Save more, spend smarter, and make your money go further
Are you tired of having credit card bills? Do you wish you could get out of debt once and for all?
If you want get out of debt permanently, first consider this: Debt is not a financial problem. Hard to believe, but true.
Debt is actually a personal problem that masquerades in financial clothing. That is why so many people have persistent problems with debt. They look outward for financial solutions, when the true solution is found by looking inward.
Planning a Permanent Debt Solution
Defining your debt problem correctly is critical to solving it.
That is where most debtors run into trouble. They mistakenly define debt as a financial problem and develop financial solutions. That is why their debt returns shortly after paying it off. They fail to identify the root cause of debt, opening the door to repeating the vicious cycle.
For a debt solution to be effective your plan of attack needs to be based on principles that actually work. Unfortunately, when you just pay off your balances you relieve the pain, but the underlying condition that put you in debt in the first place still lurks under the surface, ready to return.
Let’s face it, the real causes of overspending are your personal habits and attitudes. In other words, the true solution is personal — not financial. That is a key, and understanding this principle is what will make or break your success in slaying the debt monster for good.
Masking The Problem
When you get a headache what is the logical response? You reach to the medicine cabinet for immediate pain relief. Unfortunately, the various pills do nothing to cure the underlying disease: they merely treat the symptom. The cause could be excessive stress, brain cancer, dehydration, eye strain, or any number of other issues. By taking a pill you’ve treated the symptom — not the underlying cause.
The same is true with debt. Everyone knows they need to make more and spend less to solve their debt problems. So they pursue financially driven solutions to relieve financial symptoms. It seems logical on the surface.
Whether you choose to consolidate your credit card debt to lower interest rates or you choose any of the quick-payoff strategies (inheritance, gift, sell an asset, bankruptcy, home equity line of credit, or refinancing), the reality is you are treating the symptom and not creating a lasting cure.
Your financial problems are merely the accumulated reflection of the many small financial mistakes you are making on a daily basis — often without knowing any better. That’s why teaching a debtor to spend less and earn more is like telling someone to lose weight by eating less and exercising more. Everyone already knows that is the answer. The difficult part is not knowing what to do, but actually getting it done. The solution lies in your daily habits and attitudes.
[Related Article: 3 People Who Dug Out of Deep Debt]
Money Breakthroughs
I first discovered this approach to debt recovery in my work as a money coach. I started out making the same mistakes as everyone else. I thought debt problems were financial, so I coached my clients to financial solutions. The lackluster results proved it was the wrong approach.
The breakthrough came when I noticed my wealthy clients had mirror opposite attitudes and behaviors compared to my get-out-of-debt clients. For example:
My wealthy clients viewed their financial situation from a position of self-responsibility, whereas my debt clients were victims of their finances.
My wealthy clients planned their finances, but my debt clients had no plan.
My wealthy clients organized their plans around delayed gratification, whereas my debt clients pursued instant gratification.
My wealthy clients associated their self-worth with intrinsic values, while my debt clients associated self-worth with extrinsic stuff.
These are just 4 examples from a long list of opposing traits. They are guidelines or tendencies that generally hold true. While there may be personal variation, on the whole the patterns were unmistakable. These mirror opposite attitudes produced mirror opposite financial results in life.
[Related Article: 7 Ways to Avoid a Debt Relapse]
Amazingly,when I applied these principles, coaching habitudes instead of specific financial actions, the debt problems solved themselves over time.
This is obvious when you think about it. Your daily financial decisions result from your habits and attitudes that drive those decisions. For example, consider the following choices and their obvious financial implications:
Do you buy fancy coffees throughout the day or do you make a pot of your favorite coffee in the morning and bring it with you?
Do you lease a new car every few years or maintain your reliable used car?
Do you dine out frequently or cook healthy meals at home?
Are you a minimalist or do you desire the latest designer fashions?
Do you shop to get what you need or do you shop for pleasure and recreation?
When you focus on financial solutions, you treat the symptom instead of the cause. When you focus on your attitudes and habits, you focus on the cause, and the symptom takes care of itself automatically without any self-discipline.
Let me be clear — this isn’t a quick fix. The results you produce from this approach will occur gradually over time. Just as it took time to accumulate the debt, it takes time to unwind it when you work with root causes.
However, the solutions are as permanent as the new attitudes and habits you adopt — and that makes all the difference.
The truth is the financial results of your life aren’t dependent upon how much money you make. Instead, they depend on how well you manage the money you already have. This article series will show you the easiest way to adopt wealthy habits and attitudes and be smarter with your money so that you can get out of debt — permanently.
[Related Article: 5 Ways to Get Out of Debt: Which Will Work for You?]
Todd Tresidder is a financial coach and consumer advocate. His unconventional take on worn financial topics has appeared in the Wall Street Journal, Investor’s Business Daily, Smart Money magazine, Yahoo Finance, and more. He’s authored 5 financial education books including How Much Money Do I Need To Retire?, Variable Annuity Pros and Cons, and the 4% Rule and Safe Withdrawal Rates In Retirement.
Save more, spend smarter, and make your money go further
Previous Post
4 Questions to Ask Yourself Before Investing in Home Improvements
Next Post
From Stoked to Broke: Why Are So Many Professional Athletes…
Browse Related Articles
Financial Planning
In Debt…Again? How to Break the Borrowing Cycle
Credit Info
Top 5 Mistakes Consumer Make While Managing Debt
Financial Planning
The Secret to Getting Out of Debt
How the Euro Debt Crisis May Impact You
European Spotlight: The Potential Consequences (Part 3)
Credit Info
The Worst Kind of Debt to Carry Is…
Financial Planning
Which Debt Should I Pay Off First?
How to Decide if You Should Pay Off Your Debt Or Invest
Personal Finance
Expert Interview with Dominique Brown on Personal Finan…
Shortly after my daughter, now 14, was born, I got the best advice: “Travel with her soon, ideally when she’s 6 or 7 months. That’s old enough to be engaged but young enough to be portable.”
My wife and I soon whisked her off to Amsterdam. We strolled along canals, sipped white beers with lunch, and explored art and history museums. Contrary to what many new parents believe, it could not have been better timing.
Pros and Cons of Traveling With a Baby
The most obvious perk of traveling with a baby: You don’t need to pay for their airplane seat until they reach age two! Besides that, the upsides and downsides depend on your approach to parenting.
Generally speaking, traveling around the 6-month mark is mostly positive. Before babies start crawling, they don’t struggle to be put down or need a baby-proofed hotel room in which to roam. You can ditch the stroller and opt for a carrier as you explore, and the baby can either nap or observe the scenery.
There’s also a good chance your baby isn’t yet relying on solid food — we actually delayed kickoff by a month or two until after our travels — so there’s no need to hunt down special infant meals. If you’re breastfeeding, keep it up through your trip and you’ll barely need to pack a thing for your baby. Otherwise, just bring enough formula (yes, TSA will allow it through) and you’ll be good to go.
With infants younger than 6 months, you may face more fussiness. And depending on the conditions your little one needs to get to sleep, your schedule may have to revolve around nap times. After they’ve started to crawl or toddle, you’ll want to be more vigilant of potential hazards in your hotel, rental, or host’s home.
When planning your day, keep in mind that picky eaters can take time to satisfy. But what better way to expand your kid’s palate than in another country? Our daughter tried her first taste of pancakes in Amsterdam, while sitting in her first-ever high chair, and it remains one of our favorite early-parenting memories.
By the way, we also have good tips for new parents wondering how families afford to travel.
Pre-Trip Checklist
Before you go anywhere, you’ll want to check a few important items off your to-do list.
Collect Your Baby’s Travel Documents
When you’re traveling within the United States, your baby is good to go. Just be sure to have their birth certificate on hand and, if only one parent is present, a letter of consent from the other, to avoid any custody dramas while you’re trying to enjoy a vacation.
If you’re traveling internationally, via plane, your little one will need a passport just like every other U.S. citizen. When traveling by sea, you’ll want to bring the birth certificate and consent letter from a parent who stays at home.
To apply for your baby’s passport, be sure to start the process as early as possible by filling out form DS-11 , found on the State Department’s site. You’ll be asked for evidence of a birth certificate (and/or other options to prove citizenship, if they apply to you) and a properly formatted photo. This image will be used until your kid is 5 and needs an updated passport — a source of great amusement for them until then, guaranteed.
Recommended: How to Balance the Urge to Travel and the Need to Save
Visit the Pediatrician
Consider bringing your baby to the pediatrician about a month before your departure, and make sure they are up-to-date on routine vaccinations. Additional shots may be required depending on your destination.
Check the Centers for Disease Control and Prevention (CDC) website for other travel alerts. And be sure to pack any medications your child might need, such as baby acetaminophen in case of teething pain or fever.
(By the way, this article will tell you what to do if you or your baby get sick on vacation.)
Pack or Reserve Baby Items
Think about what you might need at your destination: bassinet, Pack ‘n Play, etc. You may be able to call to request larger items at your hotel or rental, attached to your reservation. If you plan on renting a car, make sure you reserve a car seat.
If you don’t already have a baby-wearing sling or pack that’s light and comfortable, consider investing in one. The structured Ergobaby and Tula are two excellent options. If you’re not a baby-wearing type and your baby is old enough to sit up, think about getting a lightweight folding stroller (Maclaren has a range of great options) that’s easy to carry and maneuver (and should meet all carry-on specifications). Leave your souped-up fancy version at home.
Flying With a Baby
What to Bring
The things you’ll need when traveling with a baby are not so different from what you need for a day in the park. Besides a stroller or carrier, you’ll want to make sure you’ve got enough amusements on hand to get your baby (and those around you) through the flight without much drama. I remember getting great new-parent tips from others about flying, including the advice to bring a small bag stuffed with distractions: board books, her Sophie the Giraffe teether, a light-up rattle. It was an excellent idea, even though she wound up happily playing with an empty plastic water bottle for much of our time in the air — anything that works!
If you’ve got a toddler who likes to snack, have plenty of their favorites with you (for yourself, too, as they’re not the only one who needs to be distracted from grumpiness). Other useful items to bring in your carry-on: plenty of diapers, wipes, a travel diaper pad to use in the cramped bathroom (not fun), formula, and a small cozy blanket.
Recommended: Air Fares: What You Need to Know
Dealing With Air Pressure Changes
When flying with a baby, take-off and landing are likely to be the toughest parts, due to air-pressure changes in the cabin that can plug up their little ears. Start breastfeeding or bottle-feeding a few minutes before the actual take-off or landing. The sucking and swallowing actions will help their ears keep popping. Your little one will be blissfully unaware that they’re supposed to start screaming.
At Your Destination
When traveling, think of your baby as a mini-version of you, and take all precautions (and then some) that you’d take for yourself. For summer travel in warm climates, apply mosquito repellant, use plenty of sunscreen (don’t forget to reapply!), and dress them in long-sleeved rash guards while swimming or on the beach. In new countries, avoid tap water.
Consider nap times, and where you’d like to be to help facilitate your baby falling asleep in a strange environment. Finally, be prepared to adjust your plan as you go to accommodate any fussiness and meltdowns.
Recommended: Responsible Tourism: How Travelers Can Support Local Economies
The Takeaway
Don’t stress out about traveling with your infant — enjoy it! Now, when your little one is still portable and not yet making their own demands, might be your last chance to feel free as a bird while exploring a new place. No, they won’t remember the experience, but you will. And you’ll have the pictures and stories to prove it.
Photo credit: iStock/tatyana_tomsickova
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement. Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners. Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. SOCC0323044
Save more, spend smarter, and make your money go further
Last year this time– right around Halloween – my wallet was stolen from my son’s stroller. (Okay I shouldn’t have placed it in the stroller in the first place, but I never imagined anyone would steal it. It was only slightly visible, tucked inside a pouch.)
You can guess the rest.
In a store elevator, while a woman to my right started talking me up and gushing over my then 1 year old son’s shoes (they were really cute), her quiet accomplice (to my left) crept her fingers into my stroller pouch and nabbed the wallet.
An hour later, when I realized the wallet had disappeared, I rushed home to check my bank and credit card accounts. As expected, the thieves had spared no time. They’d racked up over $500 in charges at the very department store where they’d stolen my wallet. They also purchased a number of monthly subway passes on their way out of the crime scene.
Some serious professionals had defrauded me right in my own neighborhood!
Lesson learned: Keep your wallet out of sight and reach.
But, sadly, wallet theft is not the only way or even the most common way fraudsters can get a hold of our financial accounts. Much of it happens online via hacks or breaches. Fraud devices or “skimmers” at ATM machines and card readers can also be sources of fraud.
This Halloween here’s some advice on how to prevent your financial info from getting in the wrong hands and what to do in case you become a victim of fraud.
Double Down on Password Protection
A wise rule of thumb is to use various passwords for various accounts. Don’t just use one universal password for every website since it makes it all too easy for a fraudster to access your bank accounts, payment sites, etc. if he or she gets ahold of your secret alpha-numeric-symbolic code.
But few of us actually follow that rule of thumb. Nearly three out of four consumers use a duplicate password, many of which haven’t been changed in the last five years, according to a recent survey.
If you’re worried about remembering all your passwords, consider using password management tools that provide a secure and virtual “vault” for all your passwords. LastPass and TrueKey offer free basic memberships.
As for how often should you change your passwords? Do better than every five years, but don’t worry about changing them every month. A study by the University of North Carolina at Chapel Hill found it’s better to change passwords infrequently.
While some sites and offices require you to change your password every few months, this can actually backfire, the study found, because when we are forced to change our passwords so many times we don’t get very creative. We may add a “1” or make a slight variation from the last password. And this makes our passwords all the more predictable to hackers.
In fact, for 17% of the accounts in the study, knowing a user’s previous password let researchers to correctly guess their next password in fewer than 5 guesses.
It’s fine to change your password once or twice a year, as long as it is made of a random variation of text including different cases of letters, numbers and symbols. And stay away from the obvious like your birthdate or a sequence of letters and numbers (e.g. ABC123)
Stick With Credit
You may notice when you go to checkout with a card, you’re now asked to dip instead of swipe. The U.S. recently moved to EMV chip card technology, in an effort to combat counterfeit card fraud. In time paying with a credit card should get safer.
Meantime, if you’re ever wondering whether it’s safer to use a debit or credit card, stick with credit. In the event of fraud, it will be easier to dispute the claims.
According to the Fair Credit Billing Act your maximum liability for fraudulent credit card transactions is $50. But if you report your card lost or stolen prior to fraudulent transactions your liability could even be $0.
With debit card fraud, on the other hand, you’re sometimes at a loss until the claim is resolved. What’s more, if you don’t report your card lost or stolen within sixty days your liability limit is up to $500.
Scan Your Statements
Keep a watchful eye on your accounts. Even if you’re a fan of auto-pay, it’s worth reviewing your bills regularly for unfamiliar charges. Card issuers and banks are getting better at alerting us of suspicious charges, but it’s always helpful to play an active role ourselves, too.
If you suspect your account’s been compromised contact your bank or card company immediately and have them investigate. In the meantime, they may shut off the account and send you a new card with a new account number just to be on the safe side.
Another place to look for red flags is your credit report. You can receive a free credit report from each of the three major credit-reporting agencies – Equifax, Experian and TransUnion – once a year at annualcreditreport.com. If you don’t recognize some of the items on your credit report such as random credit inquiries or unfamiliar card accounts immediately reach out to the credit reporting agency or agencies that’s listing the false information and explain the situation. Here’s a list of their phone numbers:
Experian: 1-888-EXPERIAN or 1-888-397-3742
Equifax: 1-800-525-6285
TransUnion: 1-800-680-7289
You may want to place an extended fraud alert or credit freeze on your account. You can find more information on how to do this on the Federal Trade Commission’s website.
Avoid Random ATM Machines
Fraudsters and ID thieves may secretly install special equipment in credit card readers either at the ATM, gas pump machine or any other card swiping device to capture or “skim” our personal information on our credit or debt card each time we swipe. The reader makes two copies of your credit or debit card information: one to process the transaction and one to later download the information to the ID thieves.
To play it safe, use trusted ATM locations. Your bank branch’s ATM is usually a safe bet, since a security officer or camera often guards it. It’s a lot more difficult for ID thieves to compromise an indoor bank ATM than say, a random ATM on the street corner outside a convenient store.
Trim Down Your Wallet
While it’s not realistic to say, “Don’t carry your credit cards or cash in your wallet,” there are some other sensitive items a few of us DO carry in our wallets that aren’t necessary. The Identity Theft Resource Center recommends five things you should never carry in your wallet including your social security card or even a copy of your social security number, your birth certificate, bank account or routing numbers and password cheat sheets.
It’s best to keep these items tucked away in a safe and hidden place…and by no means in your child’s stroller!
Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected].
Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.
Save more, spend smarter, and make your money go further
Previous Post
Your Finances This Election Year: The Argument Against “Moving to…
Next Post
Money Etiquette: Sticking to a Holiday Budget Without Being a…
Many home buyers gravitate toward the traditional fixed-rate mortgage, but home loans aren’t one-size-fits-all. You may be able to get an even lower initial interest rate with an adjustable-rate mortgage, or ARM.
Comparing ARM and fixed-rate mortgages will help you choose the best home loan for your current needs and goals.
How a fixed-rate mortgage works
Fixed-rate mortgages have interest rates that stay the same through the life of the loan. The traditional 30-year fixed-rate mortgage is the most popular mortgage around, but 15-year and 20-year fixed-rate mortgages are available, too. Most mortgages are fixed-rate loans.
How an adjustable-rate mortgage works
An adjustable-rate mortgage begins with a set interest rate for a specified period of time. After that, the rate is adjusted periodically according to a benchmark index until the end of the loan term, which is typically 30 years.
The key to knowing how an ARM will adjust is hidden in its name: A 5-year ARM, also known as a 5/6 ARM, means your rate will be fixed for five years, then adjusted every six months, for example. The most common ARM terms have initial fixed-rate periods of three, five, seven or 10 years.
Although ARM interest rates start lower than fixed-rate loan rates, there’s always a chance they will reset higher several times over the life of the loan, increasing your mortgage payment.
ARMs also have caps, which limit how much the interest rate can change the first time it’s adjusted, in subsequent adjustments and over the lifetime of the loan.
Be careful with interest-only ARMs. These loans let you pay only interest during the introductory period. After that your payment goes way up to cover both interest and the principal.
Example: ARM vs. fixed-rate mortgage payments
5-year ARM
30-year fixed rate mortgage
Mortgage amount: $300,000
Mortgage amount: $300,000
Interest rate: 3.5%
Interest rate: 4.5%
Payment: $1,347.13 (after five years, this payment will reset using a new interest rate that could increase it)
Payment: $1,520.06 (this payment will never change as long as you have the same mortgage)
Getting ready to buy or refinance a home? We’ll find you a highly rated lender in just a few minutes
Just answer a few questions to get started on a personalized lender match
Is an ARM or a fixed-rate mortgage better?
The choice depends on your situation and goals.
The case for a fixed-rate mortgage
A 15- or 30-year fixed-rate mortgage may be right for you if you plan to own the home for the long haul. With a locked-in rate, you’ll always know what your payment will be. And if rates drop or your home appreciates significantly a few years into your mortgage, you can always consider refinancing into another fixed-rate mortgage at a lower rate.
Overall, fixed-rate mortgages are simpler to understand than ARMs, which can make comparing lender offerings easier.
The case for an adjustable-rate mortgage
Adjustable-rate mortgages most often appeal to first-time homebuyers because lower rates boost buying power. If you know this isn’t your forever home and think you’ll move in several years, an ARM could be a good choice. You’ll get the benefit of a lower introductory rate in the first years of homeownership. Then ideally you’ll move or trade up to a bigger home before the fixed-rate period ends.
ARM vs. fixed: Tips for choosing
To decide between an ARM or fixed-rate mortgage:
Think about how long you plan to own the home. An ARM might be worth it if you’ll sell the home or pay off the mortgage in 10 years or less. But a fixed-rate mortgage would probably work better if this will be your forever home and you want the certainty of a stable interest rate and monthly payment.
If you’re considering an ARM, check the caps on how much the interest rate can increase. Then calculate how much your mortgage payment would be if rates rose to those levels. Would you be able to afford the payments? If not, shop for a fixed-rate mortgage.
Whether you choose an ARM or a fixed-rate mortgage, shop around and get preapproved with at least three lenders to compare offers.
This is a guest post from Lily of The Honest Dollar, a great new personal finance blog.
The most common ways to increase your salary are to get promoted or to negotiate a raise. But promotions don’t come along often, and negotiating a raise may or may not result in a salary increase. So what do you do when you want to make more, but you’re between promotions and raises? The good news is that you’re not out of options. The bad news is that you’ll need to get creative and may have to use a little elbow grease.
Low Effort, High Reward 401(k) match. Perhaps the easiest way to get your employer to give you more money is to contribute to your 401(k), if your employer offers a match. A 2007 Hewitt Associates survey [PDF] reports that 98% of employers put some money into 401(k) plans, and two-thirds provide matching contributions. According to Hewitt, the most common type of match is 50% of employee contributions up to 6% of pay. This means that if you make $60,000, then contribute $3,600 to your 401(k), your employer will kick in $1,800. That’s free money that should never be left on the table, if you can help it.
Employee referral rewards. Most companies have employee referral programs, where an employee recommends a candidate and earns a bonus if the referral is subsequently hired. This is an effective way for firms to discover great candidates without paying exorbitant headhunter fees. But referral programs are not always well-publicized. Check with your HR department to see if a program exists and what the rewards are for referrers, then consider submitting a few referrals. Tread carefully, since referring a bunch of people who are not qualified to work at your company will reflect negatively upon you.
High Effort, High Reward Ask for a better 401(k). Maybe your 401(k) doesn’t offer enough choice to fully diversify your retirement savings. Maybe the only investment options carry high fees. Maybe you have to pay fees to the 401(k) administrator. If your 401(k) plan is unreasonably awful, it may be time to speak up and ask for a change; SmartMoney offers a few tips to lobby for a better 401(k). While this does not directly increase your income, it puts your money to work more efficiently. High fees can cost you thousands of dollars by the time you’re ready to retire, and bad investment options can cost even more.
Improve your skill set. Even if your company didn’t give you a raise this year, the best way to score one next year is to make yourself indispensable. One way to do this is to constantly improve your knowledge and skill set. This can mean taking training classes offered by your employer, seeking additional certification in your industry, or even getting an advanced degree. The good news is that some employers are willing to pay for education. Large companies may have established tuition reimbursement programs. If you’re willing to do the paperwork and put in the study hours, you can get a graduate degree at a huge discount. [J.D.’s note:Even small companies can have tuition reimbursement programs. At the box factory, we’ll pay for one class per term. Nobody ever takes us up on it, though.]
Non-Cash Rewards Ask for non-monetary rewards. Bankrate.com notes that it’s difficult to negotiate hard benefits, or “employment areas defined by statues and tax deductions [including] health benefits, pension plans and 401(k)s, stock options, insurance programs, tuition reimbursement and day care.” However, employers have more leeway when it comes to non-regulated benefits and rewards that don’t necessarily require a large and lasting cash outlay, like a raise would. For example, consider asking for an extra week of vacation or a flexible work arrangement where you can telecommute once a week. After all, time is money, and getting more free time (especially free time with family or friends) can be a lot more valuable than a meager raise.
Volunteer within the firm. There are many ways to contribute to your company outside of excelling at your job. Join the recruiting team and participate in school events and interviews. Offer to write a company blog. Even organize the firm holiday party. These volunteering gigs may not have immediate or monetary rewards, but they will expand your in-firm network outside of your department. This might create career opportunities that would not otherwise have been available, and it doesn’t cost you anything but your time.
Get a Virtual Raise Taking advantage of all your company has to offer will require some effort on your part. In the short term, your paycheck may not get bigger, but you may be making more money nonetheless. On a $60,000 salary, in a single year:
You can get $1,800 by getting the maximum 401(k) match if you company matches 50% of employee contributions up to 6% of salary.
You can get $1,500 for referring a candidate who is later hired by your company. (Payouts vary, but the number seems reasonable given going rates in technology, nursing, and chemical engineering.)
You can get $11,000 more out of a 401(k) contribution of $10,000 this year if you manage to lower your investment cost by 0.5% per year for the next 20 years by convincing your company to cover administrative fees or offer lower cost funds.
You can get $5,000 in tuition reimbursement. Of course, you also get the benefit of additional education and accreditation.
You can get the equivalent of $1,200 in salary if you get one additional week of paid vacation.
You can get priceless career opportunities by expanding your network through volunteering opportunities within your firm.
Taken together, those are over $20,000 in non-salary benefits. Opportunities vary at every company, but you won’t get a dollar if you don’t try.
When it comes to picking the best brokerage account for your needs, the type of trader you are is crucial in your decision. Capital One ShareBuilder is an online broker that is part of the same parent company of ING.
Capital One ShareBuilder was created to make automatic online investments through automated withdrawals from your existing accounts so that your savings will grow automatically.
What’s all that really mean?
You don’t have to sit and worry about which day you’re going to invest money. You set up an automated plan, sit back, and watch your retirement account grow without a lot of checking in from you. It’s an easy, low-hassle way of starting to invest.
It’s very similar to the way that an IRA or 401K is managed by your financial advisor. Instead of investing once or twice per year, you build up a habit through consistent investments.
This is also a great way to start investing for new investors that have never traded stocks or invested in mutual funds. You are taking the thinking out of investing.
Set the plan, engage the automatic investments, and go back to worrying about the rest of your life.
Before we jump into the details of Capital One ShareBuilder, you should also look into other great investing options before you make your final decision. Check out these in depth reviews for more details:
Betterment Review
Ally Invest Review
Personal Capital Review
E*TRADE Review
Automated Withdrawals with Capital One ShareBuilder
Automated withdrawals can be used to your advantage in many different ways. For example, if you have ever owned a 401k or IRA, you may have noticed the deduction when you receive your pay stub at the end of your pay period.
Your financial advisor set this up so that the deduction goes straight into your IRA or 401k which is typically a collection of mutual funds.
These mutual funds are all made up of individual securities which commonly are shares of common stock. What Capital One ShareBuilder has created allows you to do the same thing except you are in control of your investment activities.
You can set up this automated withdrawal from either an existing checking account, a deduction from your paycheck, wire transfer or by simply mailing a check.
Upon setting up your account, you get to decide the frequency as well as the amount of these withdrawals which will be automatically transferred into your ShareBuilder account.
For example, if you receive$1,000 check bi-weekly, you can opt for $200 to be automatically invested into Capital One ShareBuilder.
ShareBuilder will take your funds and purchase shares in whatever stock, ETF, or mutual fund of your choosing and automatically invest the dollar amount. This gives you the opportunity to buy partial shares so that you can put the entire $200 in your account to good use immediately.
At the most simplistic level, this is essentially creating your own IRA or retirement fund that you personally manage. The fees that you will be assessed depend on the account level you sign up for.
Different Accounts That Capital One ShareBuilder Offers
Capital One ShareBuilder offers two different account levels. They offer a Basic Plan and a subscription-based Advantage Plan.
The Basic Plan has no monthly fee so it’s free to start. When using the automated investment method with the Basic Plan, you will be assessed a $4 fee for every automated transaction, as well as $9.95 for all real-time trades. You can trade Options with the Basic Plan as well for $9.95 per trade + $1.50 per contract.
With the automatic investing option you can limit the cost of your trades for stocks and ETFs to just $4 per investment. That is among the lowest in the industry.
The next step up is the Advantage Plan. With the Advantage Plan you pay $12 per month and receive 12 automated investment transactions per month for free. All automated transfers after 12 per month will be assessed a fee of $1.
If you need to make a real-time trade (rather than on an automated schedule) the fee will drop to $7.95 ($2 less than on the Basic Plan). Option pricing also drops $2 to $7.95 per trade plus $0.75 per contract.
Capital One ShareBuilder also kicks in premium research from S&P such as the S&P Morning Brief and a list of research team upgrades/downgrades on stocks.
Essentially if you plan to regularly invest funds more than 3 times per month then it makes a lot of sense to switch to the Advantage Plan. Three automatic transactions under the Basic Plan would cost $12.
With the Advantage Plan you get 9 additional automatic transactions for free compared to the Basic Plan. It’s like paying $1 per trade — a price that cannot be beaten with any other broker.
Both account types allow you to invest in mutual funds. The trade costs range from $0 (yes, free) for No Transaction Fee Funds to $19.95 for other mutual funds.
Excellent Research
Like any other broker, Capital One ShareBuilder offers a variety of tools to its customers. They offer screening options for mutual funds, ETFs, and of course stocks.
They have your normal market mover and watch list options as well. You can also research option chains and there is a calendar of upcoming IPOs so you can track which ones you want to invest in.
Capital One ShareBuilder also offers easy tax applications to keep track of your gains/losses throughout the year which you can easily export to typical tax software programs. If you trade a lot having clear and concise tax records is a huge benefit when it comes time to file your taxes.
Building a Diverse ETF Portfolio with Capital One ShareBuilder
Whether you are a new investor just trying to figure out how to invest each month or a seasoned investor looking to lower your investment options, Capital One ShareBuilder is a solid choice. Here are two examples of how you can use Capital One ShareBuilder to grow your portfolio automatically.
New Investor: Open a Roth IRA
The best time to start investing is right now. The longer you wait to begin investing, the more you have to save in order to hit your retirement goals.
If you are a new investor that is just trying to figure out how to budget for your retirement, starting with Capital One ShareBuilder’s Basic Plan is a great place to look.
With opening a Roth IRA you are investing after-tax income from your paycheck. IRS rules limit you to investing $5,000 per year into a Roth IRA. But even if you don’t have $5,000 (that’s $416.67 per month), any amount will help grow your account. Learn more about the Roth IRA contribution limits here.
Let’s assume you have just $100 per month to save for a Roth IRA. To make things simple we will invest 75% of your money into Vanguard’s Total Stock Market ETF (VTI) and 25% into Vanguard’s Total Bond Market ETF (BND). If you are just starting out you don’t need to worry about asset allocation as much as you need to worry about actually investing money for your future.
Here are the steps to take to set up that portfolio:
Open a Basic Plan account with Capital One ShareBuilder and get a $50 account bonus
During the account opening process, make sure you select “Open a Roth IRA”
During the investment selection process, choose Automatic Investment
Search for VTI (the total stock ETF from Vanguard) and choose to invest $75 per month with 1 automatic transfer per month
Then search for BND (the total bond ETF from Vanguard) and choose to invest $25 per month with 1 automatic transfer per month
Sit back and relax, you’re done!
That’s all it takes to get started with investing. You will pay $4 per automatic transfer (so $8) for your two investments each month.
As time goes on you can increase how much you invest or upgrade to an Advantage Plan to increase the number of transactions you have each month.
Seasoned Investor: Lower Your Trading Costs
If you’re a seasoned investor, Capital One ShareBuilder can still be a big help by reducing your automatic investment costs. (If you are a day trader that is not the plan or broker for you.)
Here are the steps to take to cut down on your investing costs:
Open an Advantage Plan account with Capital One ShareBuilder and get a $50 account bonus
During the account opening process, choose whichever account you need whether it is a Roth IRA, Traditional IRA, or a normal trading account
During the investment selection process, choose Automatic Investment
Search for your investments and how much you want to invest in each
Make sure you choose at least 4 automatic investments each month, otherwise, the Basic Plan would be the same or lower cost (3 trades x $4 = $12, which is the cost of the Advantage Plan each month)
Sit back and relax, you’re done!
This plan can save you significantly compared to other brokers.
Conclusion
If you consider yourself to be a day trader, then Capital One ShareBuilder is not the online broker for you. Their real-time trades, as well as options fees at $9.95 (or $7.95 with the Advantage Plan), are not attractive relative to other online brokers.
However, Capital One ShareBuilder is a great option if you want to set up an easy automatic investing plan in ETFs, Equities or No Transaction Fee Mutual Funds.
By picking these quality investment tools you will be able to set up automated withdrawals from a variety of sources to have your account grow steadily while only paying transaction fees ranging from $1 to $4 depending on which plan option you choose.
By setting up your account with Capital One ShareBuilder you will be able to theoretically replace your financial advisor using your own skills and Capital One ShareBuilder’s easy automated system to steadily save for retirement without the approximate 1% fee given to your advisor on an annual basis.
Setting up your ShareBuilder account will take no more than 20 minutes, and requires no extra paperwork than any other financial account.
When planning for the overall financial security for yourself and those you love, life insurance should typically play a part. This is because the proceeds from a life insurance policy can be used to ensure that dependents and survivors won’t be left with having to pay a debt or other expenses out of their own pockets. These funds can also be used for ensuring that the daily living expenditures of a spouse and children can continue – without those you care about having to go into a financial hardship, or even to change their lives drastically.
If you are in the process of shopping for life insurance – or you soon will be – then several key factors are important to keep in mind. These include securing the right type and amount of insurance coverage, as well as making sure that the company you plan to purchase the coverage through is safe and stable financially, and that it also has an excellent reputation for paying out its policy holders’ claims. One carrier that meets these standards is Primerica.
The History of Primerica Insurance Company
Primerica has been in the business of offering term life insurance that is affordable since 1977. Since its beginning, the company has had a key focus on serving middle America’s “Main Street” families in neighborhoods across the country. Primerica was started by Arthur (Art) Williams, a former high school football coach turned life insurance advisor.
Within just the first few years of operation, the company contracted with Massachusetts Indemnity and Life Insurance Company – and by 1982, the company had gone public and started trading its stock on the NASDAQ market.
The company takes more of an educational approach, and in addition to insurance coverage, it also focuses on educating its prospects and customers. For instance, the company’s complimentary Financial Needs Analysis asks some important questions to pinpoint exactly where an individual or family is on their goals, and then it suggests various financial solutions that fit both their needs and their budget.
There are currently three components to Primerica’s life companies. These include the following:
Primerica Life Insurance Company
Primerica Life Insurance Company of Canada
National Benefit Life Insurance Company
Primerica’s products are offered through independent representatives, many of whom work on a part-time basis. Over time, Primerica has earned numerous awards and accolades, including being named to the 2015 Forbes list of America’s 50 Most Trustworthy Financial Companies. The company has it main headquarters in Duluth, Georgia.
Primerica Life Insurance Review
Today, Primerica is a leading provider of term life insurance in the industry. The company pays out an average of $3.5 million in benefit claims every day – and more than 90 percent of these allegations are paid out within 14 days of the claim being submitted. Currently, Primerica serves more than 4.3 million customers and policy holders.
The company currently has more than $728 billion of life insurance in force. A significant portion of the policies that are sold via Primerica agents are done so using the “Buy Term Invest the Difference” philosophy. This alludes to having clients purchase affordable life insurance, and use the remainder of their funds (that may have been spent on more expensive permanent insurance protection) to invest in mutual funds and other appropriate investments for the client.
Using this concept, Primerica believes that people should look at purchasing life insurance in the same manner that they view buying auto, health, or home owner’s insurance – in other words, maximize the amount of the coverage and invest the difference. Doing so can provide individuals and families the ability to accumulate more money, and in turn, live a stress-free retirement in the future.
Certainly, one of the key advantages of the term life insurance products that are offered through Primerica is the lower rates (as compared to a comparable permanent life insurance policy). While an insured can get a nice amount of coverage for a reasonable rate, especially if they are young and in good health at the time of application, it is important to keep in mind that term life insurance is only issued for a set period, such as ten, fifteen, twenty, or thirty years. Then, once the initial policy has expired, it will be required that the insured renew the policy if they want to keep coverage in force. This, however, will typically be at a much higher premium rate, given the insured’s then-current older age.
However, for those who are seeking a way to cover “temporary” needs, such as the payoff of a mortgage and ensuring that a child or grandchild has enough money to attend college in the future – then a term life insurance policy could be a viable option.
Insurer Ratings and Better Business Bureau (BBB) Grade
Due to its robust and stable financial footing, and the timely way it pays out claims to its policy holders, Primerica has earned high ratings from the insurer rating agencies. This includes an A+ (Superior) by A.M. Best Company, of which less than 20 percent of life companies meet this standard.
Also, Primerica has been an accredited company via the Better Business Bureau (BBB) since January 1, 1980. The company has been provided with a grade of A+ by the BBB, on a scale of A+ to F.
Over the last three years, Primerica has closed out a total of 140 customer criticisms through the Better Business Bureau (12 of which were closed out within the past twelve months). Of the total 140 customer complaints, 77 of them focused on problems with the company’s products and services, 33 focused on billing and collection issues, and the other 30 had to do with advertising and sales issues.
Life Insurance Coverage Offered Through Primerica
Primerica offers straightforward and affordable term life insurance coverage. Many of the policies that are sold by this company offer renewal options, so that the insured may continue coverage once the initial period of the policy has been surpassed.
There are many different ways in which policy holders may structure their insurance coverage through Primerica, as the company offers individual riders and add-ons like terminal illness benefit, waiver of premium, and increasing benefit riders.
Primerica offers value through their unique approach to buying life insurance. Its primary life insurance offerings include the TermNow and Custom Advantage plans. Both options offer guaranteed insurability to the insured’s age 95, as well as a terminal illness benefit, industry leading renewal options, affordable renewal rates, and the flexible use of riders that can help with increasing the coverage and / or better “customizing” the policy to better fit the insured’s needs.
Other Products and Services Available Via Primerica Insurance Company
In addition to term life insurance coverage, Primerica also offers several other products and services that can provide solutions to its clients. These include:
Investments – Primerica offers mutual fund investments so that clients can put away money for the future. In many cases, clients may have the option of either investing a lump sum, or dollar cost averaging whereby they invest a certain amount of money on a regular basis over time.
Auto Insurance Coverage – Primerica offers auto insurance coverage through the Primerica Secure Referral Program. Here, clients can obtain competitive rates in ten minutes or less, and most individuals will qualify for this coverage.
Home Owners Insurance Coverage – As with the auto insurance coverage, the home owners insurance coverage that is offered via Primerica is done through the Primerica Secure Referral Program, which can make it easy for individuals to find out the quote they are eligible for, and to move forward if it is the plan they choose.
Long Term Care Insurance – Primerica also offers long-term care insurance coverage via some of the oldest and most experienced companies in the long term care insurance market place. Having this coverage can help clients to ensure that their other assets and savings are secure and in place for their originally intended purpose.
Pre-Paid Legal Services – While many people may need the services of a lawyer, not everyone can pay the high fees that attorneys are known for charging. With legal insurance protection, though, the playing field is leveled. By having a legal insurance plan, clients can access a plethora of different services, such as will creation, legal consultation, motor vehicle-related benefits, durable powers of attorney, IRS audit assistance, and probate benefits.
Identity Theft Defense – Today, identity theft is the fastest growing crime – which puts everyone in harm’s way when it comes to having their identity stolen. By having identity theft protection, though, if an incident occurs, the client may be covered from a financial perspective, as well as via a long list of other support services.
Debt Reduction / Payoff Solutions – The debt solutions that are offered through Primerica can help individuals and families to get on the road to debt freedom. The Primerica Debt Watchers product allows clients to use the information that is contained in their Equifax Credit Report to put together a simple to understand plan towards paying off their debt. This differs from many of the other debt relief products that are found in the market place today because it doesn’t just limit clients to seeing debts on their credit report, but rather to create an overall plan for becoming debt free.
Also, in addition to the other educational solutions and concepts that may be provided include the following:
High Cost of Waiting
Pay Yourself First
Theory of Decreasing Responsibility
Rule of 72
Power of Compound Interest
Debt Stacking
Being out of debt, and well protected with life insurance and other coverage, can make clients’ lives much easier.
How to Get the Best Life Insurance Rates with Primerica Insurance Company
If you are seeking the best rates on life insurance through Primerica – or from any other life insurance carrier – then it is recommended that you work in conjunction with an independent life insurance agency or broker. In doing so, you can compare different life insurance policies, companies, and premium prices – and from there, you can choose which one will be the greatest for you.
When you are prepared to proceed with finding out the best coverage option for you, we can offer support. We are an independent life insurance brokerage, and we work with many of the best life insurers in the market place today. We can get you all the necessary details needed to make a well-informed life insurance coverage buying decision. We can do so for you very swiftly, simply, and conveniently – all from your computer – and without you having to meet in person with a life insurance agent.
We understand that the process of purchasing a life insurance policy can seem a tad bit overwhelming. There are many different variables and components you need to consider while choosing the right coverage for your needs. But there is good news. This process can be so much easier when you are working with an ally on your side who can point you in the right direction. So, contact us today – we’re here to help.
Today we’ll check out “Supreme Lending,” a mortgage banker out of Dallas, Texas that is all about speed.
In fact, their goal is to close and fund every loan that comes in their door in 20 days or less, using the latest technology and more efficient loan processing.
This is especially important because they specialize in home purchase lending, which is often more time-sensitive than a standard mortgage refinance.
They also believe they can offer lower rates and fees than other lenders thanks to their advanced processing software and automated underwriting systems.
Additionally, their “Give Back Program” provides up to $800 in reduced closing costs to veterans, first responders, and cancer survivors, and possible discounted real estate agent fees as well.
Supreme Lending Fast Facts
A direct-to-consumer retail mortgage banker that offers home purchase and refinance loans
Founded in 1999, headquartered in Dallas, Texas (a dba of Everett Financial)
Funded $16 billion in home loans last year
About a third of their overall volume comes from home state of Texas
Licensed to do business nationwide including the District of Columbia
Has 300 physical branches and 1,800+ employees across the country
Supreme Lending is a direct-to-consumer retail mortgage banker based in Dallas, TX that was founded all the way back in 1999 by Scott Everett.
The company is actually a dba of Everett Financial, which gets its namesake from, you guessed it, their founder.
They are a home purchase-heavy lender, meaning they probably have good relationships with real estate agents and home builders too.
Nearly 75% of their overall volume consisted of purchase loans, with the remainder made up of mortgage refinance loans.
And while they’re licensed to do business nationwide, roughly a third of overall volume comes from their home state of Texas.
Supreme is also quite active in the states of California, Colorado, Florida, and Georgia.
How to Apply at Supreme Lending
You can apply online, call/email them, or meet a loan officer face-to-face
They offer a digital mortgage application powered by Ice Mortgage Technology
Allows you to complete most loan tasks electronically such as linking bank accounts or eSigning disclosures
Aim to close loans in 20 days or less by starting the closing process sooner than other lenders
To apply with Supreme Lending, you can either call them, visit a local branch, or head right to the online application on their website.
Whichever route you choose, their digital mortgage application powered by Ice Mortgage Technology (formerly Ellie Mae) allows borrowers to complete most tasks electronically.
This includes the ability to link bank accounts using your login credentials, scan/upload documents, eSign disclosures, and track loan status 24/7.
You’ll also have a dedicated, human lending team that is available to assist whenever you have questions or concerns along the way.
Supreme says it aims to close loans in 20 days or less, and is able to speed up the process by using the latest technology while starting the closing process sooner than other lenders.
Loan Programs Offered by Supreme Lending
Home purchase loans
Home renovation loans: HomeStyle and FHA 203k
Refinance loans: rate and term, cash out, and streamline
Conventional loans backed by Fannie Mae and Freddie Mac
Jumbo loans
FHA/VA/USDA loans
First-time home buyer programs
Down payment assistance
Educator Mortgage Program
Fixed-rate mortgages: 10 to 30-year terms available
Adjustable-rate mortgages: 5/1, 7/1, and 10/1 ARMs
One area where Supreme Lending really shines is their loan programs. They offer just about anything you could ask for, including purchase, renovation, and refinance loans.
You can get a first-time home buyer loan like Fannie Mae HomeReady or Freddie Mac Home Possible, or an FHA, VA, or USDA loan.
They also offer jumbo home loans, including ones with just a 10% down payment requirement, along with conventional loan offerings.
Those in the market to buy a home can take advantage of their “Lock & Look” program that allows borrower to pre-lock their mortgage rate before they find a property.
Lastly, they offer a so-called “Educator Mortgage Program,” which similar to their perks for veterans, first responders, and survivors, offers up to $1,600 in closing cost credits for teachers, librarians, secretaries, nurses, counselors, and more.
They lend on all major residential property types, including condos, second homes, and investment properties.
You can get both a fixed-rate or adjustable-rate mortgage in a variety of different loan terms.
Supreme Lending Mortgage Rates
One slight drawback to Supreme Lending is their lack of transparency regarding mortgage rates and lender fees.
They don’t appear on their website, so you’ll need to get in touch with a loan officer first to discuss loan pricing before you proceed to an application (assuming pricing matters to you).
Be sure to ask about both mortgage rates and lender fees, such as a loan origination fee, processing and underwriting fees, and so on.
Collectively, these will make up the mortgage APR, which is a more effective tool to compare loan offers than the interest rate alone.
As always, be sure to gather multiple mortgage quotes to ensure you don’t miss out on a better deal elsewhere.
Given their strong customer satisfaction numbers and the fact they’re a mortgage banker as opposed to a large bank, my guess is their pricing is pretty competitive.
Supreme Lending Reviews
Over at Zillow, Supreme Lending has a really impressive 4.97-star rating out of 5 from over 7,000 customer reviews.
The sheer number of reviews combined with the super high score shows they’ve consistently made customer satisfaction a top priority.
A lot of the reviews also indicated that rates and/or fees were lower than expected, which is a good sign in terms of loan pricing.
At LendingTree, they’ve got a similarly high 4.8-star rating from about 500 reviews, along with a 94% recommend rating.
You can also look up specific branch locations near you and find their ratings via Google if you want to see how a certain location performs.
While they aren’t an accredited business with the Better Business Bureau, they do hold a coveted ‘A+’ rating based on customer complaint history.
Supreme Lending Pros and Cons
The Good
You can apply online via a digital mortgage application
Also have hundreds of physical locations nationwide
Aim to close loans super-fast (in 20 days or less)
Tons of different loan programs to choose from
Excellent customer reviews across multiple ratings websites
Free mortgage calculators and mortgage glossary online
The Maybe Not
Do not publicize mortgage rates or lender fees
May transfer your mortgage to a third-party loan servicer after closing
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
46k salary is a solid hourly wage when you think about it.
When you get your first job and you are making just above minimum wage making over $46000 a year seems like it would provide amazing opportunities for you. Right?
The median household income is $67,521 in 2020 which decreased by 2.9% from the previous year (source). Think of it as a bell curve with $68K at the top; the median means half of the population makes less than that and half makes more money.
The average income in the U.S. is $48,672 for a 40-hour workweek; that is an increase of 4% from the previous year (source). That means if you take everyone’s income and divided the money evenly between all of the people.
But, the question remains can you truly live off 46,000 per year in today’s society since it is below both the average and median household incomes? The question you want to ask all of your friends is $46000 per year a good salary.
In this post, we are going to dive into everything that you need to know about a $46000 salary including hourly pay and a sample budget on how to spend and save your money.
These key facts will help you with money management and learn how much per hour $46k is as well as what you make per month, weekly, and biweekly.
Just like with any paycheck, it seems like money quickly goes out of your account to cover all of your bills and expenses, and you are left with a very small amount remaining. You may be disappointed that you were not able to reach your financial goals and you are left wondering…
Can I make a living on this salary?
$46000 a year is How Much an Hour?
When jumping from an hourly job to a salary for the first time, it is helpful to know how much is 46k a year hourly. That way you can decide whether or not the job is worthwhile for you.
$46000 a year is $22.12 per hour
Breakdown Of How Much Is 46k A Year Hourly
Let’s break down how that 46000 salary to hourly number is calculated.
For our calculations to figure out how much is 46K salary hourly, we used the average five working days of 40 hours a week.
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, divide the yearly salary of $46000 by 2,080 working hours and the result is $22.12 per hour.
46000 salary / 2080 hours = $22.12 per hour
Just above $22 an hour.
Key Points….
That number is the gross hourly income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
You must check with your employer on how they plan to pay you. For those on salary, typically companies pay on a monthly, semi-monthly, biweekly, or weekly basis.
Just an interesting note… if you were to increase your annual salary by $5K to $51000 a year, it would increase your hourly wage to almost $25 an hour – a difference of $2.40 per hour.
To break it down – 51000 salary / 2080 hours = $24.52 per hour
That difference will help you fund your savings account; just remember every dollar adds up.
How Much is $46K salary Per Month?
On average, the monthly amount would be $3,833.
Annual Salary of $46000 ÷ 12 months = $3833 per month
This is how much you make a month if you get paid 46000 a year.
$46k a year is how much a week?
This is a great number to know! How much do I make each week? When I roll out of bed and do my job of $46k salary a year, how much can I expect to make at the end of the week for my effort?
Once again, the assumption is 40 hours worked.
Annual Salary of$46000/52 weeks = $884 per week.
$46000 a year is how much biweekly?
For this calculation, take the average weekly pay of $884 and double it.
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x 52 weeks = 260 working days
Annual Salary of$46000 / 260 working days = $177 per day
If you work a 10 hour day on 208 days throughout the year, you make $221 per day.
$46000 Salary is…
$46000 – Full Time
Total Income
Yearly Salary (52 weeks)
$46,000
Monthly Wage
$3833
Weekly Pay (40 Hours)
$884
Bi-Weekly Pay (80 Hours)
$1769
Daily Wage (8 Hours)
$177
Daily Wage (10 Hours)
$221
Hourly Wage
$22.12
Net Estimated Monthly Income
$2,926
Net Estimated Hourly Income
$16.89
**These are assumptions based on simple scenarios.
46k a year is how much an hour after taxes
Income taxes is one of the biggest culprits of reducing your take-home pay as well as FICA and Social Security. This is a true fact across the board with an all-salary range up to $142,800.
When you make below the average household income, the amount of taxes taken out hurts your hourly wage.
Every single tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
So, how much an hour is 46000 a year after taxes?
Gross Annual Salary: $46,000
Federal Taxes of 12%: $5,520
State Taxes of 4%: $1,840
Social Security and Medicare of 7.65%: $3,519
$46k Per Year After Taxes is $35,121
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$35121 ÷ 2,080 hours = $16.89 per hour
After estimated taxes and FICA, you are netting $35,121 per year, which is $10,879 per year less than what you expect.
***This is a very high-level example and can vary greatly depending on your personal situation and potential deductions. Therefore, here is a great tool to help you figure out how much your net paycheck would be.***
In addition, if you live in a heavily taxed state like California or New York, then you have to pay way more money than somebody that lives in a no tax state like Texas or Florida. This is the debate of HCOL vs LCOL.
Thus, your yearly gross $46000 income can range from $31441 to $36961 depending on your state income taxes.
That is why it is important to realize the impact income taxes can have on your take home pay. It is one of those things that you should acknowledge and obviously you need to pay taxes. But, it can also put a huge dent in your ability to live the lifestyle you want on a $46,000 income.
46k salary lifestyle
Every person reading this post has a different upbringing and a different belief system about money. Therefore, what would be a lavish lifestyle to one person, maybe a frugal lifestyle to another person. And there’s no wrong or right, it is what works best for you.
One of the biggest factors to consider is your cost of living.
In another post, we detailed the differences between living in an HCOL vs LCOL vs MCOL area. When you live in big cities, trying to maintain your lifestyle of $46,000 a year is going to be much more difficult because your basic expenses, housing, transportation, food, and clothing are going to be much more expensive than you would find in a lower cost area.
To stretch your dollar further in the high cost of living area, you would have to probably live cheap and prioritize where you want to spend money and where you do not. Whereas, if you live in a low-cost of living area, you can live a much more lavish lifestyle because the cost of living is less. Thus, you have more fun spending left in your account each month.
As we noted earlier in the post, $46,000 a year is below the average income that you would find in the United States. Thus, you have to be wise in how you spend your money.
What a $46,000 lifestyle will buy you:
If you are debt free and utilize smart money management skills, then you are able to enjoy the lifestyle you want.
Have some fun money in your budget.
Know being frugal green is helpful to stretch your budget.
You are able to rent in a decent neighborhood in LCOL and maybe a MCOL city.
You should be able to meet your expenses each and every month.
Participate in the 200 envelope challenge.
Ability to make sure that saving money is a priority, and very possibly save $3000 in 52 weeks.
When A $46,000 Salary Will Hold you Back:
However, if you are riddled with debt or unable to break the paycheck to paycheck cycle, then living off of 46k a year is going to be pretty darn difficult.
There are two factors that will keep holding you back:
You must pay off debt and cut all fun spending and extra expenses.
Break the paycheck-to-paycheck cycle.
It is possible to get ahead with money!
It just comes with proper money management skills and a desire to have less stress around money. That is a winning combination regardless of your income level.
$46k Salary to Hourly
We calculated how much $46,000 a year is how much an hour with 40 hours a week. But, more than likely, you work more or fewer hours per week.
So, here is a handy calculator to figure out your exact hourly salary wage.
$46K a year Budget – Example
As always, here at Money Bliss, we focus on covering our basic expenses plus saving and giving first, and then our goal is to eliminate debt. The rest of the money leftover is left for fun spending.
If you want to know how to manage a 46k salary the best, then this is a prime example for you to compare your spending.
You can compare your budget to the ideal household budget percentages.
recommended budget percentages based on $46000 a year salary:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$268
Savings
15-25%
$690
Housing
20-30%
$1052
Utilities
4-7%
$134
Groceries
5-12%
$288
Clothing
1-4%
$23
Transportation
4-10%
$153
Medical
5-12%
$192
Life Insurance
1%
$10
Education
1-4%
$10
Personal
2-7%
$31
Recreation / Entertainment
3-8%
$77
Debts
0% – Goal
$0
Government Tax (including Income Tatumx, Social Security & Medicare)
15-25%
$907
Total Gross Monthly Income
$3833
**In this budget, prioritization was given to basic expenses and no debt.
Is $46000 a year a Good Salary?
As we stated earlier if you are able to make $46,000 a year, that is a decent salary. You are making more money than the minimum wage and close to double in many cities.
While 46000 is a good salary starting out in your working years. It is a salary that you want to increase before your expenses go up or the people you provide for increase.
However, too many times people get stuck in the lifestyle trap of trying to keep up with the Joneses, and their lifestyle desires get out of hand compared to their salary. It is okay to be driving around a beater car while you work on increasing your salary.
This $46k salary would be considered a lower middle class salary. This salary is something that you can live on if you are wise with money.
Check: Are you in the middle class?
In fact, this income level in the United States has enough buying power to put you in the top 95 percentile globally for per-person income (source).
The question you need to ask yourself with your 46k salary is:
Am I maxed at the top of my career?
Is there more income potential?
What obstacles do I face if I want to try to increase my income?
In the future years and with possible inflation, in many modest cities 46k a year will not be a good salary because the cost of living is so high, whereas these are some of the cities where you can make a comfortable living at 46000 per year.
If you are looking for a career change, you want to find jobs paying at least $52000 a year.
Is 46k a good salary for a Single Person?
Simply put, yes.
You can stretch your salary much further because you are only worried about your own expenses. A single person will spend much less than if you need to provide for someone else.
Learn exactly what is a good salary for a single person today.
Your living expenses and ideal budget are much less. Thus, you can live extremely comfortably at $46000 per year.
And… most of us probably regret how much money wasted when we were single. Oh well, lesson learned.
Is 46k a good salary for a family?
Many of the same principles apply above on whether $46000 is a good salary. The main difference with a family, you have more people to provide for than when you are single or have just one other person in your household.
The costs of raising children are high and will steeply cut into your income. As you can tell this is a huge dent in your income, specifically $12,980 annually per child.
That means that amount of money is coming out of the income that you earned.
So, the question really remains can you provide a good life for your family making $46000 a year? This is the hardest part because each family has different choices, priorities, and values.
More or less, it comes down to two things:
The location where you live in.
Your lifestyle choices.
You can live comfortably as a family on this salary, but you will not be able to afford everything.
Many times when raising a family, it is helpful to have a dual-income household. That way you are able to provide the necessary expenses if both parties were making 46000 per year, then the combined income for the household would be $92,000. Thus making your combined salary a very good income.
Learn how much money a family of 4 needs in each state.
Can you Live on $46000 Per Year?
As we outlined earlier in the post, $46000 a year:
$22.12 Per Hour
$177-221 Per Day (depending on length of day worked)
$884 Per Week
$1769 Per Biweekly
$3833 Per Month
Next up is making $50000 a year.
Like anything else in life, you get to decide how to spend, save and give your money.
That is the difference for each person on whether or not you can live a middle-class lifestyle depends on many potential factors. If you live in California or New Jersey you are gonna have a tougher time than in Oklahoma or even Texas.
In addition, if you are early in your career, starting out around 38,000 a year, that is a great place to be getting your career. However, if you have been in your career for over 20 years and still making $46k, then you probably need to look at asking for pay increases, picking up a second job, or finding a different career path.
Regardless of the wage that you make, if you are not able to live the lifestyle that you want, then you have to find ways to make it work for you. Everybody has choices to make.
But one of the things that can help you the most is to create a biweekly budget to make sure you stay on track.
Learn exactly how much do I make per year…
One of the best ways to improve your personal finance situation is to increase your income. Here are a variety of side hustles that are very lucrative. With time and effort, you can start enjoying the lifestyle you want.
As an Amazon Associate and member of other affiliate programs, I earn from qualifying purchases.
Learn how to supplement your daily, weekly, or monthly income with trading so that you can live your best life! This is a lifestyle trading style you need to learn.
Honestly, this course is a must for anyone who invests. You will lose more in the market than you will spend this quality education – guaranteed.
Read my Invest with Teri Review.
If you’ve ever wanted to make a full-time income while working from home, you’re in the right place!
This intensive training combines thousands of hours of research, years of experience in growing a virtual assistant business, and the power of a coach who has helped thousands of students launch and grow their own business from scratch.
Learn how to buy and resell items from flea markets, thrift stores and yard sales. They will teach you how to create a profitable reselling business quickly
…no matter how much or how little experience you have.
Our friends Cody & Julie of Gold City Ventures are experts at creating five figures of passive income selling printables. Learn how to create your online printables business from scratch with our programs and templates.
Are you passionate about words and reading? If so, proofreading could be a perfect fit for you, just like it’s been for me! I’m excited to share how you can create a freelance business as a proofreader, just like I did.
The ultimate discounted bundle of my 4 best-selling courses and WordPress theme on how to build and grow a profitable blog.
Learn the best SEO practices and how to monetize your blog quickly!
Designed as a 101-level course on freight brokerage, you’ll learn the basics of freight brokering in this online course.
This course is designed for freight brokers in any setting, regardless of their employment status.
If you want to start your brokerage, we’ll show you exactly how to do it. If you are an agent or employee of a brokerage, we’ll take you through sales and operations modules designed to help you source more leads and move more freight.
You can make money as a freelance writer. Learn techniques to find those jobs and earn the kind of money you deserve! Plus get tips to land your first freelance writing gig!
This is the perfect side hustle if you don’t have much time, experience, or money.
Many earn over $10,000 in a year selling printables on Etsy. Learn how to get started by watching this free workshop.
The Empowered Business Lab teaches you how to sell your digital products naturally with strategies that just make sense.
Monica helped me find my momentum and my want to pursue my business again.
After taking a second job as a driver for Amazon to make ends meet, this former teacher pivoted to be a successful stock trader.
Leaving behind the stress of teaching, now he sets his own schedule and makes more money than he ever imagined. He grew his account from $500 to $38000 in 8 months.
Check out this interview.
Know someone else that needs this, too? Then, please share!!
Last Updated on February 25, 2022 by Mark Ferguson
Buying one rental property may not make you a ton of money right away. However, rentals can be an amazing investment when held for the long-term and when multiple properties are purchased. There is also the opportunity to buy larger commercial or multifamily properties, which can increase returns as well. With a good rental property, you should be making money every month (cash flow); you should make money as soon as you buy by getting a great deal; you will have fantastic tax advantages, you can use financing which greatly reduces the amount of cash needed; and the property value and rents will most likely go up in value over time.
Rental properties have been a great investment for me. I make more than $100,000 a year from the cash flow on my rental properties after all expenses including mortgages, property management, maintenance, and vacancies. I now have 20 rental properties which are a mix of residential and commercial. I bought my first rental property in December of 2010 for $97k. I started with residential properties but now buy almost all commercial, including a 68,000-square-foot strip mall in 2018.
You cannot buy just any property and turn it into a rental if you want to make a lot of money. You have to buy properties below market value with great cash flow to be a successful rental property owner. Not only do I make money every month from my rentals with minimal work, but my rentals have also increased my net worth thanks to buying below market value and appreciation (I don’t like to count on appreciation, but it is a nice bonus). This is not just a hypothetical article. I have owned rentals for many years, kept track of their returns, and written many articles about what I have learned.
The cool thing about real estate is while I have more than $6,000,000 worth of rental properties, it did not take millions of dollars to buy them.
Why did I choose rentals?
One of my passions is automobiles. I purchased a 1986 Porsche 928 a few years ago, and I absolutely love that car. I also have a 1999 Lamborghini Diablo, a 1981 Aston Martin V8, a 1998 Lotus Esprit Twin Turbo, and a few other cars. In my early 20s, I never thought I could afford any of these cars in my early. However, I started to make decent money as a real estate agent in my mid to late 20s. The problem was I was not saving much money. I just kept spending it. I knew if I ever wanted to get ahead in life and be able to afford these cars, I would have to invest the money I was making. I researched everything I could and decided rental properties were the best investment. I worked very hard to save money to buy my first rental.
As soon as I started buying rentals, I could see the fruits of my labor. I was making money every month from rent, I made money as soon as I bought the house because I bought it below market value, and it was forcing me to save money. I wanted to buy as many as I could, and I knew with steady money coming in every month from the rentals I could someday feel comfortable buying expensive cars.
[embedded content]
Why are rentals a good investment?
Not all properties are a good rental, but if you can find properties that are, they can be an amazing investment. A rental property should have a number of attributes
Cash flow
Good rentals will make money every month after paying all expenses. The expenses should include mortgage, taxes, insurance, maintenance, vacancies, and property management. The cash flow is the rent minus all of these expenses. Some people like to shoot for different numbers, but I always liked to see $400 to $500 in cash flow per property.
Buy below market
I get a great deal on every rental I buy. I don’t want to pay retail when I can pay to 20% to 30% less than retail. It is not easy to get great deals, but it is possible. On almost every house I have ever bought, I got a great deal. That instantly increases my net worth, makes me more cash flow, and looks better on my balance sheet for banks.
Leverage
You can put as little down as 20 percent when buying rentals. You can put even less down when buying a property as an owner occupant and then turning the property into a rental.
Tax advantages
Most expenses on rental properties are deductible or depreciable. You can also depreciate the structure of a rental property, which means you can save thousands of dollars each year on your taxes. You can also complete a 1031 exchange on rentals to avoid capital gains taxes.
Appreciation
Many people only talk about housing prices when comparing rentals to the stock market, but appreciation is a bonus. It is not what you are shooting for when buying a rental property because no one knows for sure if prices will go up or when.
It is not easy to find rental properties that are a good investment. It takes me months to find great deals that make over $500 a month like mine typically have, and they are not available in every market. My typical rental property used to cost between $80,000 and $130,000, and it rented for $1,200 to $1,500 a month. I put 20 percent down on the properties and finance the rest with my portfolio lender. I usually end up spending $25,000 to $35,000 in cash to buy each rental property. Cash flow is not the only benefit of rental properties. I slowly pay down the mortgage every month; I have great tax advantages; and they will most likely appreciate.
I am able to save that much cash from each rental property because I make a very good living as a real estate agent as well as from fixing and flipping houses. I like to have nice cars and a nice house, but I always make sure I am saving and investing money first. There are ways to buy rental properties with little money down, but I think you will get further ahead in life by saving as much as possible and investing wisely.
How much do you need to buy a rental?
I go over the exact cost of a rental property here, but let us assume that it costs $30,000 to purchase and repair one rental. You do not have to invest $90,000 a year to buy three rentals a year because you can begin refinancing rental properties after you own them for a year and take cash out to invest in more rentals. You can also save the cash flow from your rental properties to buy more rental properties. I usually buy my properties for about $100,000, with a four percent interest rate and 20 percent down, which leaves a payment of $381 for principal and interest. Those numbers combined with rents from $1,200 to $1,500 a month leave me with at least $500 a month in income from my rental properties.
How much should a rental property cash flow?
It is not easy to make $500 a month in cash flow from a single rental property. I detail how to calculate cash flow here, and I created a cash flow calculator to help people determine cash flow. Cash flow is not the rent minus the mortgage payment: you must consider many other factors. My rents range from $1,250 to $1,600 a month, and my mortgage payments range from $450 to $650 a month. I have to account for maintenance and vacancies on my rental properties, which leaves me with about $500 in profit each month. I buy my properties for $80,000 to $130,000 and usually make quite a few repairs before I rent them out.
What are the long-term returns for someone with little money?
Investing in rental properties can provide fantastic returns when you have a lot of money to invest. Even if you have little money, you can invest in rental properties. I am going to walk through how many years it will take someone to accumulate one million dollars from investing $7,500 a year into long-term rental properties.
The more money you make and save, the easier it is to make one million dollars from rentals. However, even people who do not make a lot of money can get there, although it may take a little longer. I am going to write out this plan assuming someone has a $75,000 salary and can save 10 percent of their income a year.
When you first start out, $7,500 does not go very far, and it takes a lot of money to buy an investment property. Luckily, there are many ways to buy a rental property with much less money if you are an owner occupant or use some of the techniques I discuss here. In the first year, the best bet is to buy a HUD home or REO that needs some work but will still qualify for an FHA or conventional loan. The key to my strategy is buying houses below market value. HUD or REO houses are a great way to do that. We will assume the investor can buy a house similar to the ones I purchase in my area, which cost around $100,000. There are closing costs that the buyer is charged when they get a loan, but you can ask the seller to pay most of your costs.
Buying as an owner occupant year one
The first step is to buy a house. But you cannot buy just any house; you want to buy a house as an owner occupant that you can later turn into a rental. You also want to get a great deal on a house to gain instant equity. To get a great deal on a house, you may have to buy one that needs some repairs. With a HUD home, you can roll $5,000 of the repairs needed into the loan with the FHA escrow and only put 3.5 percent down for the down payment. If the home needs a lot of work, you could use an FHA 203K loan to roll more repairs into the loan. We will assume this house needs $4,000 in work to qualify for a loan, and you bought a HUD home with the costs rolled into the loan. With an FHA loan, you have to pay mortgage insurance every month and an upfront mortgage insurance premium (which could be $200 or more a month).
With a conventional loan, mortgage insurance is much lower than FHA, and you might be able to remove it after two years. However, you may not be able to roll the repairs into the loan, but you could get the seller to fix some items before closing. If the repairs are cosmetic items, you should be able to get a loan without making the repairs before closing. I will assume the total cash needed to close on this hypothetical house is about $5,000. Hopefully, this house was bought below market value because it needed some repairs and was a foreclosure. Once the house is repaired, it should be worth around $125,000.
Since you bought this house as an owner-occupant, you have to live in the home for at least one year.
Year two
After one year, you have gained about $22,000 in net worth; $125,000 – $100,000 purchase price – $4,000 repairs rolled into the loan + $1,000 gained in equity pay down. In year one, no rent was collected because the home was owner-occupied to get a low down payment. In year two, the house is rented out and you can buy another owner-occupied home using the same strategy. When you try to buy a home right away, you won’t be able to count the rent from the first house as income right away. It is best to buy houses priced low enough that you can qualify for two houses at once to make this work. Otherwise, you may have to wait up to a year for the rent to count as income and can buy again.
You can only have one FHA mortgage at a time, so this time you have to get a conventional loan with 5 percent down. In the second year, you have saved up another $7,500 from your job and have $2,500 left over from the first year for a total of $11,500 saved. The second home also costs $100,000, and the seller pays 3 percent closing costs. The down payment needed is $5,000, and $5,000 in repairs are needed on this second house. The total cash needed to buy an owner-occupied home is $10,000 and the repaired value is $125,000.
The first house is rented out for $1,300 a month (which I will do all the time on a $100,000 purchase), and the payment is $550 with taxes and insurance. Add vacancy, maintenance, mortgage insurance and we’ll assume $300 a month in positive cash flow.
Year Three
In the second year, you made $25,000 from buying house number two (equity) and made $3,600 from cash flow. You also made $2,500 from equity pay down on both loans (I am assuming each loan will pay down $500 more each year). In year two, all the savings was used from year one, but you saved $7,500 and made $3,600 in cash flow for a total of $11,100 savings. Buy another house using an owner-occupied loan and use $10,000 of cash. Net worth increases to $53,100 after adding the equity pay down, cash flow and equity gained in the purchase of a new home.
The second house is rented out again using the same figures, although the mortgage insurance may be less because we are using a conventional loan instead of an FHA loan.
Year Four
Another house is bought below market value in year four. Cash flow increases to $7,200 a year plus $1,100 in previous savings and $7,500 saved this year. You now have $17,300 cash saved up before we subtract another $10,000 for the purchase of a new house as well as cash for the repairs. Net worth has increased $25,000 on the purchase plus $4,500 in equity pay down. The total net worth increase is now $90,800 for the last four years.
You own four houses and three of them are rented out. At this point, you may be able to remove the mortgage insurance on the conventional loans that have been held for two years, but I am not going to in my calculations to keep things simple and conservative.
Year Five
In year five, we repeat the entire process again and come up with the following numbers. Cash flow increases to $10,800 and previous savings $5,800 and $7,500 saved up equals $25,600 saved cash. The investor purchases another property and uses $10,000 in cash to leave $15,600 in his cash account. Net worth increases by $7,000 for equity pay down: $10,800 for cash flow and $25,000 for the purchase of a new property. The total increase in net worth is now $133,600.
You may have noticed this investor just mortgaged his fifth house. For many people, getting a loan on more than four houses is very difficult. However, the investor is buying houses as an owner occupant, which makes it much easier to get a loan.
Year Six
The same process is repeated all over again. Cash flow is $14,400, previous cash is $14,100, savings equals $7,500 for $37,500 cash minus $10,000 for a new purchase. The investor has $27,500 left in his bank account. He increases his equity pay down to $13,500, has an increase of $25,000 in net worth from a purchase, and an increase in net worth from cash flow of $14,400. He now has increased his net worth by $186,500.
Year seven
In year seven, the seventh house is purchased. Cash in the bank equals $26,000 from previous savings, $18,000 in cash flow, and $7,500 in new savings, which totals $53,000. You are now able to buy two properties this year! Buy another owner-occupied property using $10,000 and an investor-owned property.
To purchase an investment property, we need to put at least 20% down, and we still need to make repairs. We are buying below market value still, so we are going to assume we are adding $25,000 more a year in equity and $3,600 more a year in cash flow. Estimated costs for down payment and repairs is $32,000 to buy an investment property. You have $11,000 of cash left after buying two properties this year. Net worth increased by $60,500 after adding the usual amounts to total $247,000.
Year eight
Year eight is very exciting because we get to add two properties into the mix instead of just one. With the extra houses added, increased cash flow, and continued equity pay down, our net worth increased $98,200 in just one year! Total net worth is now $345,200, and you are making real progress! You have $42,200 saved up after buying another house in year eight as an owner-occupant, so you can buy another investment property, but won’t, because our margins will be too thin with only a couple thousand in savings.
Even though you are still making only $75,000 a year, you increased your net worth by almost $100,000 a year. There are not many people who can increase their net worth by more than they make in a year!
Year nine
In year nine, you are adding $26,500 in equity pay down, $28,800 in cash flow, $25,000 in built-in equity with purchases, for a total net worth increase of $80,300. Your total net worth increase over nine years is now $425,500. You also have $60,000 saved up after paying for one house as an owner occupant, which is enough to buy another investment property, leaving $26,500 cash left over!
Year ten
In year ten, you have enough cash to buy two more properties and have $28,000 in cash left over. Net worth increases by $114,500, bringing us up to a total increase of $540,000.
Year eleven
You can buy two more properties and increase your net worth by $129,200 for a total of $669,200. Cash flow is at $43,200 a year, and there is $36,700 of cash left over after buying two more properties. You could buy a third house this year but decide not to stretch your limits. You need to make sure you have plenty of reserves for the rentals.
Year twelve
This year, you buy three houses because there is $94,600 in cash available. After buying the three houses, there is $22,100 cash left in savings, equity was paid down, and $44,500 and $50,400 in cash flow was generated. Total net worth is now $814,100! You are getting closer to making one million dollars investing in real estate!
Year thirteen
You have increased your net worth by $190,200 this year because you bought three houses last year. The total net worth increase is now $1,004,300! Your actual net worth will be higher than this because I did not calculate savings from your income into the net worth, just the gain from buying rental properties. Cash flow is now $61,200 a year, and you have paid off $54,000 of equity in one year!
You own 16 rental properties which are producing over $60,000 a year! The incredible part is we did not increase the rents at all, even though they are likely to go up over thirteen years. We assumed there was no appreciation, even though there likely will be over that time. Due to the tax advantages of rentals, you are probably taking home as much in passive income from your rentals as you are from your job.
Things we did not consider
This was a very basic calculation for how to make one million dollars investing in rental properties. It would take a book to go through all the variables and possible roadblocks that might come into play. Here are a few items we did not consider, which would have an impact on the time it takes to reach one million dollars in increased net worth.
Inflation will increase the prices of homes and wages as well as rents. While the investor has to pay more for houses each year, he will also be making more and saving more. The biggest factor is the rent increases. His rent on the first houses he buys will increase as time goes on, but his payments will stay the same. His cash flow will increase greatly as time goes on, which we did not account for.
Taxes were not accounted for either because that gets very complicated. The cash flow the investor is making would be income, but the investor could offset that with depreciation from the rental properties. I assumed those two factors even themselves out.
Investment property purchases had 20 percent down, where the owner-occupant purchases had 5 percent down. There should be an increase in cash flow on the investment property purchases because of the lower down payment, but I left them the same to make the math easier.
Refinancing was not considered either, but the investor could easily have refinanced a couple of properties to get more cash out to buy more rental properties. This would have increased cash flow and net worth due to the increased number of properties purchased.
Obtaining more than 4 or more than ten mortgages can be difficult. I am assuming the investor is able to get as many loans as possible with a lender. I can have as many loans as I want with my portfolio lender, but many people cannot. This would be a roadblock once he reached ten financed properties.
Buying owner-occupied properties each year is possible but may not be realistic. Moving thirteen times in thirteen years may put a bit of stress on the family!
I also assume the investor manages his homes himself, which is doable in the beginning but it maybe tough when he gets ten homes or more.
How Did I Build a Rental Property Portfolio
I have 20 rentals now, but I did not buy them overnight. I started in 2010 and slowly bought them over the last 9 years. I bought 1 in 2010, 2 in 2011, 2 in 2012, and kept building from there. I worked very hard to make a great living as a real estate agent, but I also used real estate to buy more rentals.
I bought my first rental by refinancing my personal house and taking cash out of it. I also refinanced some of my rentals along the way so that I would have more capital to buy even more rentals. I was lucky that our market appreciated so much, but I also bought every rental property way below market value, which allowed me to take cash out when I refinanced.
I stopped buying residential rentals in 2015 because the market in Colorado became too expensive. However, I was able to invest in commercial rentals in my area and cash flow on them. There are a lot of different ways to invest in real estate!
[embedded content]
How much have my rentals made me?
I put together some stats to show how much rentals made me after four years of owning them. It has been a few years since then, and things have gotten even better! At the time, I had bought 11 rental properties. After doing some calculating, I discovered my rental properties have appreciated and been bought cheap enough to produce a gain of $600,000 since December of 2010! It is important to remember that net worth is all on paper, and I would not realize $600,000 in profit if I decided to sell all of my rental properties today. I would have to have selling costs, and I would have a large tax bill if I sold my rental properties.
How much equity have I built with rentals?
One thing I have done with every rental property I buy is buying them below market value. I try to buy my properties at least 20 percent below the current value, and if a home needs repairs, I want that rental property worth 20 percent more than the price I paid plus the cost of the repairs. For example; if I buy a rental for $100,000 and it needs $20,000 in work, I want it to be worth $144,000 or more when I am done repairing the home ($100,000 + $20,000 = $120,000 * .20 = $144,000). That means I usually gain at least $20,000 in net worth on every rental property I buy. The 11 rentals I have bought have gained at least $220,000 (I buy many properties at more than 20 percent below market) just by buying homes at the right price.
I also have been lucky that prices have increased significantly in Northern Colorado in the last few years. I would say lucky for the sake of calculating net worth, but the increase in prices has made it harder to buy cheap rental properties with great cash flow. If you want to know how much my houses have appreciated, I broke down each rental and how much money it has made below.
Rental 1
I bought my first rental property for $96,900 on 12/5/2010. At the time I bought it, I knew it was worth at least $125,000, which is not a huge spread between the buy price and fair market value, but the home needed less than $2,000 in repairs.
The house is now worth at least $165,000 and most likely more. I had it appraised earlier this year, and the appraisal was $165,000 and our market values have increased since that time. If the house is worth $165,000, then my net worth increased about $66,000 after you subtract the repairs. The home was rented out for 1,050 a month when I first bought it and now is rented out for $1,400 a month.
Rental 2
I bought rental property number 2 for $94,000 on 10/5/2011. This home needed much more work than number one, and I spent about $15,000 repairing the house. At the time I bought this house, I thought it was worth $140,000 after it was repaired, and this house is now worth around $175,000. That leaves me with a net worth increase of about $66,000 on this property as well.
This house has been rented to my brother-in-law since I have owned it. The rent has been steady at $1,100 the entire time but could be $1,400 to $1,500. My brother-in-law has a house under contract and will be moving soon.
Rental 3
I bought my third rental property for $92,000 on 11/21/2011. This house needed repairs, and I spent about $14,000 getting it ready to rent. At the time I bought this house, I thought it was worth $135,000 fixed up, and this house is now worth around $170,000, which creates a net worth increase of $64,000.
This home has been rented to the same tenants for $1,250 a month, but we just raised the rent this month to $1,300 a month. It would probably rent for $1,400 to $1,500 to a new tenant.
Rental 4
I bought rental property number 4 for $109,000 on 1/25/2012. This home also needed about $14,000 in repairs before it could be rented. At the time I bought this house, I thought it was worth $145,000. This house is one of my most valuable rental properties and is worth $185,000 in today’s market. That leaves a net worth gain of $62,000.
This home was rented for $1,300 up until this year when I rented it to new tenants for $1,500 a month.
Rental 5
I bought rental property number five for $88,249 on 12/14/2012, and it needed more repairs than the others. The market had definitely begun to improve at this point, and finding a home that was under $100,000 was very tough. This home was a good deal, even though it needed $18,000 in repairs. I thought it was worth around $130,000 when I bought it, and I now think it is worth $165,000. That leaves a net worth increase of $59,000.
This home has been rented to the same tenants for $1,200 a month.
Rental 6
I bought rental property number six for $115,000 on 3/7/2013. This house needed about $15,000 in repairs, and I thought the property was worth about $150,000 after it was fixed up when I bought it. It is now worth $170,000, and that leaves a net worth increase of $40,000.
This home was first rented for $1,300 a month until earlier this year it was rented for $1,400 a month.
Rental 7
I bought rental property number 7 for $113,000 on 4/18/2013. This house needed only $9,000 in repairs, and I thought it was worth $155,000 when I bought it. This neighborhood has done great, and the home is now worth $185,000, which leaves a net worth increase of $63,000.
This home has been rented for $1,400 a month since I bought it.
Rental 8
I bought rental property number 8 for 97,500 on 11/18/2013. The home needed $15,000 in repairs, and I thought it was worth $150,000 once fixed up. It is now worth $165,000, and that leaves a net worth increase of $52,000.
This home has been rented or $1,400 a month since I bought it.
Rental 9
I bought rental property number 9 for $133,000 on 2/14/2014. This home only needed $4,000 in work before it was rented, and I thought it was worth $155,000 after it was repaired. I think it is worth $165,000 now, and that leaves a net worth increase of $28,000.
This home is rented for $1,400 a month.
Rental 10
I bought rental property number 10 for $99,928 on 4/13/2014. The home only needed $3,500 in repairs before it was rented, and I thought the home was worth $125,000 when I bought it. I think it is worth about $130,000 now, leaving a net worth increase of $26,500.
This home is rented for $1,250.
Rental 11
I just bought rental property number 11 on 7/24/2014. This house will need about $15,000 in repairs, and I paid $109,318. I think this house is worth $155,000 repaired, leaving a net worth increase of $30,000.
I think this home rents for $1,400 a month.
What is the total gain?
If you add up all these numbers, my total net worth has increased by $556,500, but these numbers do not tell the entire story. I had more costs than I listed when I first bought these houses, but I did not go back through each closing file to get those exact costs. On many of these properties, I had the seller pay some closing costs, which covered much of my buying costs. I also had some carrying costs while I was getting the properties repaired and they were not rented out yet. However, I also did not include any of my cash flow or the money I made on these properties since 2010. I used all of my cash flow to pay off rental property number 1, which added up to over $70,000. That $70,000 in cash flowdefinitely covers all the closing and carrying costs I had on each property and went directly to increasing my net worth by paying off a loan. Speaking of paying down loans, I did not include the equity I have gained over the last 3.5 years by paying down my loans. I have paid down thousands of dollars of loan balances with regular payments on my rental properties.
Net worth is not money in my pocket but what I am worth on paper. Even though it is cool to see this number increase over time, this money is not all readily available. I would have to sell my rental properties to see this money, and I would not see all of it. There would be selling costs when I sell the properties and taxes owed once I sold them. Since I am using the depreciation on the rental properties to save me in taxes, I would have a higher than normal tax bill because I would have to recapture that depreciation.
What about in 2019?
I have 20 rentals that have increased my net worth about $3,000,000 in the last 9 years. I have gotten lucky that Colorado has appreciated like crazy, but they were still awesome deals even without that appreciation. They make me about $13,000 a month after all expenses. The cool part is I have spent less than $350,000 on the properties after refinancing some to take money back out. Talk about an amazing investment!
You can see all my rentals here.
My book on making money with rental properties
I provide a lot of information on my blog and YouTube channel, but I also have written six books. My book Build a Rental Property Empire has been a best-seller for years. It goes over everything I do to find, finance, repair, manage, and even sell my rentals. I also added a commercial chapter to go over that aspect as well. You can find the book on Amazon as a paperback, audiobook, and Kindle. Build a Rental Property Empire: The no-nonsense book on finding deals, financing the right way, and managing wisely.
Conclusion
It can take time to make a lot of money with rentals, but it is possible. Over the years I have bought a 1999 Lamborghini Diablo, a 1998 Lotus Esprit, a 1981 Aston Martin, and more thanks to the rental properties. The rentals have also allowed me to be aggressive with my house flipping business because I know I have that cash flow coming in every month. We flipped 26 houses last year!