-year-old enterprise focused on racial, geographic and economic health disparities. “But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.”
To be sure, banks’ ability to reverse the course of the community isn’t guaranteed — and there is no formula to determine how much accountability they should hold to fix deeply entrenched problems like racism. Several Buffalo-area bankers said that while the Tops shooting heightened the urgency to help the East Side, the industry itself cannot be the sole driver of change.
“There are a lot of institutions … that can certainly play a part in reversing the challenges that we see today,” said Chiwuike “Chi-Chi” Owunwanne, a corporate responsibility officer at KeyBank, the second-largest bank by deposits in Buffalo. “I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.”
A long history of segregation
How the East Side — and the Tops store on Jefferson Avenue — became the destination for a racially motivated mass murderer is a story about racism, segregation and disinvestment.
Even as it bears the nickname “the city of good neighbors,” Buffalo has long been one of the most racially segregated cities in the United States. Of the 114,965 residents who live on the East Side, 59% are Black, according to data from the 2021 U.S. Census American Community Survey. The percentage is even higher in the 14208 ZIP code, where the Tops store is located. In that ZIP code, among 11,029 total residents, nearly 76% are Black, the census data shows.
The city’s path toward racial segregation started in the early 20th century when a small number of job-seeking Black Americans migrated north to Buffalo, a former steel and auto manufacturing hub at the far northwestern end of New York state. Initially, they moved into the same neighborhoods as many of the city’s poorer immigrants and lived just east of what is today the city’s downtown district. As the number of Blacks arriving in Buffalo swelled in the 1940s, they were increasingly confronted with various housing challenges, including racist zoning laws and restrictive deed covenants that kept them from buying homes in more affluent white areas.
Black Buffalonians also faced housing discrimination in the form of redlining, the practice of restricting the flow of capital into minority communities. In 1933, as the Great Depression roiled the economy, a temporary federal agency known as the Home Owners’ Loan Corporation used government bonds to buy out and refinance mortgages of properties that were facing or already in foreclosure. The point was to try to stabilize the nation’s real estate market.
As part of its program, HOLC created maps of American cities, including Buffalo, that used a color coding scheme — green, blue, yellow and red — to convey the perceived riskiness of making loans in certain neighborhoods. Green was considered minimally risky; other areas that were largely populated by immigrant, Black or Latino residents were labeled red and thus determined to be “hazardous.”
“The goal was to free up mortgage capital by going to cities and giving banks a way to unload mortgages, so they could turn around and make more mortgage loans,” said Jason Richardson, senior director of research at the National Community Reinvestment Coalition, an association of more than 750 community-based organizations that advocates for fair lending. “It was kind of a radical concept and it has evolved over the decades into our modern mortgage finance system.”
The Federal Housing Administration, which was established as a permanent agency in 1934, used similar methods to map urban areas and labeled neighborhoods from “A” to “D,” with “A” considered to be the most financially stable and “D” considered the least. Neighborhoods that were largely Black, even relatively stable ones, were put in the “D” category.
The result was that banks, which wanted to be able to sell mortgage loans to the FHA, were largely dissuaded from making loans in “risky” areas. And Buffalo’s East Side, where the majority of Blacks were settling, was deemed risky. Unable to get loans, Blacks couldn’t buy homes, start businesses or build equity. At the same time, large industrial factories on the East Side were closing or moving away, limiting job opportunities and contributing to rising poverty levels.
“Today what we’re left with is the residue of this process where we’ve enshrined … a pattern of economic segregation that favors neighborhoods that had fewer Black people in them and generally ignores neighborhoods that had African Americans living in them,” Richardson said.
Case in point: Research by the National Community Reinvestment Coalition shows that three-quarters of neighborhoods that were once redlined are low- to moderate-income neighborhoods today, and two-thirds of them are majority minority communities.
Adding to the division between Blacks and whites in Buffalo was the construction of a highway called the Kensington Expressway. Built during the 1960s, the below-grade, limited-access highway proved to be a speedy way for suburban workers to get to their downtown jobs. But its construction cut off the already-segregated East Side even more from other parts of the city, displacing residents, devaluing houses and destroying neighborhoods and small businesses.
As a result of those factors and more, many Black residents have become “trapped” on the East Side, according to Dr. Henry Louis Taylor Jr., a professor of urban and regional planning at the University at Buffalo. In 1987, Taylor founded the UB Center for Urban Studies, a research, neighborhood planning and community development institute that works on eliminating inequality in cities and metropolitan regions. In September 2021, eight months before the Tops shooting, the Center for Urban Studies published a report that compared the state of Black Buffalo in 1990 to present-day conditions. The conclusion: Nothing had changed for Blacks over 31 years.
As of 2019, the Black unemployment rate was 11%, the average household income was $42,000 and about 35% of Blacks had incomes that fell below the poverty line, the report said. It also noted that just 32% of Blacks own their homes and that most Blacks in the area live on the East Side.
“Those figures remain virtually unchanged while the actual, physical conditions that existed inside of the community worsened,” Taylor told American Banker in an interview in his sun-filled office at the center, located on the University at Buffalo’s city campus. “When we looked upstream to see what was causing it, it was clear: It was systemic, structural racism.”
Banks’ moral obligations
As the East Side struggled over the decades with rampant poverty, dilapidated housing, vacant lots and disintegrating infrastructure, banks kept a physical presence in the community, albeit a shrinking one. In mid-2000, there were at least 20 bank branches scattered across the East Side, but by mid-2022, the number had fallen to around 14, according to the Federal Deposit Insurance Corp.’s deposit market share data. The 14 include four new branches that have opened since early 2019 — Northwest Bank, KeyBank, Evans Bank and BankOnBuffalo.
The first two branches, operated by Northwest in Columbus, Ohio, and KeyBank, the banking subsidiary of KeyCorp in Cleveland, were requirements of community benefits agreements negotiated between each bank and the National Community Reinvestment Coalition. In both cases, Northwest and KeyBank agreed to open an office in an underserved community.
Evans Bank opened its first East Side branch in the fall of 2021. The office is located in the basement of an $84 million affordable senior housing building that was financed by Evans, a $2.1 billion-asset community bank headquartered south of Buffalo in Angola, New York.
Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that. But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.
The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity
On the community and economic development front, banks have had varying levels of participation. Buffalo-based M&T Bank, which holds a whopping 64% of all deposits in the Buffalo market and is one of the largest private employers in the region, has made consistent investments in the East Side by supporting Westminster Community Charter School, a kindergarten through eighth-grade school, and the Buffalo Promise Neighborhood, a nonprofit organization focused on improving access to education in the city’s 14215 ZIP code.
Currently, Buffalo Promise Neighborhood operates four schools. In addition to Westminster, it runs Highgate Heights Elementary, also K-8, as well as two academies that serve children ages six weeks through pre-kindergarten. Twelve M&T employees are dedicated to the program, according to the Buffalo Promise Neighborhood website. The bank has invested $31.5 million into the program since its 2010 launch, a spokesperson said.
Other banks are making contributions in other ways. In addition to the Jefferson Avenue branch and as part of its community benefits plan, Northwest Bank, a $14.2 billion-asset bank, supports a financial education center through a partnership with Belmont Housing Resources of Western New York. Meanwhile, the $198 billion-asset KeyBank gave $30 million for bridge and construction financing for Northland Workforce Training Center, a $100 million redevelopment project at a former manufacturing complex on the East Side that was partially funded by the state.
BankOnBuffalo’s East Side branch is located inside the center, which offers KeyBank training in advanced manufacturing and clean energy technology careers. A subsidiary of $5.6 billion-asset CNB Financial in Clearfield, Pennsylvania, BankOnBuffalo’s office opened a month after the shooting. The timing was coincidental, but important, said Michael Noah, president of BankOnBuffalo.
“I think it just cemented the point that this is a place we need to be, to be able to be part of these communities and this community specifically, and be able to build this community up,” Noah said.
In terms of public-private collaboration, some banks have been involved in a deeper way. In 2019, New York state, which had already been pouring $1 billion into Buffalo to help revitalize the economy, announced a $65 million economic development fund for the East Side. The initiative is focused on stabilizing neighborhoods, increasing homeownership, redeveloping commercial corridors including Jefferson Avenue, improving historical assets, expanding workforce training and development and supporting small businesses and entrepreneurship.
In conjunction with the funding, a public-private partnership called East Side Avenues was created to provide capital and organizational support to the projects happening along four East Side commercial corridors. Six banks — Charlotte, North Carolina-based Bank of America, the second-largest bank in the nation with $2.5 trillion of assets; M&T, which has $203 billion of assets; KeyBank; Warsaw, New York-based Five Star Bank, which has about $6 billion of assets; Northwest and Evans — are among the 14 private and philanthropic organizations that pledged a combined $8.4 million to pay for five years’ worth of operational support, governance and finance, fundraising and technical assistance to support the nonprofits doing the work.
Laura Quebral, director of the University at Buffalo Regional Institute, which is managing East Side Avenues, said the banks were the first corporations to step up to the request for help, and since then have provided loans and other products and education to keep the program moving.
Their participation “is a signal to the community that banks cared and were invested and were willing to collaborate around something,” Quebral said. “Being at the table was so meaningful.”
Richard Hamister is Northwest’s New York regional president and former co-chair of East Side Avenues. Hamister, who is based in Buffalo, said banks are a “community asset” that have a responsibility to lift up all communities, including those where conditions have arisen that allow it to be a target of racism like the East Side.
“We operate under federal charters, so we have an obligation to the community to not only provide products and services they need but also support when you go through a tragedy like that,” Hamister said. “We also have a moral obligation to try to help when things are broken … and to do what we can. We can’t fix everything, but we’ve got to fix our piece and try to help where we can.”
In the wake of a tragedy
After the massacre, there was a flurry of activity within banks and other organizations, local and out-of-town, to respond to the immediate needs of East Side residents. With the community’s only supermarket closed indefinitely, much of the response centered around food collection and distribution. Three of M&T’s five East Side branches, including the Jefferson Avenue branch across the street from Tops, became food distribution sites for weeks after the shooting. On two consecutive Fridays, Northwest provided around 200 free lunches to the community, using a neighborhood caterer who is also the bank’s customer. And BankOnBuffalo collected employee donations that amounted to more than 20 boxes of toiletries and other items that were distributed to a nonprofit.
At the same time, M&T, KeyBank and other banks began financial donations to organizations that could support the immediate needs of the community. KeyBank provided a van that delivered food and took people to nearby grocery stores. Providence, Rhode Island-based Citizens Financial Group, whose ATM inside Tops was inaccessible during the store’s temporary closure, installed a fee-free ATM near a community center located about a half-mile north of Tops, and later put a permanent ATM inside the center that remains there today. And M&T rolled out a short-term loan program to provide capital to East Side small-business owners.
One of the funds that benefited from banks’ support was the Buffalo Together Community Response Fund, which has raised $6.2 million to address the long-term needs of the East Side.
Bank of America and Evans Bank each donated $100,000 to the fund, whose list of major sponsors includes four other banks — JPMorgan Chase, Citigroup, M&T and KeyBank. Thomas Beauford Jr., a former banker who is co-chair of the response fund, said banks, by and large, directed their resources into organizations where the dollars would have an immediate impact.
“Banks said, ‘Hey, you know … it doesn’t make sense for us to try to build something right now. … We will fund you in the work you’re doing,'” said Beauford, who has been president and CEO of the Buffalo Urban League since the fall of 2020. “I would say banks showed up in a big way.”
Fourteen months later, banks say they are committed to playing a positive role on the East Side. For the second year, KeyBank is sponsoring a farmers’ market on the East Side, an attempt to help fill the food desert in the community. Last fall, BankOnBuffalo launched a mobile “bank on wheels” truck that’s stationed on the East Side every Wednesday. The 34-foot-long truck, which is staffed by two people and includes an ATM and a printer to make debit cards, was in the works before the shooting, and will eventually make four stops per week around the Buffalo area.
Evans has partnered with the city of Buffalo to construct seven market-rate single family homes on vacant lots on the East Side. The relationship with the city is an example of how banks can pair up with other entities to create something meaningful and lasting, more than they might be able to do on their own, said Evans President and CEO David Nasca.
The bank has “picked areas” where it can use its resources to make a difference, Nasca said.
“I don’t think the root causes can be ameliorated” by banks alone, he said. “We can’t just grant money. It has to be within our construct of a financial institution that invests and supports the public-private partnership. … All the oars [need to be] pulling together or this doesn’t work.”
‘Little or no engagement with minorities’
All of these efforts are, of course, welcomed by the community, but there is still criticism that banks haven’t done enough to make up for their past contributions to segregating the city. And perhaps more importantly, some of that criticism centers on banks failing to do their most basic function in society — provide credit.
In 2021, the New York State Department of Financial Services issued a report about redlining in Buffalo. The regulator looked at banks and nonbank lenders and found that loans made to minorities in the Buffalo metro area made up 9.74% of total loans in Buffalo. Overall, Black residents comprise about 33% of Buffalo’s total population of more than 276,000, census data shows.
The department said its investigation showed the lower percentage was not due to “excessive denials of loan applications based on race or ethnicity,” but rather that “these companies had little or no engagement with minorities and generally made scant effort to do so.”
“The unsurprising result of this has been that few minority customers or individuals seeking homes in majority-minority neighborhoods have made loan applications … in the first instance.”
Furthermore, accusations of redlining persist today, even though the practice of discriminating in housing based on race was outlawed by the Fair Housing Act of 1968.
In 2014, Evans was accused of redlining by the New York State Attorney General, which said the community bank was specifically avoiding making mortgage loans on the East Side. The bank, which at the time had $874 million of assets, agreed to pay $825,000 to settle the case, but Nasca maintains that the charges were unfounded. He points to the fact that the bank never had a fair lending or fair housing violation, no specific incidents were ever claimed and that the bank’s Community Reinvestment Act exam never found evidence of discriminatory or illegal credit practices.
The bank has a greater presence on the East Side today, but that’s because it has grown in size, not because it is trying to make up for previous accusations of redlining, he said.
“Ten years ago, our involvement [on the East Side] certainly wasn’t what you’re seeing today,” Nasca said. “We were looking to participate more, but we were participating within our means and our reach. As we have grown, we have built more resources to be able to do more.”
Shortly after accusations were made against Evans, Five Star Bank, the banking arm of Financial Institutions in Warsaw, New York, was also accused of redlining by the state Attorney General. Five Star, which has been growing its presence in the Buffalo market for several years, wound up settling the charges for $900,000 and agreeing to open two branches in the city of Rochester.
KeyBank is currently being accused of redlining by the National Community Reinvestment Coalition. In a 2022 report, the group said that KeyBank is engaging in systemic redlining by making very few home purchase loans in certain neighborhoods where the majority of residents are Black. Buffalo is one of several cities where the bank’s mortgage lending “effectively wall[ed] out Black neighborhoods,” especially parts of the East Side, the report said.
KeyBank denied the allegations. In March, the coalition asked regulators to investigate the bank’s mortgage lending practices.
Beyond providing more credit, some community members believe that banks should be playing a larger role in addressing other needs on the East Side. And the list of needs runs the gamut from more grocery stores to safe, affordable housing to infrastructure improvements such as street and sidewalk repairs.
Alexander Wright is founder of the African Heritage Food Co-op, an initiative launched in 2016 to address the dearth of grocery store options on the East Side, where he grew up. Wright said that while banks’ philanthropic efforts are important, banks in general “need to be in a place of remediation” to fix underlying issues that the industry, as a whole, helped create. (After publication of this story, Wright left his job as CEO of the African Heritage Food Co-Op.)
Aside from charitable donations, banks should be finding more ways to work directly with East Side business owners and entrepreneurs, helping them with capital-building support along the way, Wright said. One place to start would be technical assistance by way of bank volunteers.
“Banks are always looking to volunteer. ‘Hey, want to come out and paint a fence? Want to come out and do a garden?'” Wright said. “No. Come out here and help Keshia with bookkeeping. Come out here and do QuickBooks classes for folks. Bring out tax experts. Because these are things that befuddle a lot of small businesses. Who is your marketing person? Bring that person out here. Because those are the things that are going to build the business to self-sufficiency.
“Anything short of the capacity-building … that will allow folks to rise to the occasion and be self-sufficient I think is almost a waste,” Wright added. “We don’t need them to lead the plan. What we need them to do is be in the community and [be] hearing the plan and supporting it.”
Parker, of Open Buffalo, has similar thoughts about the role that banks should play. One day, soon after the massacre, an ATM appeared down the street from Tops, next to the library that sits across the street from Parker’s office. Soon after the ATM was installed, Parker began fielding questions from area residents who were skeptical of the machine and wanted to know if it was legitimate. But Parker didn’t have any information to share with them. “There was no outreach. There was no community engagement. So I’m like, ‘Let me investigate,'” she said. “I think that’s a symptom of how investment is done in Black communities, even though it may be well-intentioned.”
As it turns out, the temporary ATM belonged to JPMorgan Chase. The megabank has had a commercial banking presence in Buffalo for years, but it didn’t operate a retail branch in the region until last year. Today it has four branches in operation and plans to open another two by the end of the year, a spokesperson said.
After the Tops shooting, the governor’s office reached out to Chase asking if the bank could help in some way, the spokesperson said in response to the skepticism. The spokesperson said that while the Chase retail brand is new to the Buffalo region, the company has been active in the market for decades by way of commercial banking, private banking, credit card lending, home lending and other businesses.
In addition to the ATM, the bank provided funding to local organizations including FeedMore Western New York, which distributes food throughout the region.
“We are committed to continuing our support for Buffalo and helping the community increase access to opportunities that build wealth and economic empowerment,” the spokesperson said in an email.
In the year since the massacre, there has been some progress by banks in terms of their interest in listening to the East Side community and learning about its needs, said Nicholas. But he hasn’t felt an air of urgency from the banking community to tackle the issues right now.
“I do experience banks being a little more open to figuring out what their role is, but it’s slow. It’s slow,” said Nicholas. The senior pastor of the Lincoln Memorial United Methodist Church, located about a mile north from Tops, Nicholas is part of a 13-member local advisory committee for the New York arm of Local Initiatives Support Coalition, or LISC. The group is focused on mobilizing resources, including banks, to address affordable housing in Western New York, specifically in the inner city, as well as training minority developers and connecting them to potential investors, Nicholas said.
Of the 13 members, seven are from banks — one each from M&T, Bank of America, BankOnBuffalo, Evans and KeyBank, and two members from Citizens Financial Group. One of the priorities of LISC NY is health equity, and the fact that banks are becoming more engaged in looking at health disparities is promising, Nicholas said. Still, they have more work to do, he said.
“I need them to think more on how to strengthen and build the economy on the East Side and provide leadership around that, not only to provide charitable things, but using sound business and banking and community development principles to say, ‘OK, if we’re going to invest in this community, these are the types of things that need to happen in this community,’ and then encourage their partners and other people they work with … to come fully in on the East Side.”
Some bankers agree with the community activists.
“Putting a branch in is great. Having a bank on wheels is great,” said Noah of BankOnBuffalo. “But if you’re not embedded in the community, listening to the community and trying to improve it, you’re not creating that wealth and creating a better lifestyle for everyone.”
What could make a substantial difference in terms of banks’ impact on the community is a combination of collaboration and leadership, said Taylor. He supports the idea of banks leading the charge on the creation of a comprehensive redevelopment and reinvestment plan for the East Side, and then investing accordingly and collaboratively through their charitable foundations.
“All of them have these foundations,” Taylor said. “You can either spend that money in a strategic and intentional way designed to develop a community for the existing population, or you can spend that money alone in piecemeal, siloed, sectorial fashion that will look good on an annual report, but won’t generate transformational and generational changes inside a community.”
Banks might be incentivized to work together because it could mean two things for them, according to Taylor: First, they’d have an opportunity to spend money in a way that would have maximum impact on the East Side, and second, if done right, the city and the banks could become a model of the way to create high levels of diversity, equity and inclusion in an urban area.
“If you prove how to do that, all that does is open up other markets of consumption all over the country because people want to figure out how to do that same thing,” Taylor said.
Some of that is already happening, at least on a bank-by-bank case, said KeyBank’s Owunwanne. Through the KeyBank Foundation, the company is able to leverage different relationships that connect nonprofits to other entities and corporations that can provide help.
“I see this as an opportunity for us to make not just incremental changes, but monumental changes … as part of a larger group,” Owunwanne said “Again, I say that not to absolve the bank of any responsibility, but just as a larger group.”
Downstairs from Parker’s office, Golden Cup Coffee, a roastery and cafe run by a husband and wife team, and some other Jefferson Avenue businesses are trying to build up a business association for existing and potential Jefferson-area businesses. Parker imagined what the group could accomplish if one of the banks could provide someone on a part-time basis to facilitate conversations, provide administrative support and coordinate marketing efforts.
“In the grand scheme of things, when we’re talking about a multimillion dollar [bank], a part-time employee specifically dedicated to relationship-building and building out coalitions, it sounds like a small thing,” Parker said. “But that’s transformational.”
While it is commonly assumed that paying off debt will always result in a positive impact on one’s credit score, this is not always the case. In fact, sometimes paying off a debt will lead to a drop in the score which can be a damper if you don’t understand why.
Typically, your credit score is a result of more than just your payment history. There’s a formula that assigns a specific weight to each factor. The FICO score, used in making the majority of lending decisions, assigns 35% to payment history, 30% to outstanding debts, 15% to length of credit history, 10% to credit mix, and 10% to new credit.
Although paying off debt is a step in the right direction, it may not help improve your score immediately if you impact the credit mix, credit utilization, or length of payment history.
Below are possible scenarios why paying off debt didn’t improve your credit score
Interference with the Credit Mix
Credit mix refers to the different types of credit accounts you have, like credit cards, car loans, or mortgages. It’s important to have a mix of many accounts to keep your credit score healthy.
For example, having a credit card, a car loan, and a mortgage shows that you can handle different types of credit, which is a plus for your creditworthiness. However, if you pay off your credit card balance and close the account, your credit mix will be impacted because you’ll have one fewer type of credit account.
So, even though paying off your credit card debt is a good thing, closing the account could have a negative impact on your credit mix and, ultimately, your credit score.
Increased Credit Utilization Ratio
Your credit utilization ratio is the amount of credit you’re using compared to how much credit you have available. For example, suppose your credit cards have a combined credit limit of $20,000, and you owe $5,000, then your credit utilization ratio would be 25% ($5,000 ÷ $20,000).
Paying off your credit card balances usually boosts your credit score. However, it’s important to be aware that if you close a credit card account after paying it off, and continue to spend the same amount, your credit utilization rate could increase because you’ll have less available credit.
In this case, let’s say you pay off and close two credit cards with a total credit limit of $5,000. Your available credit will decrease to $15,000. If you utilize $5000, your credit utilization rate increases to 33% ($5,000/$15,000). This increase in credit utilization could potentially lower your credit score.
Reduced Length of Credit History
The length of your credit history is calculated using:-
How long each of your credit accounts has been opened and their average age.
The length of time since those accounts have been on your credit report.
The last account activity.
The length of your credit history is an important factor in your credit score because it demonstrates your ability to manage credit over time. Lenders prefer borrowers who have a long and stable credit history because it indicates a lower risk of defaulting on loans.
So, if you pay off a debt and close an account, and especially if it happens to be one of your older accounts, it can potentially have a negative impact on your credit score because it reduces the average age of your accounts.
In Conclusion
Ultimately, paying off debt is one great move towards repairing your financial health. That said, you might not immediately notice the benefits where the credit score is concerned. Understanding how the factors outlined above affect your credit score will help you make better decisions and anticipate their results beforehand.
To help improve your credit score eventually, you need to prevent the entry of new negative information on your credit report. You can do this by paying your bills on time, keeping your credit card debt low, and avoiding new credit unless it is necessary.
Carry trade is a strategy used by some traders who invest in currency markets to take advantage of differences in interest rates. In a carry trade, an investor buys or borrows a security or asset at a low interest rate, and then uses it to invest in another security or asset that provides a higher rate of return.
Carry trades have some clear uses in the foreign exchange market, or “forex” market. Given that they can be used to drive returns, they can be important for investors of all stripes to understand.
What Is a Carry Trade?
In a carry trade, forex traders borrow money at a low interest rate in order to invest it in an asset with a higher rate of return. In the forex markets, the currency carry trade is a bet that one foreign currency will hold or increase its value relative to another currency.
Of course, this investing strategy hinges on whether or not interest rates and exchange rates are in the traders’ favor. The wider the exchange rate between two currencies, the better the potential returns for the investor.
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Even so, a carry trade strategy can be a relatively simple way to increase an investor’s returns, assuming they understand the difference in interest rates. In that way, it’s similar to understanding “spread trading” as they relate to stocks. 💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.
How Do You Execute a Carry Trade?
Executing a carry trade can seem nebulous without an example. Here’s a runthrough.
Carry Trade Example
Imagine that the U.S. dollar has a 1% interest rate, but the British pound has a 2% interest rate. A trader could take 100 U.S. dollars, and then invest that 100 dollars into the equivalent number of pounds (according to the exchange rate), and earn a higher return in interest. The discrepancy in interest rates allows traders to take advantage and earn higher returns.
This is a rather simplistic carry trade example, professional traders and investors can engage in complex carry trade strategies, and even employ the use of a carry trade formula to help them figure out expected returns, and whether the strategy is worth pursuing in a given situation.
Rather than simply buying one currency with another, traders often execute a carry trade that involves borrowing money in one currency and using it to purchase assets in another currency. In this scenario, traders want to borrow the money at the lowest possible interest rate, and do so using a weak or declining currency.
That can create higher profits when they close the deal and pay back the borrowed money. In general, carry trade is a short-term strategy, rather than one focused on the long-term.
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Is a Carry Trade Risky?
The concept of a carry trade is simple, but in practice, it can involve investment risk.
Most notably, there’s the risk that the currency or asset a trader is investing in (the British pounds in our previous example) could lose value. That could put a damper on a trader’s expected returns, as it would eat away at the gains the difference in interest rates could provide. Currency prices tend to be very volatile, and something as mundane as a monthly jobs report released by a government can cause big price changes.
The greater the degree of leverage an investor uses to execute a carry trade, the higher the potential returns — and the larger the risk. In addition to currency risk, the carry trade is subject to interest rate risk. Given the risks, carry trades in the currency markets may not be the most appropriate strategy for investors with a low tolerance for risk. 💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.
The Takeaway
Carry trades are one way for investors or traders to generate returns, although the approach involves some risks that aren’t present in other types of investment strategies. While the carry trade concept is straightforward, it can quickly get complex when institutional investors put it in place.
Carry trades can be advanced trading tools or strategies. For that reason, they may not be appropriate for all investors or traders. If you feel like you’re in over your head, it may be a good idea to speak with a financial professional for guidance, or to do some more homework to further your understanding.
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