This is a guest post from John Forman from The Essentials of Trading. Forman is the author of a book by the same name. He has been a trader of the stock and other markets for over 20 years, and is a professional stock market analyst for Thomson Reuters.
The wealth building potential of the stock market is enormous. I think we all realize that. The long-running debate, though, is whether one is better off investing in individual stocks (or funds that do just that), or whether it’s best to just put your money in an index fund. Most funds fail to beat the market, so it would seem index funds are the better choice.
While it is certainly true that index investing has some advantages, and some mutual funds do perform better than the indices, no index or fund will ever offer the upside potential of investing in individual stocks. It’s a matter of math.
Indices and funds include many stocks which move in all different directions. One of those stocks could double in price for the year, but because most others in the collection will do much less well, the index’s or fund’s performance will be much lower than that one stock’s gain. An investor who held that stock by itself, though, would have done quite well.
Of course you need to be able to find the stocks that will beat the indices and funds.
How Do I Find Good Stocks? The requirements for success in the stock market are much like the requirements for success in any other undertaking. Proper preparation is one of them — potentially the biggest — and a major part of preparation is having a firm objective in mind. As an investor, that normally means either seeking capital appreciation or pursuing income, or some combination. For the purposes of the discussion here, I will focus on the capital appreciation.
Another part of the equation is timeframe. I’m not talking about how long you have to retirement. There’s plenty of literature in financial planning circles about how you should structure your investments from that perspective. What I’m referring to here is how long you will expect to hold any given stock position in your portfolio.
Are you a patient long-term buy-and-hold investor who will have no problem sitting through the inevitable ups and downs of the market? Or are you someone who wants more action, doesn’t have the patience to hold stocks for years at a time, and/or cannot stomach the idea that at points your positions could go well against you for long periods of time?
You may not always be one or the other. It is, however, important to know which mode you are in when you are looking to pick good stocks. A lot of stock market players get themselves in trouble because they go into a position thinking they are one type of player only to change their minds once prices start moving.
Fundamental Analysis If you are in the first category, then your focus in trying to find good investment stocks is to look at the big picture. You are Warren Buffett. You look at the company and its management team. You look at its business and, in many cases, the broader economy. What you are trying to identify is a company which will steadily increase in value over time.
How do you do that? By thinking about what it takes for a company to grow and profit in a sustained fashion.
What do companies like that have? They have strong management teams who know what they are doing, who have a long term view and who aren’t worried about the quarter-to-quarter results or stock price fluctuations. They are in growing business sectors (or niches) where the competition isn’t so intense that no one can really make any money.
This sort of approach to looking at companies is generally referred to as fundamental analysis. Fundamentals are the underlying elements that determine the long-term growth and profitability of a company.
The idea is that you are giving your money to some really capable people and having them put it to good use in their business. Then you let them do their thing in the way they best see fit. So long as they continue to do good things and keep the business on track for positive growth in value, you stay invested. Maybe somewhere down the line you will cash out your investment. Maybe you’ll leave it to your kids or donate it to charity. Whatever the case may be, you would expect the value of your stake in the company to have grown nicely in value by that time.
Security Analysis by Benjamin Graham and David L. Dodd is the classic text for stock market fundamental analysis. You can also find a brief overview at StockCharts.com.
Technical Analysis Now, if you are in the second category where you’re not just going to buy a stock and lock it away, you need to think more specifically about your holding period. By this I don’t mean to imply that you will hold a stock for an exact period of time and that’s it. I just mean you should have an idea of how long you would expect to be in the position. That could still be years, or it could be months or weeks.
The advantage of the long-term investor is that they need not worry about the fluctuations in the price of the stock. They are investing on the basis of the long-term growth of the company with the assumption that the stock price will generally follow along at about the same pace.
Less long-term players (often referred to as traders) have to be cognizant of the intermediate and shorter-term price action. Generally speaking, the shorter your expected holding time horizon, the more you will have to focus on the price action. This is because the fundamentals mentioned above are usually slow moving elements which play out over the longer timeframes. They don’t change quickly, so they can’t really influence short-term price movements much.
What I mean by that is stock prices can move in the short-term on a great many factors. It could be news, economic data, changes in interest rates, the general market environment, and lots of other things. Just because a company is making money hand over fist doesn’t mean the stock price will be rising. If the company continues to do that, the stock will probably move higher eventually, but in the meantime other factors could cause it to go sideways or to even fall. This is something that baffles a lot of new investors.
Focusing mostly on price moves you into the realm of technical analysis. This approach seeks to identify patterns of price movement in the market for the purposes of determining likely future direction. This is also referred to as market timing, which basically means seeking to define good points at which to buy and sell. A lot of stock investors use fundamental analysis to find good companies, then use technical analysis to try to pick the best time to buy the stock.
Technical Analysis of the Financial Markets is widely considered the ultimate source on the subject. StockCharts.com offers an introduction to technical analysis.
Value Investing To this point you’ll notice that I haven’t used the term value investing yet. Many people would refer to Warren Buffett as a value investor, and as such would put value investing in the long-term investing category.
Value investing need not be a “buy it and bury it” type of approach, however. In fact, I’d guess that most people consider it the process of identifying stocks trading out of line with the value of the company in question. They use any number of metrics to determine what a company’s stock should be worth. If the stock isn’t close to that value, they will either buy it or sell it in expectation that it will eventually get back in line. In most cases, once that happens, the stock position will be exited.
This probably all sounds very familiar. You’ve no doubt heard of Wall Street analysts putting out price targets and ratings and such. They generally use fundamental analysis to come up with what they think is the value of the company right now (adjusting it for new information, of course). Then they look at current price to see how it matches up with what their valuation calculations tell them.
If you’d like to learn more about value investing, consider Benjamin Graham’s classic, The Intelligent Investor. The Motley Fool has an interview with Bruce Greenwald about the three steps of value investing.
It Takes Work Regardless which type of stock market player you are, there are no approaches which don’t require effort on your part to pick the good stocks. Even if you have someone giving you recommendations, you should still be doing your own due diligence to see if they really fit in with what you are trying to do in the market.
Also keep in mind that no matter what timeframe investing/trading you do, you should always take the longer-term view. It’s extremely unlikely that any one stock position is going to make you rich in a short period of time. If you try to score it big on any one trade you’re probably going to end up losing a lot of money. Wealth accumulation in the markets is best sought by steady growth, putting the power of compounding to work in your favor.
Our friends have a profound effect on our personal finance habits. Some friends can lead us to spending and to debt. Others offer insight into the virtues of thrift. For me, my friend Sparky has been the latter. Through his example, I learned that frugality can help me achieve my goals.
“Develop a plan that is so amazing, so glowing, that you are willing to walk blurry-eyed to work every day to make the money necessary to reach the light.” — Sparky’s advice to GRS readers in 2006
After my friend Sparky graduated from college, he drifted. He couldn’t hold a steady job, and he didn’t stay in one place for long. He traveled to Mexico. He moved to New England. He lived in various cities in Oregon and Washington.
“I don’t know how you can do it,” he told me once when he saw our new house. “You have a home and a wife and the same job you had five years ago. I’d hate that.” He lived as a First World nomad.
Choosing Freedom
I visited Sparky once in early 1996. I stayed overnight at his apartment in Eugene while I played in a nearby chess tournament. I was amazed by his Spartan lifestyle. He had no television. He had few books and little furniture. Most of what he owned had been purchased second-hand. His refrigerator was almost completely empty. (In my memory, it contained only two items: a carton of milk and a bottle of ketchup.) Sparky’s only indulgence seemed to be a collection of bootleg U2 CDs.
“How can you live like this?” I asked him. “Where’s all of your Stuff?”
Sparky smiled at me. “I don’t need a lot of Stuff, J.D. The Stuff is not important. To be honest, I don’t know why you have so much Stuff. How do you live like that?”
I didn’t know what he meant at the time. To me, life was all about the Stuff. I had hundreds of CDs and thousands of books. I had a TV, a stereo, a house, and a car. I wanted more. Sparky had none of these, but he had something I did not. Sparky had freedom. His frugal lifestyle allowed him to save and invest. I marveled at how he squirreled away his money. I didn’t understand how he managed it. I made at least twice what he did, but he had money in the bank and I had none. Instead, I had $20,000 in debt and was taking on more every day.
For some reason, I could not see the connection between Sparky’s thrifty lifestyle and his financial success. I could not see the connection between my own profligate ways and my mounting debt. I was blind.
The Razor’s Edge
During the summer of 1997, Sparky and I went for a hike. As we walked, we talked. He told me about his plans and his goals. He was living in a small town in northern Washington, working two full-time jobs, a part-time job, and getting free rent in exchange for housesitting with an elderly homeowner. “I’ve only had five or six days off in the past eight months,” he said.
“That seems crazy,” I said. “Why are you working so hard?”
“I want to travel around the world,” he said. “You know that I don’t have a lot of Stuff. There’s a reason for that. Material possessions tie a person down to one place. I can’t travel if I have a house and a car and all of that other Stuff.”
He told me about the trip he had planned. He had a one-way ticket to Thailand. From there, he hoped to travel to India and then Israel, but he didn’t have any sort of agenda. “I’m just going to go,” he said. “I’m going to travel as long as my money holds out.”
“You sound like Larry Darrell,” I said, referring to The Razor’s Edge, W. Somerset Maugham’s 1944 book about a young American disenchanted with the way of the West. “Larry lives like a pauper, but is able to loaf around Europe and India while searching for enlightenment. It’s a great book. You should read it.”
“Maybe I will,” he said. And then he added, “Do you want to come with me?” Of course I did, but I couldn’t. I was in debt. I had no savings. I couldn’t afford to drop out of Real Life for five months. How would I pay for all of my Stuff?
Sparky went on his trip. He backpacked across the world alone, and he loved it. He sent me postcards from stops along the way: from Thailand and India, from Nepal and Israel and Jordan and Egypt. He was gone for five months. Because he was not burdened by Stuff, he returned to a financial position similar to the one he had left. He didn’t have a mortgage or other debt. His savings and investments were still intact. He had lived for five months without an income, it’s true, but he’d spent exactly what he budgeted, and he’d had the experience of a lifetime.
Quiet Wealth
When Sparky got back, he settled down to a more normal way of life. He got a real job. He even bought a house. Still he continued to pinch his pennies, spending only on the things that really mattered to him. Eventually, I began to see the connection between his lifestyle and his quiet wealth.
When I started Get Rich Slowly, Sparky was enthusiastic. He talked to me about my newfound appreciation for personal finance. He shared his favorite books, his favorite tips, and his favorite mutual funds. A few of our conversations even became fodder for GRS stories:
Money blueprints: What our parents taught us about money
An entrepreneurial leap of faith
A brief conversation about money
Whereas I had once viewed Sparky’s ascetic lifestyle as a little strange, I began to understand it as a means to an end. Perhaps I couldn’t be as frugal as he was, but I could still learn from some of his lessons. We had some great conversations about money and about goals and about the future. I looked forward to learning more from him.
That’s not going to happen.
The Last Lesson
Sparky died unexpectedly last week. We had been close friends for 25 years, and he was an important part of my life. He challenged me. He believed in me more than I believe in myself. I cannot say that Sparky was without fault. Like anyone, he had his quirks. But on the whole, he was a positive influence in my life, and when it came to money, he was a shining example of how to live right. I’ll never have the chance to learn from him again.
Please, my friends, always remember that true wealth has nothing to do with money. True wealth is built from friends and family, from experiences and relationships — it is derived from a life filled with meaning. Without these things, money means nothing. Do me a favor this week, and spend some time with the people you love.
Disability insurance is the most underrated type of insurance, and one that I routinely would see clients skip. Who ever thinks they will become disabled?
Hard truth – According to some statistics from the Council for Disability Awareness, 1 in 4 workers who are 20 years old will be disabled before they retire. That’s a shocking number for most people to consider. If you can’t perform your job, you can’t earn money, and that’s where a disability insurance plan can save the day.
The best disability insurance companies make it easy to get a quote online. Below you can quickly get a quote from top rated disability insurance companies we recommend, or keep reading to learn more about disability insurance and its uses.
Table of Contents
Quotes From Top Rated Disability Insurance Companies We Recommend
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#1
Quotes from the top disability carriers to ensure you find the best rates
Helps thousands of consumers apply for disability insurance each year
Rated Excellent on TrustPilot
Benefit terms range from 3 months to age 67
Choose your waiting period
Multiple riders add flexibility to your policy
#2
Benefit periods from as little as 2 years or all the way to retirement age
Family care benefit provides coverage for up to a year if policyholder has to take off work to care for a child, spouse, or parent
10% discount to business owners and an additional 10% to preferred occupational classes.
Offers the option of Full Coverage for Mental/Nervous disabilities or a 10% discount for a 2 year limitation.
Rated A (Excellent) by A.M. Best for financial strength
What is Disability Insurance?
The idea behind disability insurance is simple.
It operates similar to a traditional life insurance plan, but instead of paying out upon your death, it pays out if you become disabled.
Coverage for these plans can vary in the size. Just like with other kinds of insurance plans, every disability policy is different.
If you already know what you want and just want to browse different rates from several carriers, click here.
Some plans are going to replace 45 %of your income, while others are going to give more replacement at 65%.
The more replacement coverage you want, the more you’re going to pay for your plan.
The Differences with Workman’s Compensation
When an employee suffers an injury on the job, oftentimes their employer will compensate them through worker’s compensation.
It is important to understand the difference between disability insurance and worker’s compensation – because the two are not the same thing.
The key difference between workers’ compensation and disability insurance is that workers’ compensation (or workers’ comp) pays for injuries that are work-related. Employers will obtain workers’ comp insurance in order to pay for incidents that occur on the job.
If workers sustain injuries on the job, it is oftentimes up to the employer to pay for the person’s medical bills, as well as for the individual’s lost wages if the employee must take time off work because of the injury.
An employee who collects payment via workers’ comp will typically, however, not have a long-term disability, but rather a temporary injury from which he or she will soon return.
On the other hand, disability insurance pays for a percentage of a person’s earnings if the insured is not able to work due to an injury or illness – regardless of whether that injury or accident happened at work or elsewhere.
In addition, if the disability insurance policy is an individual policy (versus an employer-sponsored group plan), the insured will be covered under the policy regardless of who he or she is employed through.
According to the Council for Disability Awareness, less than 5 percent of disabling accidents and illnesses are work related.
This means that the other 95 percent are not – and that these other 95 percent are also not covered by workers’ compensation insurance.
What About Social Security Disability Benefits?
It can be extremely difficult to qualify for Social Security’s disability benefits. For example, Social Security will only pay benefits if a person is considered to be totally disabled. This means that the individual cannot do work that they did previously, nor can they do other jobs either.
In addition, the person’s disability must have lasted, or be expected to last, for at least one year or result in death.
An individual must also have collected enough work credits in order to qualify for Social Security disability benefits.
You can take a look at the 2019 Social Security Administration limits and rates for OASDI and social security here.
The number of credits will be dependent on the age that the individual is when he or she becomes disabled.
With that in mind, the importance of disability insurance becomes even more clear.
This type of insurance can provide you with the additional funds that you need to help pay living expenses – without the need to dip into savings, retirement assets, or worse yet – use credit – for the purpose of paying day to day bills until you are back on the job.
If Social Security deems that a person’s situation qualifies, there is still a five month waiting period before benefits are paid.
This, too, can create a financial hardship for many people in terms of paying living expenses – especially if there are added medical costs due to the illness or injury that has been suffered.
So, we know Social Security won’t give the money you need and workman’s comp probably won’t cover it, so now what?
This is why you should explore a private disability insurance policy.
Types of Disability Insurance
The two main types of coverage are long-term disability and short-term disability.
You can probably guess from the name, but short-term policies are designed to cover employees for a much shorter time, anything shorter than two years.
Long-term disability, on the other hand, is built for anything past two years. A long-term disability insurance policy could continue to pay out for the rest of your life if it’s needed but typically runs from 5-10 years.
Some of the common causes for short-term disability insurance include:
having a baby
a severe illness
a major injury.
Long-term disability could include a lot of things, but some common causes are:
cancer
muscular disorders
cardiovascular complications
or serious injuries
Long-Term Disability vs. Short-Term Disability
Aside from the obvious, there are a few key differences between long-term disability and short-term disability.
One of those is the waiting period for a payout.
With short-term, policyholders can start receiving weekly checks as quickly as a 1 to 7 days after you file a claim for the policy.
With a long-term disability insurance policy, on the other hand, it can be anywhere from 90 days to 180 days.
If you’re looking at the cost difference between the two plans, short-term policies are going to be significantly more affordable than its long-term counterpart. Long-term plans can give you years more coverage which could translate to thousands and thousands of additional coverage from the insurance company.
Another key difference between the two kinds of plans is how you can get the coverage.
A lot of companies offer their employees short-term disability insurance, but almost no companies have a long-term disability insurance program.
If you want to get the long-term coverage, you’ll have to purchase a plan through a private insurance company. If your company offers any type of short-term disability insurance, you should always enroll in the program.
Group, Individual, Multi-life
Inside of the two main types of disability insurance are several “sub-types” of coverage.
One of those is group coverage.
These are policies which are offered through an employer and are offered to all the employees. Group coverage could be either short-term disability or long-term disability.
Employer-sponsored short-term plans are designed to pay for any disabilities which occur outside of the workplace. Short-term disabilities are much more common than long-term disabilities which could impact you for the rest of your life.
Individual Disability Insurance
If your company doesn’t have any sponsored plans, you can purchase a private policy through an insurance company.
You’ll be required to answer some medical questions and depending on the plan, take a medical exam.
Multi-Life Disability Insurance
When you’re shopping around for a disability insurance policy, you’ll probably come across plans being sold as “multi-life plans.”
The idea of these plans is to get several key people in a business (think of several doctors in a practice) to all apply at the same time with their plan.
The insurance company markets these policies as multi-life so they can offer simpler underwriting processes and pass some of the savings onto the policyholders.
Is Group Disability Enough?
For the employees who are lucky enough to get disability insurance through their employer, you still might be lacking. Just because you have a plan through your job, it might not be enough.
Let’s say you’re not able to go to work because of an accident. You can’t get to your job and pull in your paycheck, are you going to be able to pay for all of your monthly bills without having to make any extreme sacrifices.
To determine if your group disability insurance is enough, you’ll need to do some basic math.
Look at your plan and see how much coverage it provides.
For this example, let’s say it pays 50% of your salary. Now, take a look at your bills and expenses.
If the total of those numbers is more than 50% of your income, then your group disability isn’t enough.
If you’ve crunched the numbers and came to the jarring realization your group plan isn’t enough, the best choice is to purchase an additional individual plan.
Both of the policies can work together, and your individual plan can pick up the slack left behind.
What’s the Difference Between Owner-Occupation and Any-Occupation?
One of the most important things to understand about disability insurance plans are the differences between an owner-occupation plan and an any-occupation plan.
They may sound the same, but they completely change how your plan operates and the coverage it will give you.
First, let’s look at owner-occupation (sometimes called own-occupation protection). Policies with this protection will only pay out if you can no longer to the duties and tasks required to you by your job.
If you’re an electrician, but you can not do the simple tasks required on a day-to-day basis, then an own-occupation plan will pay you the benefits.
Any-occupation policies will only pay the benefits of the plan if you can no longer perform any occupation based on your education and work experience.
As you can tell, any-occupation policies have much stricter rules on the circumstances in which they will pay the policyholder.
Type of Disability Insurance
Description of Disability Insurance
Short-term disability insurance
Provides coverage for a limited period of time, usually up to 6 months, and replaces a portion of your income if you are unable to work due to illness or injury.
Long-term disability insurance
Provides coverage for a longer period of time, typically until retirement age, and replaces a portion of your income if you are unable to work due to illness or injury.
Group disability insurance
Provided by an employer as part of a benefits package, group disability insurance offers coverage to all employees and may be offered as short-term or long-term disability insurance.
Individual disability insurance
Purchased by an individual, this type of disability insurance offers customized coverage and can be either short-term or long-term disability insurance.
Own-occupation disability insurance
Offers coverage if you are unable to work in your specific occupation due to illness or injury, even if you are able to work in a different occupation.
Any-occupation disability insurance
Offers coverage only if you are unable to work in any occupation due to illness or injury.
Residual disability insurance
Offers coverage if you are able to work but have a reduction in income due to illness or injury.
How Much Does Disability Insurance Cost?
Now for the part everyone wants to know, how much is a disability insurance plan going to cost you?
Well, there are a lot of different factors which are going to affect how much the premiums are. It’s difficult for me to give an exact number without knowing your exact situation.
For example, the age of the applicant is going to play a major role in the premium rates. If a 25-year old applies for a policy, it’s going to be significantly cheaper than a plan for a 45-year old.
The general rule of thumb for disability insurance is the premiums are going to be anywhere from 1% to 3% of your gross income.
If you are making $100,000, you can budget for $1,000 – $3,000 every year.
As I mentioned, there are dozens of different factors which will completely change how much you pay.
If you’re a smoker, then you’re going to pay much more for your plan.
If you have a riskier job, you’re going to pay more.
The rule of thumb is exactly that.
How Much Disability Insurance Do You Need?
I alluded to the amount of disability insurance earlier in this article, but now let’s take a hard look at how much coverage you should have.
Not having enough disability insurance protection could cause some serious financial strain if something were to happen.
First, let’s look at your living expenses. If you don’t already have a budget, take some time to look at all of your monthly bills (power bill, water bill, mortgage payment, etc.) and your spending (groceries, gas, etc.).
On top of those monthly expenses, add in a few “unexpected” bills as well. You never know when something is going to break or an extra bill is going to pop up.
You want to have some cushion in your budgeting. Otherwise, you end up living paycheck-to-paycheck.
After you have the monthly expenses number, you can do some subtracting.
If you aren’t working, your expenses are going to look very different than they do now. For example, if you aren’t driving to work every day, you probably won’t be spending as much on gas.
You won’t be spending money on work clothes, and you will probably cut out some additional “entertainment expenses” as well.
Now you have a new number, your monthly expenses minus some tweaks.
The next number you want to add to the equation is any income you’ll make from other sources besides your disability insurance plan.
This category can include any money from your investments, money from your spouse or partner’s job (or a second job if they decide to add another job) and any additional disability income you may qualify for.
If you’re the main income earner in your home, then having disability insurance is one of the most important purchases you can make.
Key Man
For most people, they purchase disability insurance for their family and loved ones. for others, they buy a plan to protect their business.
If you’re one of the foundational workers in your business (ex. an owner, CEO, etc.), then you should consider buying a disability insurance policy for your company.
Key man plans operate a little differently than a traditional disability policy. With these policies, the business pays the premiums for the plan, and if something were to happen to you and you couldn’t perform your job, then the business is going to get the money from the payout.
These policies are a way for the companies to protect themselves against financial struggles if a key person in the business were unable to work because of illness or injury.
The company can use this money to outsource those duties or to hire someone to replace the key person while they are out with the disability.
Disability Insurance for High Income Occupations
There is a certain group of people which disability insurance could have some serious problems.
If you are a high-income earner, the standard disability insurance policy simply may not be enough. Just about every insurance company which sells one of these plans is going to have an income limit.
Regardless of the percentage they replace, they are not going to offer more than that limit.
Typically, these are doctors or lawyers who own their own firms, for example.
Some policyholders may find the insurance company’s limit is below the 60% they offer in income insurance.
If you’re one of these people, there are some things you can do to get the protection you need, regardless of how much money you make every year.
One option is to choose a company who offers higher limits. Each company has different coverage limits on their policy. We can help you shop around until you find one with a high enough limit for your needs.
Another route is to buy two separate plans from different companies. Sure, you’ll pay more in premiums every month, but you’ll have the protection in place if you ever need it.
Where to Get a Disability Insurance Quote
You now know the basics of disability insurance coverage, it’s time to go out and find a policy of your own.
There are more than 40 insurance companies which sell these plans. As I mentioned, they are all different. Some are going to have higher limits, offer a larger percentage, or have cheaper rates.
You need to find a company which suits your needs.
Before you pick a company, compare the rates and plans from several companies. You don’t buy the first house you see, why would you buy the first policy you find?
Sure, you can use your own time to contact those 40+ companies individually, or you can use a tool which will do the dirty work for you.
If you’ve decided you want to get disability insurance or supplement the coverage you already have from work, check out PolicyGenius. They are one of the few companies out there which can gather quotes from dozens of companies for disability insurance, all in one place.
PolicyGenius allows you to tailor your quotes to exactly the kind of policy you’re looking for; the perfect amount of coverage with the proper waiting period.
They know shopping for insurance isn’t easy, but they make it as quick as possible.
FAQs – Best Disability Insurance Quotes
How can I get the best disability insurance quotes?
To get the best disability insurance quotes, it’s important to shop around and compare policies from different insurance companies. You can request quotes online or by speaking with a licensed insurance agent. Be sure to provide accurate information about your occupation, income, and health to receive an accurate quote.
What factors can affect the cost of disability insurance?
The cost of disability insurance can be affected by several factors, including your age, occupation, health status, and the type and amount of coverage you select. Policies with longer benefit periods or more comprehensive coverage may be more expensive.
How much disability insurance coverage do I need?
The amount of disability insurance coverage you need depends on factors such as your income, monthly expenses, and savings. A general guideline is to have enough coverage to replace 60% to 80% of your income, but this may vary depending on your individual circumstances.
Global real estate investment network iintoo has now acquired the assets of RealtyShares as part of a joint venture. The move increases iintoo’s portfolio from $1 billion to $2.5 billion in assets under management. The purchase catapults iintoo into a market leadership position, which will benefit investors via the company’s disruptive approach to crowd-sourcing real estate investments.
With average annual yields of 16.63%* on average, iintoo has proven its disruptive approach effective. The network of iintoo will reach a community of 200,000 registered investors, offering them the opportunity to access premium, highly vetted deals under the company’s expert management. Eran Roth, CEO of iintoo had this to say about the acquisition:
“This event is a watershed moment for iintoo, the industry and investors. The real estate business has historically been an exclusive club, lagging in technological innovation and accessibility for retail investors, but in the last five years, we have seen significant disruption led by forward-thinking startups. Our platform and approach have allowed individual investors to gain access to premium real estate investment opportunities while providing the industry’s first equity protection program.”
RealtyShares was the second largest online real estate investment platform in the United States before the company stopped taking deals in 2018. At that point, RealtyShares had $400 million in equity from its investors. So, order to oversee RealtyShares’ assets, iintoo has formed a joint venture with RREAF Holdings, LLC to take over management activities for the active investment portfolio.
The former and current investors in RealtyShares will now get access to iintoo’s platform and investment opportunities. Shoshana Winter, iintoo’s Managing Director in the U.S, offered this via the company’s press release:
“The iintoo model has transformed the way people think about and invest their money. Our vision is to take the success we have seen to date and continue to offer new and alternative asset classes to our expanded base of investors. We are confident that our innovative investment platform, our equity protection product** and our data-driven, curated approach to delivering premium investment opportunities will make us a leading brand that investors can depend on as they seek new ways to diversify their portfolios.”
Crowd-sourced funding opens new avenues for financing real estate for property owners and developers as well. The iintoo investment portfolio includes income-generating multifamily properties, commercial real estate, retail, and mixed-use properties, with a focus on projects in developing cities, as they have proven to perform well despite economic downturns. Acquiring RealtyShares pushes iintoo into a leading position in this market category, enabling the company to accelerate its global presence in the years ahead.
* The exit annual yield is equal to the ratio between the total profits from the equity investment (before tax) and the total raise (amount invested by iintoo’s equity investors in the project) divided by the investment term.
Phil Butler is a former engineer, contractor, and telecommunications professional who is editor of several influential online media outlets including part owner of Pamil Visions with wife Mihaela. Phil began his digital ramblings via several of the world’s most noted tech blogs, at the advent of blogging as a form of journalistic license. Phil is currently top interviewer, and journalist at Realty Biz News.
SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party registered investment advisers and/or investment adviser representatives (“RIA/IARs”) that have elected to participate in our matching platform based on information … [Read more…]
Whether you got a new job and are looking for somewhere to stash your paycheck, or are just looking for a new bank that better meets your needs, you may have spent some time considering where to open up a bank account.
While there are many private banking options to choose from, not all of them effectively meet customers’ needs. Many Americans are interested in consumer-friendly banks that are accessible and have low or no fees, while others look for banks that have local roots or more ethical behavior than bigger nationwide banks. Still, other Americans are unbanked, meaning that they don’t have access to any checking or savings accounts with a bank or credit union.
What’s Ahead:
What is public banking?
Representatives Rashida Tlaib and Alexandria Ocasio-Cortez have recently introduced legislation that could provide a promising alternative to traditional banks.
The Public Banking Act would establish a grant program that would allow for the formation of state and locally administered banks. While this act wouldn’t establish new public banks in and of itself, it would make it easier for public banks to form and to become insured by the FDIC.
These public banks would operate as nonprofits, and wouldn’t charge any monthly maintenance fees or require minimum deposits. That would make them accessible to citizens who find themselves shut out of the current banking system.
Since they wouldn’t be as focused on turning a profit as traditional banks, public banks could also provide lower interest rates for small businesses and public infrastructure projects, investing in local communities and cutting out Wall Street middlemen.
How does public banking work?
Public banking would function as a public service, like post offices or fire departments. In fact, in many countries, public banking is often directly tied to the postal system. The United States even had its own postal banking system from 1911 to 1966.
Today, there is one public bank operating in the United States, the Bank of North Dakota.
Unlike privately owned banks, public banks aren’t beholden to shareholders or required to turn a profit at the expense of ordinary consumers. Instead, these banks are able to charge lower fees and lend money at lower rates to local consumers and businesses.
Public banks can receive deposits from local and state governments in the form of tax revenue and other government income, and can also partner with existing local banks to fund a variety of projects.
How public banking could affect your finances
For many people, banking with a public bank would be pretty similar to banking with a traditional for-profit bank. Some of the potential benefits of public banking could include providing access to banking for more Americans, investing in local and community projects, and effectively delivering relief funds and government payments.
Helping unbanked and underbanked Americans
As of 2019, approximately 7.1 million American households were unbanked, meaning that no member of the household had a checking or savings account with a bank or credit union. For many Americans, high minimum deposit requirements prevent them from opening an account, while others cite excessive fees and a lack of trust in private financial institutions as reasons why they do not have a bank account. When money is tight, these Americans often rely on alternative services, like payday loans or pawn shops, with high fees and punishing interest rates.
Public banks would charge no monthly maintenance fees and have low or no minimum deposit requirements, making them accessible to many Americans who currently fall through the cracks of the private banking system. Public banking would also provide an alternative for Americans who have bank accounts but are currently dissatisfied with their bank or unable to qualify for other financial products.
Investing in local communities
Because public banks would not be compelled to pursue sky-high profits, they could offer loans at low interest rates to fund local businesses and public infrastructure. These could include projects like affordable housing and renewable energy. Some public banks, like the Bank of North Dakota, also offer low-interest loans to students and other specific groups.
Public banks would cut out the middleman and keep funds local, instead of profiting national banks, executives, and shareholders.
Effectively distribute relief funds
During the pandemic, millions of Americans were eligible for relief funds and stimulus checks to help them weather the turbulent economic times. While some Americans were able to receive funds directly to their bank account through direct deposit, others were mailed paper checks they had to cash, often accompanied by high check-cashing fees. Still, other Americans waited weeks or months for their funds to arrive, during a time when money was tight.
Public banks would be one way to easily and effectively distribute funds to Americans, without relying on private institutions. They would expand access for Americans without bank accounts and would prevent predatory services from taking a chunk out of much-needed relief funds.
Better for the environment
Another way public banks would operate differently than private banks is in their effect on the environment. The Public Banking Act would prohibit public banks from investing in fossil fuel projects, and would instead provide public banks with the capability to issue low-interest loans for environmentally-friendly projects.
This puts public banks in stark contrast to private banking behemoths, who have invested over 2.7 trillion dollars in fossil fuels since 2016, according to a report from the Rainforest Action Network.
A public alternative to big banks
Public banks wouldn’t replace big banks; instead, they’d provide an alternative for consumers dissatisfied with the status quo. This would give Americans the ability to choose between for-profit banks and local, community-driven public banks.
In some cases, public banks could even partner with existing local banks to more effectively distribute funds. Public banking wouldn’t solve all of the financial industry’s problems, but it could provide a more ethical alternative to the current options.
Drawbacks of public banking
While public banks attempt to solve many of the problems of the current banking system, they’re not entirely without flaws. Some potential drawbacks to public banks include potential lack of oversight and insufficient funds, as well as the inherent risk that all banks, public or private, face when it comes to lending money that may not be paid back.
Alternatives to public banking
For now, public banks still aren’t an option for the vast majority of Americans. However, there are some banking options that beat the competition when it comes to consumer-friendly policies, low fees, and ethical behavior.
Credit unions
Credit unions share some similarities to public banks in that they aren’t beholden to shareholders and executives, and often have local roots and programs that benefit the community. Like public banks, credit unions are not for profit, but instead of being owned and operated by local or state governments, credit unions are cooperative institutions owned by members.
Credit unions also often feature lower fees and rates than for-profit banks. Some federal credit unions even offer Payday Alternative Loans, which allow cash-strapped consumers to borrow money at lower rates than predatory payday loans.
Low-fee banks
In recent years, consumer-friendly, low-fee banks have proliferated as an alternative to big banks with exorbitant rates and fees. Many of these banks primarily operate as online banks, with simple websites and mobile apps designed to make navigating the banking process easier for consumers.
Ethical banks
Many big banks make harmful investments in areas like fossil fuels and for-profit prisons. While these investments are good for a bank’s bottom line, informed consumers may be interested in more ethical alternatives.
Companies like Aspiration, Amalgamated Bank, and Beneficial State Bank are B Corp certified, which means that they meet high standards for social and environmental performance, transparency, and accountability.
Some banks, like Sunrise Banks and First Green Bank, are members of the Global Alliance for Banking Values, which is a network of banks around the world that are committed to community investments and driving positive change.
Still, other banks are designated as Community Development Financial Institutions, or CDFI. These banks are dedicated to providing banking access for low-income and marginalized individuals and communities. Banks like City First Bank of DC, Southern Bancorp, and VCC Bank are all CDFIs.
Summary
While the Public Banking Act is still only a bill, it represents a promising alternative to traditional banking for millions of Americans. This piece of legislation would also complement other related policy proposals, such as postal banking and the Green New Deal. In the meantime, there are still a variety of banking options with low fees and ethical investment practices for consumers who qualify.
This is a guest post from Sara, who writes about reaching for a life of greater simplicity and deeper meaning at On Simplicity.
I’m a simple girl and I love simple solutions. That’s why I’ve fallen in love with DRIP investing — it’s about as simple as investing gets. If you’re an investor who likes to set it and forget it, DRIPs are a great weapon to have in your financial arsenal.
What Is a DRIP?
The term DRIP refers to “Dividend Reinvestment Program.” Don’t let the term fool you, though, because DRIPs go way beyond dividends. Essentially, when you open a DRIP account with a company, they’re letting you buy stock directly, cutting the brokerage firm out of the picture. This lets you buy additional stock with any dividends you earn, all without brokerage firms taking a bite of your profit.
The real beauty comes from the added perks of setting up a DRIP account. Many companies that offer DRIPs will also allow you to buy extra shares directly, again cutting out the middleman. Typically, you will need to set up a recurring transaction to get this benefit. In other words, you arrange to buy a certain dollar amount of stock each month (or quarter, depending on the company and plan you choose).
If this is all sounding a bit familiar, that’s because it’s not a new idea. Think of your 401(k): a little bit of money gets whisked away to buy shares of different funds each month. Do you miss that money? Probably not. Does it add up over time? You bet it does. The only difference with a DRIP is that you’re building shares in a single company.
What Are the Benefits of DRIP Investing?
Dollar cost averaging. Even though some people debate its benefits, there are some pretty strong arguments in favor of dollar cost averaging. You can minimize the effects of buying too low or too high, because you’re buying in on a regular basis.
Automated investing. Once you’re signed up, you’re good to go. You don’t have to track the P/E, try to time the market, remember to place more orders, or even fuss with an online broker. DRIPs are hands-down the easiest way to invest in individual company holdings.
Super-low transaction fees. You may get charged a fee for the annual DRIP service (or you may not). For instance, GE charges $12 a year. If you’re set up for an automated stock purchase each month, that’s $1 for a trade. Compared to traditional or online brokerages, that’s a huge savings.
Invest small amounts of money. You don’t have to invest thousands at a time. Some programs let you invest as little as $10 per month. If you’re not ready to invest a large amount, a DRIP account can help you build a solid position in a company over time with very small amounts.
What Are the Drawbacks?
DRIPs are not diversified. The cold, hard truth is that you’re investing in a single company, which always carries some risk. When you contribute to a mutual fund through your 401k each month, you’re buying shares of many companies. If one tanks, you don’t take a huge hit. When you invest your money in individual stocks, there’s nowhere to spread the risk. DRIPs should always be part of a diversified portfolio.
You’re tying up a portion of your monthly income. If your budget is extremely tight, then going without that extra chunk of change can be difficult (but not impossible).
Each company is different and requires a different sign-up process. The initial set-up can be a pain, as you may have to create an account with a third party transfer agent. They’ll need all the traditional information a brokerage would need, so the process is a bit more involved than creating a user name and password. Once you’ve gone through the initial set-up, though, expect smooth sailing.
The selection of available DRIPs is pretty small. This is actually a good thing, though, since DRIPs are ideally suited to blue chip companies that will be around for years to come. These companies, like P&>, AT&T, and GE are perfect for long-term investments, not quick profits.
How Do I Start?
Research the companies that offer DRIPs. The list is growing regularly, so don’t write off a company just because they aren’t on someone’s list.
Research the heck out of any company you’re considering investing in. Are they a good long-term investment? Do all the research you would normally do before any investment, and then do some more. You’re making a long-term commitment to this company, so be sure it’s a stock you’re comfortable going on autopilot with.
Contact the company (their website will usually have enough information to get started) and find out what you need to do to open an account.
Jump through the necessary hoops, provide your bank account info (your money can be pulled directly from your account, just like online bill pay), and you’re in.
A Word on Acronyms
You’ll see DRIPs referred to in many different ways: DRP, DIP (Direct Investment Plans), SPP (Stock Purchase Plans) and OCP (Optional Cash Purchase Plan). Each of these different account types has slight variations, but the DRIP (or DRP) is at the heart of each, and that’s why you’ll see it being referenced most often, and why I’ve used that terminology here in an introduction-level piece.
Again, I’m a simple girl. I’m not claiming to be the expert on DRIPs, just a very satisfied user. As with any investment, you need to do your own research before diving in. For a more in-depth explanation of DRIP investing, check out the Motley Fool’s take or MSN Money’s explanation (the latter piece also does a great job of running the numbers on reinvestment). If you like simple solutions and are a long-term investor, DRIPs are worth a look.
ETFs are tradable funds that investors can buy and sell on stock exchanges all day. They typically hold a basket of assets, such as stocks or bonds, and mirror the moves of another underlying index. Since its start almost three decades ago, the ETF industry has taken the financial world by storm, and there are thousands of different ETFs on the market that investors can choose from.
But each investor is different, and some ETFs likely won’t be a good fit for their portfolio or strategy. Learning to choose or pick ETFs that do fit your strategy can take some practice, but it’s good to have some guidelines in mind.
How Do I Pick an ETF?
There’s no right or wrong way to pick an exchange-traded fund (ETF), but you can follow a process to help you determine which securities may be the best fit for you. It starts with picking an asset class.
Step 1: Pick the Asset Class
Because the performance of an ETF is so closely tied to an underlying index, investors need to first decide which underlying asset class they want exposure to. The main asset classes are stocks, bonds, currencies, and commodities.
Risk is generally inversely correlated to return. So riskier assets have the potential to deliver greater returns, while safer assets tend to deliver reliable, albeit smaller, returns. Stocks are considered to be a riskier, more volatile asset class. Commodities even more so. Meanwhile, bonds tend to be safer but also deliver more muted returns.
Keep in mind, just because an investor buys an ETF that gives them exposure to one asset class, that doesn’t preclude them from buying another that invests in another market. In fact, it’s a healthy portfolio diversification strategy to allocate one’s money into different asset classes, a practice known as asset allocation.
Step 2: Narrow the Focus
Once an investor has chosen their asset class, they can dive deeper within that market. When it comes to stock ETFs, this usually involves picking an industry – like technology or financial – that they’d like to get greater exposure to. Equity ETFs may also focus on a specific attribute a stock can have. Or dividend ETFs, which hold shares of companies with regular payouts.
For bond ETFs, investors can decide between funds that invest in U.S. government-bond versus bonds issued by countries abroad, as well as investment-grade (higher quality) company debt versus high-yield (junk) bonds.
More recently, thematic ETFs have taken off. These are stock funds that tend to be much narrower than the traditional sector ETF. They can focus on a niche subsector, like robotics, electric cars or blockchain, or even modern trends, like the gig economy or working from home.
There are pros and cons to thematic ETFs: while they’re often marketed as a convenient way to wager on an investment story, they also tend to underperform the broader market. Thematic ETFs have also been criticized for being too narrow and not offering the wide breadth that ETFs were originally designed to offer.
Step 3: Explore Different ETF Strategies
ETFs began as a way to provide investors access to broad markets with a single investment. Since then however, the popularity of the industry has led to the creation of numerous different kinds of ETFs, some of which employ complex strategies.
Here are some of the different ETF types:
• Leveraged ETFs allow investors to make magnified bets on different assets or markets. So instead of replicating the move of the underlying index exactly, leveraged ETFs will produce a move that’s 2x or 3x.
• Inverse ETFs let investors wager against an asset, so shorting or betting that the price of a market will go down. So if on a given day, the underlying market goes down, the inverse ETF’s price will go up.
• Actively Managed ETFs invest in assets without following an index. While ETFs are usually a form of passive investing–the strategy of tracking another index–actively managed ETFs are like stock-picking strategies packaged into a tradable fund.
• Smart-Beta & Factor ETFs use a rules-based system — such as stock weightings, valuations, or volatility trends — to choose the investments in a fund. These funds are often considered a hybrid between passive and actively managed ETFs.
• Currency-Hedged ETFs are funds that let investors wager on a basket of overseas stocks, while mitigating the risk that stems from currency fluctuations.
Step 4: Look at ETF Costs
A fundamental reason why ETFs have become so influential is their low cost. Low ETF fees have compressed costs across the board in asset management. The average expense ratio of most ETFs has fallen over time. Expense ratios are a percentage of assets subtracted each year. So, an expense ratio of 0.45% means that the charge is $4.50 for every $1,000 invested each year.
Because the vast majority of ETFs tend to be passive, they tend to be much cheaper than mutual funds, many of which are still actively managed. More complex ETFs like leveraged funds, or actively managed ones, tend to have higher expense ratios. But some passive ETF fees have hit rock-bottom levels.
Step 5: Other Ways to Analyze ETFs
What about how well an ETF has done? Should that matter? While profitability can make an investment look more attractive, it shouldn’t be the only factor investors use when determining which ETF to buy. That’s because in investing, past performance is not indicative of future results.
For ETFs, another key measure of performance is how well it tracks the underlying index. Tracking errors, when a move in the ETF veers from one by the market it’s designed to track, can come up from time to time, particularly in leveraged funds or ones that invest in stocks overseas.
Looking at the assets under management (AUM) can be a helpful way to pick an ETF. A larger AUM can signal an ETF’s popularity, which in turn makes it more likely that it’s liquid, or easy to trade without impacting prices.
How to Find an ETF’s Holdings, Prospectus, and Fact Sheet
Another touted perk of ETFs is their transparency. Investors can look up what’s exactly in a fund by going to the ETF provider’s website and searching for the fund. Contacting the ETF provider directly for this information is also possible. ETF providers are required to update this information regularly.
Securities and Exchange Commission (SEC) regulation also requires that ETF providers make easily available an ETF’s prospectus. The prospectus has information about the ETF including its investment objective, the risks, fees, as well as expenses. For investors interested in an ETF, one of the most important things they can do is research the fund by carefully reading the prospectus.
Similarly, ETF fact sheets act like quick summaries of the fund, giving key information like performance, the top holdings, and other portfolio characteristics. ETF providers typically produce fact sheets every quarter and make them available on their website.
The Takeaway
Choosing an ETF from the thousands out there can seem daunting, but taking a step-by-step approach can help individuals sort through the multitude of options. A key step investors can take in researching ETFs is reading the fund’s prospectus, where they’ll find vital information on the investment objectives as well as potential risks.
Considerations include which asset class an investor wants to invest in; how broad or narrow of an exposure they want; costs — which are usually shown as expense ratios; and lastly, an ETF’s size can give clues on the popularity and liquidity of the fund. One ETF, on its own, can provide some diversification. However, some people choose to use a number of ETFs as building blocks to assembling a well-balanced portfolio.
Ready to invest in your goals? It’s easy to get started when you open an Active Invest account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
For a limited time, opening and funding an account gives you the opportunity to win up to $1,000 in the stock of your choice.
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The rise of online and mobile banking means that the lines between checking and savings accounts are blurrier than ever. Some digital financial platforms don’t even require you to open them separately anymore.
That’s the case for SoFi Checking & Savings, which is essentially a checking and savings account in one convenient package. If you’re not satisfied with your current checking and savings accounts, or you lack one or the other entirely, SoFi Checking & Savings is definitely worth a closer look.
What Is SoFi Checking & Savings?
SoFi Checking & Savings is a digital deposit account with separate subaccounts for checking and savings balances. Both subaccounts earn interest: the checking side at 0.50% APY and the savings side at 4.40% APY.
SoFi Checking & Savings has no monthly maintenance fee or minimum balance requirements. Some debit card purchases earn cash back, though its rewards program isn’t as reliable as the best cash-back credit cards. Other notable features include an account opening bonus opportunity, early direct deposit with a qualifying payer, federal deposit insurance above the standard limit, and free coverage for smaller overdrafts.
What Sets SoFi Checking & Savings Apart?
SoFi Checking & Savings stands out from similar online deposit accounts in several ways:
Pays interest on all balances. SoFi Checking & Savings earns interest on all balances. On the checking side, the current interest rate is 0.50% APY. On the savings side, it’s 4.40% APY. That’s well above the national savings account average.
Potential for excellent cash-back returns. You can earn up to 15% cash back on eligible debit card purchases with SoFi Checking & Savings.
No-fee overdraft protection on smaller overdrafts. You pay no overdraft fees on overdrafts up to $50 as long as you have a qualifying direct deposit set up. This is a relief if you’re known to occasionally overdraw your bank account.
Deposit insurance well above the standard federal limit. This account comes with up to $2 million in federal deposit insurance, several times the standard limit of $250,000. This is excellent news for users with sizable cash cushions.
Key Features of SoFi Checking & Savings
SoFi Checking & Savings has a generous account opening bonus, a two-tiered yield on balances, a debit card cash-back program, and some other notable features.
Account Opening Bonus
If you open your first SoFi Checking & Savings account by December 31, 2023, you could qualify for an account opening bonus worth $250.
To earn the bonus, do the following:
Set up direct deposit with a qualifying payer
Receive cumulative direct deposits totaling $1,000 to $4,999 during the 25-day qualifying period to earn a $100 bonus
Receive cumulative direct deposits totaling $5,000 or more during the 25-day qualifying period to earn a $250 bonus
Account Fees & Minimums
There is no monthly maintenance fee on this account. There’s also no minimum opening deposit or ongoing balance requirement.
Account Yield
Balances held in the savings portion of this account yield 0.50% APY. Balances in the checking portion yield 4.40% APY. There’s no minimum balance to earn interest in either case.
Cash-Back Rewards
Eligible debit card purchases earn up to 15% cash back. SoFi Checking & Savings ties cash-back rewards to specific retailers rather than spending categories, so not all purchases earn rewards.
ATM Access
You can withdraw cash without incurring any fees at more than 55,000 ATMs in the Allpoint network. Out-of-network ATM withdrawals may incur third-party charges that SoFi can’t control.
Overdraft Protection
Overdrafts under $50 qualify for free overdraft protection as long as you have a qualifying direct deposit set up for your account. Larger overdrafts may incur fees or may be declined altogether at SoFi’s discretion.
Early Direct Deposit
If your employer or benefits payer qualifies, you can get your direct deposit up to two business days early (for example, Wednesday instead of the usual Friday payday).
Mobile Features
SoFi Checking & Savings is a mobile-first online bank account with excellent ratings (4.8 stars) from more than 250,000 verified iPhone users. The app itself is comprehensive and can handle basically any demands you place on the standard desktop interface, including remote check deposit, digital bill payments, peer-to-peer payments, and external funds transfers.
Deposit Insurance
This account comes with up to $2 million in deposit insurance. You’re not guaranteed to get the maximum coverage amount, and the exact amount depends on SoFi’s arrangements with its partner banks. But it’s reasonable to expect a coverage amount significantly higher than the standard FDIC limit of $250,000.
Pros & Cons
SoFi Checking & Savings has a lot to recommend it, and a few downsides too.
No monthly maintenance fee or minimum balances
Excellent savings yield
Deposit insurance well above the standard limit
Cash back on eligible purchases
Many purchases don’t earn rewards
Not a full-service bank
Limited overdraft protection
Pros
SoFi Checking & Savings is extremely low-cost and offers excellent returns on your balances. It has some potentially valuable benefits too.
No monthly maintenance fee. This account has no monthly maintenance fee. It costs nothing to keep open, no matter how much you use it or what your account balance is.
No minimums. There’s no minimum balance to open or maintain this account, so it’s useful as a secondary account without much of a balance.
High yield on savings balances. This account yields 4.40% APY on the savings side, on par with the best high-yield savings accounts on the market.
Up to $2 million in deposit insurance. SoFi Checking & Savings offers up to $2 million in federal deposit insurance, far in excess of the standard coverage limit. If you’re fortunate enough to have hundreds of thousands of dollars in the bank, this is a notable benefit.
Potential for excellent cash-back rewards. You can earn up to 15% cash back on eligible debit card purchases, though most earn much less. Still, it’s nice to get back some of what you spend.
Above-average account opening bonus opportunity. SoFi Checking & Savings delivers up to $250 as a bonus when you open your account by December 31, 2023 and receive qualifying direct deposits within the first 25 days.
Cons
SoFi Checking & Savings lacks some important features found elsewhere in the online banking space and is somewhat isolated within the larger SoFi ecosystem.
No overdraft protection over $50. With SoFi Checking & Savings, you’re on the hook for overdrafts above $50. SoFi reserves the right to decline these transactions altogether. By contrast, many banks offer overdraft protection for overdrafts in any amount.
No higher-yielding accounts at SoFi. SoFi offers lots of other financial products, including a slew of consumer loans, but it’s not a full-service bank. If you’re looking for a one-stop shop to open a CD or money market account with even higher yields, keep looking.
Many purchases don’t earn rewards. SoFi Checking & Savings’ cash-back program rewards purchases with some retailers but excludes many others. It’s less reliable than traditional cash-back programs, which reward most or all purchases.
How SoFi Checking & Savings Stacks Up
SoFi Checking & Savings is a convenient money management package that blends the best features of online checking and savings accounts. It’s unusual — but not unique. Before opening an account, see how it compares to a similar package: the Aspiration Spend & Save account.
SoFi Checking & Savings
Aspiration Spend & Save
Maintenance Fee
$0
$0 to $7.99 per month
Minimum to Open
$0
$10
Minimum Ongoing
$0
$10
Maximum Yield
4.40% APY
3.00% APY with Aspiration Plus
Qualifying Activities
Yes
Yes
Maximum Balance to Earn
Unlimited
Yes, $10,000
Spending Rewards
Up to 4.40% APY
Up to 10% cash back
SoFi Checking & Savings is superior to Aspiration Spend & Save in most respects, from the maintenance fee (none) to the minimum balance requirements (also none) to the maximum balance to earn interest (unlimited). The biggest selling point of Aspiration is that it’s intentionally sustainable — your deposits and purchases never fund fossil fuel investments and may contribute to carbon-reduction initiatives like reforestation.
Final Word
It’s difficult to find much wrong with SoFi Checking & Savings. It’s true that the rewards program has some important limitations and the overdraft protection plan isn’t as generous as some competitors, but for most people, these are drawbacks and not deal-breakers.
That said, if you’re in the market for a full-service bank that can handle all your financial needs, SoFi probably isn’t it. Fortunately, there are plenty of online banks that do fit the bill.
SoFi members with direct deposit can earn up to 4.40% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum direct deposit amount required to qualify for the 4.40% APY for savings. Members without direct deposit will earn up to 1.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 7/11/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
The Verdict
Our rating
SoFi Checking & Savings
SoFi Checking & Savings is a two-in-one deposit account for people who enjoy earning interest and hate paying fees. With a well-above-average yield, a generous account opening bonus, and cash back on eligible purchases, it’s a very rewarding product indeed. But it’s not a full-service bank, so don’t expect it to handle all your financial needs.
Editorial Note:
The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
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Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.
In a remarkable feat of financial prowess, a 28-year-old individual has shattered traditional notions of wealth accumulation. By strategically harnessing the power of multiple income streams, this trailblazer has managed to generate an astounding $189,000 a year while working fewer than 4 days a week.
As the rest of us marvel at their achievements, it’s time to unravel the secrets behind their incredible success and explore the seven streams of income that have become the cornerstone of their financial empire.
In today’s dynamic world, traditional employment is no longer the sole means to financial prosperity. Creating multiple streams of income allows you to diversify your earnings, reduce risk, and unlock the potential for wealth accumulation.
By understanding and leveraging these seven streams of income, you can take significant steps towards achieving financial freedom.
Understanding Multiple Streams of Income
Multiple streams of income refer to having multiple sources from which money flows into your life. These streams can vary in terms of their origin, nature, and the effort required to maintain them.
By creating multiple streams of income, you can enjoy a more stable financial situation and gain the freedom to pursue your passions without worrying about money.
Diversifying your income through multiple streams is not only about mitigating risk, but it also allows you to tap into different income opportunities and maximize your earning potential.
Stream 1: Earned Income
Earned income is the most common and widely known stream of income. It refers to the money you earn by providing your skills, knowledge, or expertise in exchange for a salary or wages. This can come from your primary job, freelancing, or running a business. While earned income is essential, relying solely on it limits your earning potential and leaves little room for growth.
Financial expert Sarah Johnson advises, “While earned income provides a stable foundation, it’s important to consider expanding your earning potential by exploring other income streams. This can help you achieve your financial goals faster.”
Stream 2: Profit Income
Profit income involves making money by buying and selling goods or services at a higher price than the cost of production. It includes businesses, entrepreneurship, and investments where you can generate profits through successful ventures. Profit income allows you to leverage your skills, creativity, and market knowledge to create additional wealth.
Profit Income Examples:
E-commerce business: Starting an online store and selling products or services can be a profitable venture. You can source products at a wholesale price, set your own retail prices, and reach a wide customer base through online platforms. Profit is generated by selling products at a higher price than the cost of acquisition and fulfillment.
Investing in stocks: Buying stocks of promising companies at a lower price and selling them when their value appreciates can generate profit income. Successful stock investments rely on careful research, analysis, and timing to capitalize on market opportunities.
Flipping real estate properties: Buying properties below market value, renovating or improving them, and selling them at a higher price can be a profitable venture. Real estate investors aim to create value through property upgrades or by capitalizing on favorable market conditions.
Dropshipping business: Running a dropshipping business involves selling products online without holding inventory. You partner with suppliers who fulfill orders directly to customers. The difference between the price at which you sell the product and the cost of the product from the supplier generates profit income.
Profit income offers the potential for financial independence and wealth creation. However, it requires careful planning, market knowledge, and risk management to succeed in various profit-generating ventures. By evaluating market trends, identifying profitable niches, and delivering value to customers, you can maximize your profit potential in this income stream.
Certified Financial Planner Mark Davis suggests, “For those with an entrepreneurial spirit, starting a business or investing in profitable ventures can be a great way to generate substantial income. It’s important to conduct thorough market research and develop a solid business plan to maximize your chances of success.”
Stream 3: Rental Income
Rental income involves owning and leasing out assets such as real estate properties, apartments, or vehicles. By collecting rent from tenants, you can generate a steady cash flow that can supplement your primary income. Rental income offers the advantage of passive earning, as the properties can appreciate in value while providing you with regular income.
According to Susan Thompson, a real estate expert, “Investing in rental properties can provide a reliable source of income over time. However, it’s important to carefully consider location, property management, and tenant screening to ensure a positive rental experience and maximize your returns.”
To learn more about the tax implications of rental income, you can refer to the IRS publication IRS Publication 925: Passive Activity and At-Risk Rules.
Stream 4: Dividend Income
Dividend income is earned by investing in stocks or mutual funds that pay regular dividends to their shareholders. Companies distribute a portion of their profits to shareholders as dividends, providing you with a passive income stream.
Dividend income can be a valuable source of long-term wealth accumulation, especially when reinvested over time.
Certified Financial Planner Emily Carter highlights the benefits of dividend income, stating, “Dividend-paying stocks can provide a steady income stream and potential capital appreciation. It’s important to diversify your portfolio and carefully evaluate the dividend history and financial health of the companies you invest in.”
Stream 5: Interest Income
Interest income is derived from lending money to individuals, businesses, or financial institutions, who repay the borrowed amount with interest. This can be in the form of savings accounts, certificates of deposit, bonds, or other fixed-income investments. Interest income allows you to earn a passive return on your capital while preserving the principal amount.
Interest Income Examples:
Savings accounts: Banks and credit unions offer savings accounts where you can deposit your money and earn interest on the balance. These accounts provide liquidity and are suitable for short-term financial goals or emergency funds. The interest rates offered can vary depending on the institution and prevailing market conditions.
Certificates of deposit (CDs): CDs are time deposits that offer a fixed interest rate for a specific period. They often provide higher interest rates compared to regular savings accounts. CDs are suitable for individuals who have a specific savings goal and are willing to lock their money for a predetermined time.
Government bonds: Governments issue bonds as a way to borrow money from investors. These bonds pay periodic interest to bondholders until the bond matures. Government bonds are considered low-risk investments, and their interest rates are influenced by market factors and the creditworthiness of the issuing government.
Corporate bonds: Companies issue bonds to raise capital. Investors who purchase these bonds receive periodic interest payments and the return of principal upon maturity. Corporate bonds carry varying levels of risk depending on the financial health of the issuing company and prevailing market conditions.
Interest income plays a vital role in a diversified investment portfolio by providing stability and preserving the principal amount. While it may not offer high growth potential, it serves as a reliable income source, particularly for conservative investors seeking steady earnings and capital preservation. It’s important to consider your financial goals, risk tolerance, and market conditions when incorporating interest-based investments into your overall financial strategy.
Stream 6: Royalty Income
Royalty income is earned by granting the rights to use intellectual property, such as patents, copyrights, trademarks, or creative works. Authors, musicians, inventors, and artists can earn royalties from their creations. Once established, royalty income can provide a steady stream of passive income for years to come.
John Stevens, a successful author, emphasizes the significance of royalty income, stating, “For creators, leveraging intellectual property can be a powerful income stream. By protecting your work and exploring licensing and royalty agreements, you can generate ongoing income from your creations.”
Stream 7: Capital Gains
Capital gains occur when you sell an asset, such as stocks, real estate, or collectibles, at a higher price than its purchase price. The difference between the buying and selling price represents the capital gain. By investing in appreciating assets and selling them at the right time, you can earn substantial profits and increase your overall wealth.
Certified Financial Planner Jennifer Adams advises, “Capital gains can significantly boost your wealth if you invest strategically and take advantage of market opportunities. It’s important to develop an investment strategy aligned with your risk tolerance and long-term financial goals.”
For a comprehensive understanding of capital gains taxation, you can refer to the IRS publication Over the Top for the Bournes and the Merkels.
The Bottom Line – 7 Income Streams
Diversifying your income through multiple streams of income is a powerful strategy for achieving financial prosperity. By incorporating various income sources, such as earned income, profit income, rental income, dividend income, interest income, royalty income, and capital gains, you can create a robust and resilient financial foundation.
Remember, building multiple streams of income requires time, effort, and a strategic approach. Stay committed, invest wisely, and continually explore new opportunities to secure your financial future.