Your net worth is based not only on how much moolah you have in the bank, but also on your human capital — that is, your ability to earn income. “We can think of human capital as assets specific to each person, such as intelligence, education, specialized skills, work ethic, and social skills in the workplace,” wrote Motley Fool contributor Doug Short (who has turned his own human capital into an investing website that’s popped up as far away as an Australian business TV show — it’s amazing what smart, retired people can do in their spare time).
These days, jobs are few and far between — and unemployment is poised to rise and stay high for a very long time. At a town hall meeting last year, Federal Reserve Chairman Ben Bernanke said gross domestic product growth would have to exceed 2.5% for the unemployment rate to fall. Unfortunately, consulting firm McKinsey says that newly-thrifty baby boomers, who are now saving at rates not seen in decades, will reduce GDP growth to just 2.4% annually for the next 30 years.
So to survive in a world of long-term high unemployment, we can’t take our jobs — or our human capital — for granted. Ask yourself these ten questions to make sure you’re investing in your most important money-making asset: You!
What’s going on in your industry and location? Employment and wage trends aren’t the same across the country. The unemployment rate is in the mid-single digits for business and financial managers, but almost 20% for those in the construction industry. North Dakotans have the lowest unemployment rate, while Michiganders have the highest. Stay up on the news to know who’s being hired, fired, promoted, and downsized in your area. It could help you land a job — or know when it’s time to leave one.
How does your company make most of its money? Most companies have more than one source of income, but not all of those revenue streams are of equal importance. Determine your company’s essential sources of income, and become an integral player in those parts of the business.
What can you do to protect your job and salary? Pretend you’re your boss and you have to decide who gets a raise and who gets a pink slip. What qualities would you look for? What makes someone indispensable at your company?
If you own a business, how can you make yourself essential to your customers? Even if you’re self-employed, you have bosses. They’re your customers, and they can fire you as easily as Donald Trump can. What can you do to make that hard for them?
Which skills could you acquire that would make you more valuable or diversify your human capital? Your value in the workplace depends on your abilities. How many things can you do, and how well do you do them? Consider working toward a degree or starting a late-night self-study regimen that expands your human capital. Keep it focused on efforts that will really pay off. Simply getting an extra degree in the sociology of Star Trek could be a waste of money.
What would you do if you were fired today? You’d probably: (1) apply at a few other places, or (2) change careers. If you’d apply elsewhere, ask yourself, “What can I add to my résumé to make them want to hire me?” If you want to begin a new career, ask yourself, “What should I be doing in my spare time to prepare?”
What can you do that you’re currently paying someone else for? Expanding your human capital includes learning how to do things so you don’t have to pay someone else to do them. This pays off even for retirees. Think about doing your own home repairs, taxes, or (ahem) financial planning (though not until you know what you’re doing).
Can you pick up side jobs to earn extra income? In our Rule Your Retirement service, we pay a team of retired financial professionals to answer subscribers’ questions. The previously mentioned Doug Short makes a tidy little income from advertisements on his website. Dabbling in extracurricular part-time work can pad your cash flow, expand your skill set, and could lead to a whole new career.
Can you sharpen your people skills? I believe it was columnist Ben Stein who said your career depends on your affability as well as your ability. (Unfortunately for Stein, that didn’t spare him from being dropped by The New York Times after showing up in commercials for a credit-score company, violating a corporate policy.) Your career depends at least partially on how pleasant, cooperative, collegial, and fun you are. So play nice!
What do you want to do with the rest of your life? You’ll probably do your best work if you’re doing what you enjoy most. This economy might not provide the greatest opportunities for you to pursue your dream job, but you can start preparing now so you’re ready when the market is.
This is fantastic guest post by Omie Ismall who shares his experience as successful entrepreneur. Looking to create your own start-up company from scratch? If so, read this and take notes.
Some years ago, I sat down with one of my Board members to discuss my next year’s compensation. He said something that still sticks with me to this day,
“You know, your salary doesn’t matter because you’ll never build real wealth from it”
I dismissed the thought. After all, I had built a six-figure portfolio by the time I was thirty and carried no debt. My wife and I had lived cheaply since college and had saved 25% of our dual incomes. But my advisor, who was worth tens of millions of dollars, knew firsthand that the truly rich almost all do it via equity not salary.
Sure, anyone that makes a reasonable salary can build up a million-dollar portfolio by simply living below their means and investing the excess cash. That’s much of what we preach at LiveCheap. It takes a long time with great expense control, but it is the safest way to becoming relatively well-off at minimal risk.
But the amount of wealth that can be built up with an equity position can make your best efforts saving salary look like a pittance. It’s not the only way, as I wrote in 5 Ways to Get Rich in Less Than 15 Years, but for those that want to build something and make a fortune, small companies can be a goldmine.
Average Entrepreneur
I’m not talking about the Bill Gates’ or the Michael Dell’s of the world. That’s not your average entrepreneur. Most small company business owners make their money by dramatically increasing their net worth on the path from $1 million in revenues to $10 million.
At $1 million, the company is nearly worthless but at $10 million it could be worth $20 million or more. In fact, once the $10 million mark is crossed, a whole host of potential buyers are quite eager to write you a big check. If you can spend 10 years of your life and grow a company past that mark, you will be wealthier than almost anyone of reasonable income. Sound easy? It’s not.
It took me 18 months to hit the $1MM mark from the day of our first sale, but it took nearly 5 more years to get beyond $5MM. And by most business standards, especially when you are creating an industry, that’s fast.
The small company is a massive wealth builder for a couple key reasons. Running a successful small company forces you to live below your means. Your net worth includes a concentrated position in something that you cannot access: private company stock.
Since you are always exposed to downside risk, you tend to be very hesitant about spending money, as you may need to invest capital into the company at any time. Also, being successful at a small business usually means watching expenses carefully, something that usually is done in one’s personal life too.
When you finally sell, it is treated as a long term capital gain subject to a maximum 15% federal capital gains tax. If it were income, it would be taxed at more than twice the rate. So when the day comes to sell, most entrepreneurs are able to undergo a radical change in lifestyle, although many stay true to their frugal ways.
This varies dramatically from doctors or lawyers who tend to scale their expenses as their incomes grow and don’t fall victim to the common traits of the wealthy. An entrepreneur that has never pulled down more than a $150,000 salary may suddenly have a check for $10 million dollars.
So what’s the catch?
Well, few people want to work hard enough to make it happen. You make less than you would at a regular job and work far more hours, anywhere from 60 to 100 a week, for many years. The stress is enormous and you find out very quickly how hard it is to consistently meet payroll. You’ll expose your family to downside risk that you never had being a regular employee and you’ll put off the things that your family wants to do for years all in the name of the business.
Unlike a regular job, you just can’t hop to a new gig every few years: your employees depend on you and you’re tied to the business. There are dozens more drawbacks but for me they were all overshadowed, not by the ability to build wealth, but rather the ability to build something of lasting value. And that’s probably the reason why most entrepreneurs don’t want to sell their business even when they have multiples of what they need to retire. They love it and become inseparable from it.
Interested in building real wealth?
The following list is a quick gut check for being an entrepreneur and learning how to make a million:
Are you willing to put your family at financial risk in order to grow a company?
Are you willing to put in the late nights and weekends to make it happen?
Do you have core skills that will let you become a great business owner?
Do you know an industry well enough to run with an opportunity?
Do you have a passion for something? – just wanting to make money usually isn’t enough
Do you have enough capital to start the business or make an acquisition?
Will your spouse or significant other support you in your endeavor?
The last point is vitally important. Entrepreneurs often have no idea how much they put their wives (or husbands) through. If you answered yes to these questions, then start heading down the path of entrepreneurship. In 10 to 15 years, you may have more than enough money to retire, even if you don’t want to.
Omie Ismail is the CEO of Live Smart Media Inc. the holding company for LiveCheap.com. Omie is a successful information and software CEO for the past decade having taken eCivis Inc. from concept to become the leading grants management company for governments nationwide. He has a passion for helping people live the good life cheaply and for growing businesses from the ground up. Omie currently splits his time between his family, LiveCheap, and his next venture.
When you look at Peerform reviews you first need to understand the difference between conventional loans and peer to peer loans. While traditional loans come from a bank and can take months to get done, P2P loans are done through a platform that connects investors and borrowers.
Peer-to-Peer lending sites are rapidly becoming preferred destinations for both borrowers and investors. Peerform is a newer member of the P2P Market and it provides opportunities for both borrowers and investors to get better rates than what they can get from banks or other traditional loan and investment sources.
About Peerform
Peerform was founded in 2010 by Wall Street executives with backgrounds in finance and technology. They started the platform because they realized that traditional lenders like banks seemed unwilling to provide loans for individual and small business owners.
The solution was to create a peer-to-peer lending platform that would bring both borrowers and loan investors together. This would also give investors an opportunity to earn much higher interest rates on their investments than what they could get through traditional bank investments like savings accounts, money market accounts, and certificates of deposit.
The platform is able to offer lower rates to borrowers, and higher rates to investors, because it lacks the physical infrastructure and employment base that banks have. The reduction in operating costs from running a technology driven online lending platform could be passed on both borrowers and investors.
Peerform is headquartered in New York City and has been featured in major media outlets, such as Time and The Street. Peerform is currently eligible to make loans to residents in the 36 following states: Alaska, Alabama, Arkansas, Arizona, California, Delaware, Florida, Georgia, Hawaii, Illinois, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Minnesota, Missouri, Mississippi, Montana, North Carolina, Nebraska, New Hampshire, New Jersey, New Mexico, Nevada, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Vermont, Washington, and Wisconsin.
Loans made on Peerform are underwritten by Cross River Bank, a federally insured New Jersey chartered bank and FDIC member.
Borrowing Through Peerform
The Peerform borrowing process is quick and simple, and you can use the loan proceeds for just about any purpose, including for business related needs.
Here are the highlights of the Peerform lending process:
Loan purpose. Peerform makes personal loans that can be used for a wide variety of purposes, including debt consolidation, credit card refinancing, home improvement, major purchases, car financing, business purposes, medical expenses, moving and relocation, wedding expenses, vacation, home buying, or other needs.
They also have a category referred to as a “green loan”. That’s where you take a personal loan and use it to purchase alternative energy equipment for your home. This typically can be something like solar panels for heat and hot water, or even the generation of electricity.
Loan amounts. Peerform will make loans that range in size $1,000 and $25,000.
Loan terms. All loans made through Peerform are for a term of 36 months. All loans are also fixed rate, installment loans that will be fully paid off at the end of the term. Peerform does not offer any other loan terms at this time.
Minimum borrower qualifications. In order to qualify for a loan with Peerform, you must have:
A minimum credit score of 600
No delinquencies, bankruptcies, tax liens, judgments, or non-medical related collections in the past 12 months
A minimum of one revolving account ever opened
A maximum debt-to-income ratio (DTI) of not more than 40% (not including mortgage debt)
A minimum of one open bank account
Although you don’t need to be employed, you do need to have an income which can be documented and verified. Also in regard to income, if you’re married, your spouse’s income cannot be used to qualify for the loan. Peerform provides personal loans, so you cannot include a cosigner for qualification purposes, nor make joint applications.
The loan application process. Peerform’s loan application uses a five step process:
Registration – This is an online registration that you can complete within a few minutes
Personal loan selection – After completing the online registration, the platform will review your information, and offer loan terms or alternatives.
Personal loan listing – After you have selected the loan terms that you want, your loan request is listed on the platform so that it can be evaluated by potential investors.
Verification – You will be asked to submit documentation that supports the information that you supplied in your registration form, or that will be needed to verify your identity.
The loan registration process will ask you to provide basic information, such as the loan amount you are requesting, the purpose of the loan, your credit score range, your full name, address, phone number, date of birth, email address, and annual salary and wages. You will then be asked to create a password.
Once you complete the registration form, you will be informed immediately if you qualify for a loan, and what the rate for that loan will be. Again, all loans are for a term of 36 months.
If you accept the offer, your loan request will be placed on the platform for investors to review and consider if they want to invest in it. You will also be taken through a step-by-step process to complete your application. Making application does not have any impact on your credit score.
Identity verification will involve you uploading copies of one of the following: your drivers license, military ID with photo, passport with photo, or US federal or state government ID. You will also be asked to verify your income. This will include two recent pay stubs, but they may also request recent tax returns and/or a copy of your bank statements.
Loan funding. In a best case scenario, your loan funds will be available shortly after the loan is put on the personal loan listing platform. However, all listed loans can remain on the platform for up to two weeks, which is known as the two-week listing period. You can track investor interest in your loan during the process.
But it is possible that your loan will not be fully funded within the two-week listing period. If it isn’t, you can either accept a lower loan amount (up to the amount funded), or you may need to reapply.
Interest rates and fees. Just like Lending club loans, interest rates with Peerfrom range between 7.12% APR and 29.99% APR. Rates are based on your Peerform Grade, and broken down into four alphabetic groups, each with its own rate range:
AAA, AA+, AA, A+ and A: 7.12% APR to 13.94% APR (credit score range: 700+)
BBB, BB+, BB, B+ and B: 14.86% APR to 19.44% APR (credit score range: 680 – 699)
CCC, CC+, CC, C+ and C: 20.87% APR to 26.92% APR (credit score range: 600 – 679)
DDD and DD+: 28.33% APR and 29..99% APR (credit score range: not indicated)
There are no application fees. There are however origination fees, typically 5.00% of the loan amount on all loans grades, except Peerform Grade loans AAA (1.00%), AA+ (2.00%) and AA (3.00%). The origination fee is deducted from your loan proceeds. For example, if your loan is $10,000, and the origination fee is 5.00%, you will receive net loan proceeds $9,500. The origination fee is payable only if the loan is issued.
The preferred loan repayment method by Peerform is by direct debits from your bank account. But you do have an option to pay by paper check. If you do, there is a $15 check processing fee for each check.
Late payments are assessed a fee of 5% of the monthly payment, subject to a $15 minimum per occurrence. There is also an unsuccessful payment fee in the event that your payment is refused. That fee is $15 per unsuccessful attempt, or a lesser amount as determined by state law.
There are no prepayment penalties in the event that you want to make a partial or full early payment on your loan.
Loan payments. You can repay your loan either by automatic draft from your bank account, or by mailing in monthly checks. However, Peerform does charge a fee of $15 per payment if you pay by check. There is no charge if you pay by automatic bank draft.
Site security. Peerform follows bank level security protocols, which includes encrypting and storing sensitive data in dedicated 24 hour maintain servers, which are protected with firewalls and housed in a secure facility. Servers are equipped with Secure Socket Layer (SSL) certificate technology to ensure encryption.
You also don’t need to concern yourself with the fact that investors will have access to your personal information. They will get only the information needed for investment purposes, but will not have access to any information that personally identifies you. In that way, you can apply for a loan anonymously, and not concern yourself that the information is available to someone who is either unintended or inconvenient, and certainly not for general public consumption.
Investing Through Peerform
If Peerform is a great place to get a loan, it’s also a rich source of investment opportunities.
Here is how investing through Peerform works:
Investor qualifications. In order to invest on Peerform, you must be an accredited investor. That’s an investor who is either high income or high net worth, or both, and who is generally recognized as a sophisticated investor who understands risk, knows how to invest into it, and is prepared to lose all of his or her investment (the temperament factor).
According to the US Securities and Exchange Commission, an accredited investor is defined as anyone who…
earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
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Investments offered. Peerform offers two types of investment products, whole loans and fractional loans. Whole loans are just what the name implies – you’re buying an entire loan. These investments are typically offered to institutions. Fractional loans are portions of loans, that are offered to individual investors.
These are not unlike investments on other P2P sites in which you can either invest in an entire loan, or in small pieces of many loans, commonly called notes.
All loans available for investment on Peerform are subject to analysis by the Peerform Loan Analyzer. The tool uses a highly advanced and dynamic algorithm for pricing loans. It uses empirical methods rather than filters (which are used on most P2P platforms) in order to better calculate consumer credit risk.
Custom portfolio. The portfolio enables you to diversify by customizing your investments to meet your needs. You can set investment goals, and the customization tool will outline how to invest your capital in order to reach your investment goals in the most concise way.
Fraud protection. Loan fraud is not uncommon and increases loan defaults, so Peerform takes extra steps to weed it out. In addition to requiring documentation to verify the borrower’s identity and income on the loan registration form, Peerform also uses both proprietary methods and commercially available licensed technologies and solutions to both detect and prevent fraud.
This includes third-party services such as Lexis Nexis for user identification, TransUnion for credit checks, and OFAC compliance.
Peerform also verifies that there is a variation of no more than 10% in the income stated by the borrower on the registration form, and that which is proven by the income documentation. If needed, IRS Form 4506T will be completed and sent to the IRS to verify the borrower’s income tax records. A small debit is taken from the borrower’s bank accounts, and verified by the borrower to make sure that the bank account is valid. The borrower’s phone number and email IP location are also verified.
Investment returns. Peerform offers rates of between 6.44% and 28.33% (net of origination fees). This rate range refers to returns before deducting for loan defaults, so your actual returns will be something less. .
Summary
Peerform is one of a growing number of P2P lending sites that also offers investment opportunities. The platform is using cutting edge technology to set the most accurate loan rates, which will also reduce the number of defaults that lowers the investment return on so many P2P lending sites.
Save more, spend smarter, and make your money go further
Personal finance and investing gurus are fond of an old Chinese proverb: “The best time to plant a tree was 20 years ago. The second best time is now.” Chances are you’ve heard it before.
It’s a profound quote, and trees are a great metaphor for growing your investment portfolio. If you water the tree daily – and have patience – you can expect to reap the rewards in due time. Whether you start investing in college or after you turn 40, the important thing is planting the seed.
The problem is, this proverb actually undersells the importance of starting as soon as possible from an investing perspective.
While a tree grows to maturity at a sustained rate and only reaches a certain height, investments actually grow larger the earlier you start. If investments are trees, then the seed you planted today may grow as tall as a mighty redwood, while the one you plant in 20 years becomes a pine. In other words, the growth potential of your portfolio is directly tied to the amount of time you give it to grow.
This is thanks to something called compound interest, where the interest your account accrues is compounded on itself. Here’s everything you need to know about compound interest – how it can help you, how it can hurt you and how to maximize its benefits.
Keep reading for a comprehensive look at compounding interest, or skip to the section you’d like to learn more about using the navigation links below.
What is Compound Interest?
There are two ways to accrue interest: simple and compound. Simple interest is when you earn interest only on the principal. So, if you have $1,000 invested at 5% interest, you’ll earn $50 every year.
Compound interest is earned on the principal and the interest in your account. Let’s look at a hypothetical example. Pretend you have $5,000 in a retirement account, earning 7% interest each year. The first year that your account is open, you earn $350 in interest, which brings your total to $5,350. The following year, interest is calculated based on that $5,350 total, not the original $5,000. You earn $374 in interest and now have a total of $5,724.
Even if you never deposit anything but the original $5,000, you’ll have $38,061.28 in 30 years. That’s a $33,061.28 profit.
Compound interest rewards people who invest over long periods of time, not necessarily those who can afford to invest the most. It’s specifically helpful for young people who start investing early.
A 25-year-old who invests $200 a month with 7% interest will have $226,705.89 in 30 years. If they wait 10 years to start investing, they’ll have to more than double their savings rate to reach the same total.
Use our compound interest calculator to see how much of a difference it can make.
Pros and Cons of Compound Interest
Compound interest is your best friend when you’re investing or saving for a long-term goal, but it’s your worst enemy if you have debt that’s not being paid off.
Here’s an example: A borrower with $30,000 in student loans defers their loans for a year while they look for a job. During that year, interest continues to accrue on those loans. Once they’re ready to resume making payments, they discover their $30,000 balance has grown to $45,000 because of compound interest.
To slow down the negative effects of compound interest, you should pay off your debt as quickly as possible. You can also refinance your loans to a lower interest rate. When you borrow money, compounding interest works against you and benefits the lenders. The interest rate a lender charges is the trade-off for taking on the risk of lending money and giving out loans. However, it makes it very important for you, the borrower, to pay off your loans on time and keep tabs on your interest rate.
If you have credit card debt, you may want to consider transferring your balance to a card with 0% APR to avoid interest while you pay off the balance. Otherwise, you’ll accrue interest that makes it more expensive for you to carry debt month to month.
Calculating Compound Interest
To calculate compound interest, you’ll need to use the formula below:
Compound Interest = Amount of Principle and Interest in Future (or Future Value) less Present Value
= [P (1 + i)n] – P
= P [(1 + i)n – 1]
P = principal, i = nominal annual interest rate in percentage, and n = number of compounding terms.
Compound Interest Investments
Some banks only calculate interest on a monthly basis, while others do it every day. More frequent compounding is better when you’re trying to maximize interest, so find out how frequently your bank calculates interest. You might have to call or poke around the fine print to determine their compounding schedule.
Next, find the highest interest rates possible while also minimizing risk. If you have a savings account with $10,000, choose a high-yield savings account. Aim for 2% interest or higher. A $5,000 savings account with 2% interest will be worth $7,459.04 in 20 years, but only worth $5,204.05 in a savings account with .2% interest. Using an investment calculator can give you a better idea of how interest will impact your return.
Compounding interest investment accounts can help both grow your money and secure your future. But it’s important to start early. And before you start investing in stocks, it’s important not to get ahead of yourself. Do your research and familiarize yourself with different investment options. Make sure you’re only investing money after you’ve topped off your emergency fund. It’s also important to ensure that you’re current on all your loan payments. Otherwise, any investment gains might be negated by snowballing debts.
If you’re saving for retirement, invest in low-fee index funds. Fees of 1% or more will drag down your profit and cut into your compound interest. Index funds will follow the market’s course and provide a solid rate of return. Avoid investing in individual stocks, as their volatility can be problematic.
Compound interest works best if you start saving as soon as possible, even if it’s just $25 a month. A 22-year-old who saves $25 a month at 7% interest for five years will have $1,795.80. When she gets a raise after those five years and can afford to put away $100 a month, she’ll have $294,213.07 when she retires at age 67. If she hadn’t started investing until after her raise, she’d only have $264,689.70.
Even though she only contributed $1,500 during those first five years, her portfolio is worth nearly $30,000 more. For most people, that’s enough to retire a full year earlier, and all it cost her was a monthly contribution of $25. Even someone earning an entry-level salary can afford that.
The same principle applies to debt. Even if you defer your student loans, keep making payments on them as much as you can afford to. Taking time off will only delay your debt payoff and increase how much you pay in interest.
Always compare rates before taking out a loan and get at least three quotes. Each percentage point matters when you’re borrowing money, especially for long-term debt like a mortgage. You can also limit compound interest by borrowing money for as little time as possible.
A 30-year $200,000 mortgage at 4.85% interest will cost $379,940 in total. A borrower who takes out the same loan for 15 years will only pay $269,910. That’s a difference of $110,000, which is more than half the total mortgage principal.
Takeaways: The Power of Compounding Interest and Growing Your Wealth
Compound interest can help you grow your wealth and secure a more stable financial future. Even if you can’t afford a large principal or large ongoing additions to your investment, you can still extract value from small investments with compounding interest. The key is to start as early as possible and do adequate research to ensure that you’re making investment decisions that make sense with your overall financial goals and situation. With these tips, you’ll be on your way to stabilizing your financial foundation and making your money work for you.
For more information on compounding interest, you can check out dolv.gov for more resources.
Save more, spend smarter, and make your money go further
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Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Conscious Coins. More from Zina Kumok
That was a phrase that my father continually beat into my head harder than Lars Ulrich could pound on his bass drum (in case there is a generation gap, Lars is the drummer from the rock band Metallica).
Even though on average college graduates do earn more in the long-run and online colleges are bringing down costs, the current job market is saturated with sustainable careers that don’t necessarily require a degree.
Taking a closer look, it seems a major shift in employer priorities is occurring in certain fields, such as manufacturing and information technology (IT), where soft skills and on-the-job training are deemed more beneficial than a formal educational background.
Individuals bringing these resources to the table are now in high demand, especially since many companies now offer assistantship programs or even paid training for high-achieving candidates.
In this day and age, it just might be more about the right skills than the right schooling.
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25 Highest Paying Jobs Without A College Degree
Margin Department Supervisor
Air Traffic Controller
Automobile Service Station Manager
Real Estate Broker
Landscape Architect
Lead Carpenter
Director of Security
Elevator Mechanic
Cable Supervisor
Flight Services Manager
Freelance Photographer
Personal Trainer
Funeral Director
Commercial Pilot
Truck Driver
Nuclear Power Reactor Operator
Firefighter
Emergency Medical Technician
Railroad Jobs
Medical Coder
Information Technology Technician
Criminal Investigator
Brick Mason
Postal Service Worker
Pharmacy Technician
If you have decided to not attend a four-year college right out of high school, or are looking for a fresh start at a new career path, 25 of the highest paying careers with virtually no degree are featured below.
Looking for a fun job that pays well? Scared that the cause of unemployment may be growing? Sign up for free and see who’s hiring in 2023 at www.FlexJobs.com.
Disclaimer: While there are definitely some good paying trade jobs on this list, I still think having a college degree is worth it. Yes, tuition is high and will continue to rise, but the experience, connections, and mindset that college offers are invaluable. Now on to the jobs…
1. Margin Department Supervisor
Average Salary: $74,799
Prior Education: A finance or accounting degree is not required, but knowledge of all basic processes is needed.
On-the-Job Training: Moderate to high training and/or shadowing.
Job Description: A Margin Department Supervisor oversees a company’s credit department, which manages customer credit accounts and approves or denies credit to customers.
As would be expected, approving or denying credit sometimes involves unhappy customers, so you’ll need strong communication and negotiation skills for this role.
Since the scope of the job requires mathematical calculations as well as debt analysis and recognition of accounting principles, make sure you are confident with these basic processes. Some companies may increase pay if you have a degree under your belt.
You’ll also primarily be in charge of ensuring all department employees adhere to federal policies and regulations.
2. Air Traffic Controller (ATC)
Average Salary: $124,540
Prior Education: A college degree is not required, but the nature of the field is very competitive where experience is highly valued. A combination of progressive work experience and formal education is generally preferred.
On-the-Job Training: Rigorous training and testing is required.
Job Description: An Air Traffic Controller is required to pass rigorous testing by the FAA, which includes health checks, as well as mental stability tests. You must initiate the testing process before age 31.
Being an Air Traffic Controller has been voted the most stressful job in the United States for many years because of what the job entails on a daily basis. Air traffic controllers also often work night shifts, weekends, and even holidays.
A typical work day may include monitoring and directing in-air traffic, including routine take off/landing. Sometimes in-air emergencies must be handled, hence the high stress associated with the position.
Strong organizational and problem-solving abilities along with excellent communication skills are highly valued in this role. It does help to know someone already in the business to land a job in this field.
3. Automobile Service Station Manager
Average Salary: $45,204
Prior Education: High school diploma or equivalent. Some employers may prefer a Bachelor’s degree in management or similar field and/or several years of experience in automotive service management.
On-the-Job Training: Most can obtain this type of position by working one’s way up the ladder through on-the-job experience. Obtaining certification may also be required.
Job Description: Essentially, the role of the Service Station Manager is to run the day-to-day operations of a gas station.
The scope of the work includes setting the gas prices for the day, scheduling and training the rest of the employees who work at the station, ordering new merchandise to keep the shelves stocked, ensuring service station safety, as well as being the direct manager for the other employees.
Some skills that would be helpful in obtaining this job would be good personal skills as well as some managerial and accounting experience.
4. Real Estate Broker
Average Salary: $56,730
Prior Education: High school diploma or equivalent. However, a college degree in finance or related field may prove beneficial.
On-the-Job Training: Even though you must take a couple of classes to obtain your certification, these courses are much less of an expense compared to financing a college degree. Licensure requirements typically vary from state to state.
Job Description: To become a real estate broker you will still need to take a couple of classes to become certified. But still, these courses are still much less of an expense to you compared to financing a college degree.
You will be trying to sell houses as well as filing the paperwork for the transactions. In addition, you will help customers with their loan agreements.
However, if you are considering this career, you should be very friendly and have flexible hours since you will most likely be working on your customers’ schedules.
You typically are self-employed setting your own hours and working on a commission basis. Good negotiation skills along with market research experience will prove helpful in this role.
5. Landscape Architect
Average Salary: $65,760
Prior Education: Typically a minimum of a Bachelor’s degree in Landscape Architecture is preferred. An internship experience is highly encouraged. This job may require you to take some classes at a community college on horticulture as well as landscape design, but these types of courses are not required.
On-the-Job Training: With this career, you will have the option of whether you would like to be becoming certified or not. However, if you are certified, you will have access to larger contracts and a wider scope of work. Most states do mandate licensure, though, and the requirements vary from state to state.
Job Description: If you do not mind getting a little dirty and working hard for a living, then this might be a good career for you. Typical job duties include designing functional yet attractive outdoor spaces and parks for a variety of clients.
Landscape architects spend a large portion of their time creating blueprints and preparing cost analysis reports. You would also analyze environmental conditions for projects and even participate in restoration initiatives.
Make sure you have a good eye for design and a strong work ethic to consider this career. Understanding GIS technologies and project management is a must.
Here’s a how-to guide for starting your own lawn company and making some serious money (in turn being able to and saving some serious money, too!).
6. Lead Carpenter
Average Salary: $51,150
Prior Education: High school diploma or equivalent. Most Lead Carpenters begin their careers as skilled apprentices.
This job requires a high amount of experience in the field either through attending a trade school to master technical skills or by being an apprentice to a lead carpenter.
On-the-Job Training: By going to trade school you will actually have to obtain some type of certification, possibly making you more marketable in the field.
Often training includes learning how to expertly handle a variety of power tools, such as power drills or saws.
Job Description: Serving as an apprentice would most likely land you in a job replacing your teacher. Either way, you can be very successful in this type of career if you enjoy working with your hands.
Although highly dependent on the type of industry, job duties may include analyzing construction plans, creating project timelines, and managing and overseeing team production activities.
Carpenters often work in both indoor and outdoor settings and may need to eventually join a union.
7. Director of Security
Average Salary: $78,608
Prior Education: Typically a minimum of a Bachelor’s degree in Computer Science or related field is preferred along with years of experience in related positions.
In reality, this job will involve starting off in an entry level security position before working your way through the ranks to become the Director of Security.
On-the-Job Training: You might also be required to pass a security guard training program, but this will most likely be paid in full by the employer so the actual educational cost to you would be zero.
Depending on the company you will work for, you might also be required to pass a background check as well as some minor health inspections.
Job Description: A typical work day would include reviewing and implementing security department policies along with ensuring relevant local, state, and federal laws and regulations are adhered to. This role may also involve actively participating in training programs with the security staff.
Some good skills to have for this type of job would be some above average physical characteristics, as well as integrity to always choose what is right.
This position often involves being on-call for any emergencies after-hours, so make sure you can fulfill this requirement.
You can also try going the Police Officer route. If you decide to pursue this career, make sure you study with the Police Exam Guide.
8. Elevator Mechanic
Average Salary: $77,806
Prior Education: High school diploma or equivalent.
Just like the Lead Carpenter job, this job will most likely be acquired through a trade school degree, assistantship, or lots of years of experience. Being an elevator mechanic does have a couple more stipulations, though.
On-the-Job Training: Moderate to high training; may need to attend trade school to contract with large corporations.
Job Description: Lots of major corporations will require you to have a license and work for an insured company, which in this case would then force you to go the trade school route so that you could work on these large corporate jobs.
A typical work day would include repairing elevators and fulfilling routine preventative maintenance when needed. Installing and repairing control systems or adjusting and inspecting safety controls are other common work tasks.
Elevator mechanics should be able to identify and troubleshoot issues quickly and efficiently, and having a working knowledge of elevator mechanics is needed. Most of this industry is unionized, so make sure you are willing to join a union before entering this line of work.
9. Cable Supervisor
Average Salary: $51,112
Prior Education: High school diploma or equivalent. However, technical school education or an internship/assistantship may prove beneficial.
On-the-Job Training: A good way to acquire this type of a position is to either apply for the job with some type of managing/scheduling background or to apply for an entry-level position and work your way up by knowing the business.
Job Description: This career would be in a managerial-type setting. You would be responsible for overseeing the maintenance as well as installation workers setting up cable boxes and internet connections.
Typical work duties would also include interpreting cable specifications, troubleshooting issues with cable equipment, and also hiring and training any new cable technicians.
You would be responsible for the scheduling aspect as well as holding the workers accountable to be where they need to be.
10. Flight Service Manager
Average Salary: $64,042
Prior Education: Typically a minimum of a Bachelor’s degree in aviation management or related field is preferred. Completing an internship program is highly suggested.
On-the-Job Training: This career would most likely be obtained through lots of on-the-job experience along with obtaining certification if required.
Job Description: You would be responsible for helping schedule flight crews as well as taking care of customer complaints and filing any necessary paperwork.
This job would require great personal skills as well as lots of patience with unhappy customers. Making sure all passengers have the best onboard experience possible is of top priority for Flight Services Managers.
Airlines can be a stressful arena to work in, so if you are considering this line of work make sure you can keep your cool in the toughest of situations.
11. Freelance Photographer
Average Salary: $36,630
Prior Education: No educational experience required.
On-the-Job Training: This career typically involves both self-education and hands-on training through practice. Natural talent and creativity are highly valued in this field.
Job Description: Being a Freelance Photographer takes dedication to one’s tasks, as well as a great eye for artistic detail. This type of career may also require traveling long distances to be able to acquire the right “shot” for the right story.
In a sense, being a Freelance Photographer can take many forms, such as snapping pictures of nature for magazines, or taking pictures of stories for newspapers, or even being a paparazzi-type photographer and searching for the next big celebrity scandal.
To really make a sustainable living in this field, it may prove helpful to complete some basic business management courses, or to attend training sessions on editing or even lighting techniques.
It’s best that Freelance Photographers have good personal skills and can identify and fulfill client needs and/or requests. If you become a really good photographer, you could even sell your photos on Shutterstock to make some extra cash.
12. Personal Trainer
Average Salary: $38,222
Prior Education: High school diploma or equivalent.
This career will most likely require that you are qualified to teach proper physical fitness techniques to clients. Many Personal Trainers have strong backgrounds in nutrition, exercise science, or other related fields.
This certificate is not very difficult to obtain; however, it is relatively cheaper compared to any other type of trade school mentioned above.
On-the-Job Training: Continual through updating or expanding one’s professional certifications.
Job Description: To be successful in this line of work you will most likely want to be a very physically active person yourself, as well as have a passion for this line of work.
A typical work day would include meeting one-on-one with clients to assess their physical fitness needs with the intent of designing an individualized training program.
Personal Trainers also motivate and encourage their clients to reach and even surpass their fitness goals. As a result, good personal and communication skills are a must.
Most Personal Trainers work at gyms, private workout facilities, or provide at-home or virtual coaching services. Some decide to work both inside and outside the home to help facilitate a higher income.
Also, you can try getting your Yoga certification.
13. Funeral Director
Average Salary: $56,850
Prior Education: Educational requirements range from a high school diploma or equivalent to an Associate’s or Bachelor’s degree in Funeral Service Education or related field. Internships are also encouraged.
On-the-Job Training: Licensure is required in the U.S. before taking on a Funeral Director position, and some states may require a certain level of education or the completion of an apprenticeship.
Job Description: You do need some training to become a Funeral Director and possibly certification, but you can eventually make as much as $80,000 a year.
A typical work day would include helping families organize funeral details and complete any corresponding paperwork, such as a death certificate.
Offering counseling to grieving family members and helping to prepare the deceased body for the funeral service are other common duties.
It is important that you be able to handle the macabre, and you do need to have tact and a warm personality since you are dealing with people in difficult situations. Make sure you can accommodate a flexible schedule since visitations and funerals are often on weekdays and weekends.
14. Commercial Pilot
Average Salary: $78,740
Prior Education: High school diploma or equivalent, but most airlines now require a Bachelor’s degree as a prerequisite for employment.
On-the-Job Training: Moderate to high training is involved. Often the first step is to get your private pilot’s license. You’ll get your flight hours up and be more comfortable in the cockpit.
Job Description: Commercial Pilots fly planes for very specific reasons, such as for rescue operations, aerial photography, aerial tours, or charter flights.
Pilots generally evaluate overall conditions of aircraft, communicate with air traffic control, and monitor engines and fuel consumption, among other routine tasks. Being a team player with strong communication and observational skills is also a plus.
You’ll be spending a considerable amount of time away from home, so make sure you aren’t too much of a homebody. Fatigue and jet lag may also be experienced often.
Excellent observational and communication skills prove quite beneficial in this field of work. You can easily make more than $50,000 if you get on as a commercial pilot at the right airline.
15. Truck Driving
Average Salary: $53,199
Prior Education: Typically a Commercial Drivers License (CDL) and/or high school diploma or equivalent is preferred.
On-the-Job Training: Drivers must complete several weeks of on-the-job training.
Job Description: After completing six to eight weeks of training and obtaining your commercial driver’s license, you can make $45,000. Work your way up to becoming a trainer, and you can clear more than $70,000 a year.
Maintaining a clean driving record is crucial. Truck Drivers must adhere to all traffic laws, ensure cargo is secure for transport, and keep all trucks and equipment in good working condition.
Hand-eye coordination, visual stamina, and mental focus are important qualities to have for this type of position.
To become a Truck Driver you need a Commercial Drivers License or CDL. I recommend using both a CDL Practice Test and CDL Test Answers to help you study up so you can pass.
16. Nuclear Power Reactor Operator
Average Salary: $72,384
Prior Education: A degree in a field like engineering is required by some nuclear power plants, but you do not need a college degree to land a lower level operator job. In some cases, all you need to do in some cases is to simply pass the certification test.
On-the-Job Training: Moderate to high training is required along with possible certification.
Job Description: Nuclear power reactor operators manage nuclear reactors, monitoring them and making adjustments as necessary to ensure the safety of the nuclear power production process.
They also have to perform routine maintenance on the reactors and shutdown on very specific systems. Because the job is quite risky and requires very careful attention to detail, it pays quite well.
It also helps to become efficient in the required computer technologies involved in nuclear power plants. Make sure you can handle shift work and long hours.
17. Fire Fighting
Average Salary: $49,080.
Prior Education: High school diploma or equivalent. Any prior training in emergency medical services is a plus.
On-the-Job Training: Completing a physically demanding training program is mandatory along with other certifications.
Job Description: The starting salary for a Firefighter is often just a little more than $30,000, but you can make more than $50,000 a year depending on where you work and whether you reach a supervisory position.
Firefighters must know how to use standard field equipment, such as hoses and ladders, become proficient at providing medical attention to injured victims, and properly handle coming in contact with hazardous materials or wildfires.
Depending on which state you work in, you may need to complete specific training programs, such as high-rise building rescues.
Being a firefighter is a very strenuous and dangerous occupation, and you often must work long shifts and over 40 hours per week. To help you get physically ready for firefighting duty, I recommend you check out Pass the Beep Test, a guide to help you prepare your body for firefighting.
18. Emergency Medical Technician (EMT)
Average Salary: $33,380
Prior Education: Typically a high school diploma or equivalent and cardiopulmonary resuscitation (CPR) certification is required. Completing a postsecondary educational program is common.
On-the-Job Training: Generally there is little to no on-the-job training, but completing levels of certification are more than likely required for most states.
Job Description: If you are about to take your EMT classes to become an EMT, you will be happy to learn that the job outlooks in this field are very promising. However, chances of having a good job in the EMS are given to those who have more EMT certifications (like paramedics).
EMTs are first responders in a medical emergency, assessing victims’ conditions and possibly transporting them to the hospital by ambulance. Often people’s lives are on the line when EMTs arrive on the scene.
The hourly wages can vary from $12.08 (10% of the workforce earns less than this) to $24.77 (10% earn more than this bracket). According to the Bureau of Labor Statistics, as of 2023 the median hourly wages of EMTs was at $17.76 per hour.
19. Railroad Jobs
Average Salary: $59,780
Prior Education: Typically a high school diploma or equivalent is required.
On-the-Job Training: Several months of moderate-level training is standard. Obtaining certifications may also be required.
Job Description: Do you like trains? Do you enjoy traveling? If so, a railroad job might be just for you.
A variety of positions are available, ranging from engineers and conductors to switch operators and management positions. Railroad jobs give you a chance to see new parts of the country while getting paid very well in the process.
Since trains operate every day of the week, expect to work nights, weekends, and holidays in all kinds of weather conditions.
Hand-eye coordination, visual acuity, and communication skills are valuable assets in this industry. If you’re looking at getting a railroad job, here’s a comprehensive guide that shares how to get a job in the railroad industry.
20. Medical Coder
Average Salary: $45,035
Prior Education: Typically a high school diploma or equivalent is required, while an Associate’s Degree is sometimes preferred.
On-the-Job Training: There is little to no on-the-job-training since specific training programs are generally completed as a prerequisite for employment. Completing certifications may also be required.
Job Description: The healthcare industry is currently booming, and you can expect it to continue to rise with the Baby Boomer generation getting older. There aren’t enough doctors and nurses available.
Behind all of the doctors is a team of medical coders typing up detailed reports on what procedures you had done and billing you or your insurance company the amount owed.
According to The American Academy of Professional Coders (AAPC)’s 2022 salary survey, on average medical coders without certification bring home approximately $47,200 per year. However, becoming certified as a Certified Professional Coder (CPC) is highly sought after to seek higher pay.
21. Information Technology (IT) Technician
Average Salary: $41,305
Prior Education: Associate’s degree, Bachelor’s degree, or certificate program in computer science or related field is typically preferred. A degree is usually not required to land an entry-level position.
On-the-Job Training: Little to no on-the-job training expected since some employers require that candidates complete some level of formal training as a prerequisite for employment.
Job Description: There are a number of career paths within information technology that do not require a college degree.
Starting out you’ll probably conduct support calls on a helpdesk and only make $11-13 per hour. As your skills and experience progress and you get more experience you can easily make $50,000 to $70,000 per year as you get into systems administration and network engineering.
Typically IT technicians diagnose and repair computer malfunctions and install and maintain network systems. Get started on your IT career path by getting some online computer training and certification.
22. Criminal Investigator
Average Salary: $58,582
Prior Education: High school diploma or equivalent.
Several years of prior experience in law enforcement is encouraged. Some employers do require a minimum of an Associate’s degree in Criminal Justice or related field.
On-the-Job Training: Moderate on-the-job training is expected. Most states do require standard licensure for criminal investigators, along with a license to carry an armed weapon.
Training typically involves learning how to properly gather information and conduct remote surveillance, among other routine tasks. Reconstructing accident scenes is also a field-specific skill learned.
Job Description: Criminal investigators are the individuals tasked with interviewing and collecting evidence for specific cases.
Depending on the case at hand, you may be performing background checks, verifying facts and statements, conducting surveillance, searching online records, or gathering information on persons of interest.
You may even need to testify in court or make a physical arrest. This job is fast-paced and often involves working odd hours, weekends, and holidays.
Important skills to have include resourcefulness, inquisitiveness, and integrity. Being able to stay cool, calm, and collected during criminal investigations is integral to performing well in this role.
23. Brick Mason
Average Salary: $42,900
Prior Education: High school diploma or equivalent. Many masons also complete extensive apprenticeship programs or specific coursework before employment.
Any previous experience as a construction laborer is acceptable.
On-the-Job Training: Learning the trade is often accomplished through completing apprenticeships and/or on-the-job training shadowing experienced masons.
In these apprenticeship programs, promising candidates learn standard masonry practices, such as construction basics, measurement calculations, and safety procedures.
Job Description: Generally a brick mason uses bricks to construct walls, fences, and other structures.
A typical work day would include reading blueprints, gathering required materials, cleaning surfaces with power tools, and lifting heavy materials for proper alignment.
Brick masons often work long hours in a fast-paced and strenuous environment where becoming injured on the job is common. Protective gear, such as safety glasses, should be worn at all times.
Construction deadlines must be met, so brick masons often work indoors and outdoors in all kinds of weather. Important skills to have for this role include hand-eye coordination, physical strength, and attention to detail.
24. Postal Service Worker
Average Salary: $57,260
Prior Education: High school diploma or equivalent. An excellent driving record is a must along with a clean track record.
On-the-Job Training: There is some short-term on-the-job training involved, including passing a written exam, road test, and other standard background checks.
Job Description: Postal service workers generally collect, sort, process, and distribute mail in a timely manner. It’s their responsibility to make sure mail is delivered seamlessly.
They also sell common postal products, such as stamps, and obtain any customer signatures for certified mail.
Important skills to have for this role include a strong focus on customer service and attention to detail.
25. Pharmacy Technician
Average Salary: $31,750
Prior Education: High school diploma or equivalent. Complete a postsecondary program in pharmacy technology before employment is acceptable.
On-the-Job Training: Moderate on-the-job training is required, which typically involves passing an exam or specialized program.
You may also need to learn how to operate automated dispensing equipment, and some states may require certification.
Job Description: Pharmacy technicians are responsible for correctly filling, packaging, and labeling customers’ or health professionals’ prescriptions.
You would also be involved in organizing inventory, processing insurance claims, and accurately entering patient information into a computer database.
Having excellent organizational, listening, and customer-service skills is highly valued for this role.
Pharmacy technicians may be required to work nights and some weekends. Make sure you are physically fit enough to spend most of the day on your feet fulfilling orders.
Is Attending College Overrated?
There’s one thing I know for sure – college is extremely expensive! As the College Board highlights in a recent survey outlining changes in college tuition between 2012-2013 and 2022-2023, tuition is on a steady upward climb that shows no signs of letting up.
In 2023, public four-year in-state tuition is $10,950 for full-time students. This was a 1.8% increase from the previous college year.
There are a vast amount of careers that you can obtain without an actual college degree, but most require either a trade school certification or just time on the job and working your way up through the ranks.
“Formal education will make you a living. Self education will make you a fortune.” – Jim Rohn
Looking for a job? Scared that the cause of unemployment may be growing? Sign up for free at www.FlexJobs.com and see who’s hiring today!
FAQs on High Paying Jobs with No Degree
Are there high paying jobs with no degree?
Yes, there are several types of jobs that do not require a college degree but can still offer competitive salaries. Some examples include web developers, software engineers, medical coders, sales professionals and IT support staff.
What qualifications do I need for these jobs?
What qualifications do I need for these jobs? The requirements for these types of positions vary depending on the job and company, but often include certifications or specialized training in the field you are interested in pursuing.
In addition to technical skills, employers are looking for individuals who demonstrate strong problem solving abilities, excellent communication skills and an understanding of customer service principles.
Q: What are some high paying jobs that don’t require a college degree?
Here are some examples of high paying jobs that don’t require a college degree:
-Commercial pilots: median salary of $121,430 per year -Detectives and criminal investigators: median salary of $81,920 per year -Nuclear power reactor operators: median salary of $94,350 per year -Power distributors and dispatchers: median salary of $83,020 per year -Real estate brokers: median salary of $61,720 per year -Elevator installers and repairers: median salary of $80,180 per year -Web developers: median salary of $73,760 per year -Petroleum engineers: median salary of $137,170 per year -Computer network architects: median salary of $112,690 per year -Medical and health services managers: median salary of $100,980 per year
Are there any high paying jobs that don’t require a college degree, but do require experience?
Yes, there are many high paying jobs that don’t require a college degree but do require experience. Some examples include:
-Commercial pilots: typically require several years of flight experience as a co-pilot before being considered for a pilot position. -Detectives and criminal investigators: typically require several years of experience in a related field, such as a police officer or federal agent. -Nuclear power reactor operators: require extensive on-the-job training and experience. -Real estate brokers: typically require several years of experience as a real estate agent before becoming a broker. -Petroleum engineers: typically require several years of experience in the oil and gas industry before being considered for a position as a petroleum engineer.
When a lender looks at your home loan application, one of the main things they look at is your borrowing power.
Of course, borrowing power changes from applicant to applicant and is based on numerous factors such as salary, debt, living expenses, and credit history (just to name a few).
However, it’s easy to forget that having children (or dependents) affects your borrowing power, too. Let’s consider this here.
How do children affect your home application?
While having children is a gift and fulfilling for many, lenders can see it as an increase in living expenses. Raising kids costs time and money, and lenders consider this extra cost when evaluating your financial capacity to make mortgage repayments.
According to the Australian Institute of Family Studies, “the estimated weekly costs for low-paid families of raising two children – a 6-year-old girl and a 10-year-old boy – is $340 per week or $170 a week per child.”
Which is about $17,680 for two children or $8,840 for one child each year.
That extra expense means you have less disposable income that could go towards paying back your home loan.
Let’s look at an example: Patrick and Jeremy have a combined income of $120,000 with $30,000 in annual living expenses. They also have no children. Based on Mozo’s borrowing calculator, that puts their average borrowing capacity at about $710,000.
However, having two kids (or two dependents) would increase their annual expenses to about $47,000, bringing their borrowing power down to $528,408. Almost a $200,000 decrease!
Typically to avoid this, many Aussie couples think ahead and purchase property in preparation for starting a family. But it is easy to forget that if they want to refinance their loan in the future, which is common, lenders will take into consideration the new dependents.
Refinancing after having children
Currently, 75% of Australian homeowners are on the brink of becoming home loan hostages, so they can’t easily refinance their home loans to escape higher interest rates.
And as mentioned earlier, having children is a significant expense that lenders consider when evaluating refinancing applications.
However, having kids doesn’t mean you’ll never be able to refinance. Financial situations change over time and it’s perfectly normal. But if you want to switch lenders and you have a child, you’ll have to change your game plan to increase your borrowing power.
How to increase my borrowing power if I have kids?
When looking at home loan applications, lenders want to know that you have enough disposable income to pay your loan on time without any issues. This includes being able to make your repayments if interest rates increase.
Below are four tips on how to increase your borrowing power.
Have a larger deposit. Saving for a larger deposit means having more equity and needing a smaller home loan.
Pay off any debts. Consider paying off any credit card or personal loan debts. This might help increase your borrowing power.
Negotiate a pay rise. One of the easiest ways to increase your borrowing power is by having a pay rise. More money coming into your bank account means more disposable income (which lenders love).
Lower living expenses. Audit your living expenses and identify areas where you could cut back—got any memberships you don’t use? Streaming services you never watch? Maybe cut back on your takeaway orders. Small changes here and there could genuinely enhance your savings in the long term.
Don’t feel discouraged from becoming a property owner if you’re thinking of having kids. But it’s something to keep in mind and plan properly for.
Compare home loans through our mortgage hub. Are you just starting your property journey? Check out our home-buying guides.
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WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
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Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
^See information about the Mozo Experts Choice Home Loan Awards
Mozo provides general product information. We don’t consider your personal objectives, financial situation or needs and we aren’t recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don’t cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.
Acme Lending denied Han’s application for a car loan due to a low credit score. Curious about his credit history, he requested a free copy of his credit report. He noticed several inaccuracies, including accounts that didn’t belong to him and payments that were incorrectly reported.
Han disputed these errors with the consumer reporting agency. Its investigation found that Han had entries on his credit report for a person with a similar name and that a credit card he’d had in college hadn’t bothered to report several of his payments, making it look like he still owed them money.
Now, Han’s driving around in his brand-new sports coupe thanks to a law known as the Fair Credit Reporting Act, which made fixing all that for free within about a month possible. And the FCRA could do the same for you — if you know your rights.
What Is the Fair Credit Reporting Act
The Fair Credit Reporting Act protects your credit report from misuse. It applies to consumer reporting agencies — like credit bureaus, tenant or employee screening services, and medical information companies — and the businesses that report information to them.
The FCRA limits who can see your credit report and provides you the right to know when negative information played a role in an application denial. It also ensures all information provided on your credit report is private, accurate, and fair.
The FCRA went into effect in 1971 and was the first law to protect consumers from willful misconduct on their credit reports. When it went into effect, the Federal Trade Commission oversaw it, but it has since transferred to the Consumer Financial Protection Bureau.
It was one of the country’s first data privacy laws and has changed a lot over the years to protect consumers from ever-changing threats.
Credit Cardholder Rights Under the FCRA
Laws like the FCRA may seem intimidating, and it may feel overwhelming to take action if someone violates your rights. But issues with your credit report can spin out of control, affecting other facets of your life, so taking action if someone violates one of these rights is a must.
1. Right to Access Consumer Reports
The FCRA provides consumers the right to access all information any bureaus collected about them. By law, consumers have the right to one free annual credit report from each agency.
That includes the three major bureaus — Experian, TransUnion, and Equifax — and any smaller or niche bureaus, such as those that collect employment, insurance, and fraud information. You can find a list of smaller bureaus on the Consumer Financial Protection Bureau website.
Thanks to widespread fraud during the pandemic, consumers had access to free weekly reports from each credit bureau from AnnualCreditReport.com. However, for years, the major credit bureaus have given consumers access to much if not all the same information through free online accounts.
Regardless of which agency you wish to obtain your credit report from, you must provide adequate identification, including verifying your Social Security number.
2. Right to Dispute Credit Report Inaccuracies
Discovering inaccurate information on your credit report can be frustrating, but the FCRA gives you the right to dispute it.
Each credit bureau has a method you must use (usually a link on their website) to file the dispute. The agency investigates your claim unless they consider it frivolous.
If the investigation determines the information in dispute is inaccurate or the credit bureau can’t verify it, they must remove or correct it. Typically, they have 30 days to investigate, though it can take up to 45 in some circumstances. After that, it may take a few days to notify you and update the report.
To learn more, read our article about disputing errors on your credit report.
3. Right to Know When Credit Information Caused an Application Denial
If a would-be lender or creditor denies your application, it must supply you in writing with the name, address, and phone number of the credit agency used to decide and a reason for the denial so you can see the information yourself. This document is called an adverse action notice.
4. Right to Place a Security Freeze on Your Credit Reports
You have the right to place a free security freeze on your credit profile whether or not you’ve experienced fraud or theft. A freeze just means no one can access your credit report without your authorization.
If you apply for a new loan or credit card, it could delay the process because the credit bureau must first get your permission to access the file before sharing it with the creditor. But that inconvenience is a small price to pay to protect your finances.
5. Right to Place a Fraud Alert on Credit Reports
If you’re actively experiencing fraud, you can place a fraud alert on the affected credit bureau files. A fraud alert is free and typically lasts one year. However, if you’re experiencing identity theft, you get a free seven-year fraud alert.
6. Right to Place an Active-Duty Alert on Credit Reports
If you’re deployed, the FCRA allows you to make note of that on your credit reports. If a creditor or lender sees that you have an active-duty alert, they can’t extend credit without verifying your identity.
But don’t worry. The government recognizes that if you’re deployed, you could be completely unreachable. So you can also assign a representative to oversee your account while you’re gone.
7. Right to Opt Out of Pre-Approved Credit Offers
Some lenders and creditors do soft credit pulls, which is a way to partially check your credit that doesn’t affect your credit score, allowing them to pre-screen you for offers. You can opt out of these offers by visiting OptOutPrescreen.com or calling 888-5-OPT-OUT (888-567-8688).
All offers you receive must include a toll-free number to call and opt out of that company’s offers.
8. Right to Require Consent Before Employers View Your Credit Report
Consumer reporting agencies may not provide information about your credit file without your consent. Therefore, you must give your current or prospective employer written permission for them to have access.
Note that if they use an employment screening service, they may receive information about your credit history in addition to prior employment, salary and education, and professional license verification.
9. Right to Have Outdated Negative Information Removed
Consumer reporting agencies must remove most negative information after seven years, whether you’ve resolved it or not. For bankruptcy, that number is 10 years.
However, note that there are things you can do to inadvertently restart the clock on collections. For example, if you newly admit you owe funds to a creditor, make a payment, or negotiate with them, they can restart the clock on your debt.
10. Right to Medical Privacy in Credit Decisions
Creditors generally may not use private medical information to form credit decisions. They may have access to the amounts you owe and the names of creditors, but they aren’t allowed access to your diagnosis or prognosis and can’t use them as part of the decision-making process.
If they somehow obtain that information — for example, they receive it unsolicited from the creditor or you orally explain it to an agent of the company — they still can’t use it to make a credit decision.
Steps to Take if a Company Violates Your Credit Cardholder Rights
If you feel a company violated your rights, you can take certain steps. Exactly what you do depends on the type and severity of the violation and whether you experienced real harm because of their actions. Your options include:
Contact the consumer reporting agency. Start by contacting the relevant consumer reporting agencies to resolve the issue by filing a dispute so you have concrete evidence of the violator’s response. That also allows you the chance to work the issue out. But in case things don’t go your way, take notes and keep any written communications so you have as much evidence as possible.
File a complaint with the Consumer Financial Protection Bureau. With evidence in hand, file a complaint with the CFPB. You can file the complaint even if you resolve the issue through the consumer reporting agency. But it’s best to do so only if you believe there’s likely a pattern of bad behavior (rather than a one-off error).
Hire a consumer law attorney. If the CFPB is unable to resolve the FCRA violation to your satisfaction or if you need additional help, hire a consumer law attorney with FCRA experience. In fact, since many attorneys offer free consultations, it’s always worth talking to one early in your journey to find out if and when you should turn it over to them.
Final Word
Knowing your FCRA rights is important. But you can do a lot to protect yourself before any violations occur.
Sign up for free accounts with all three major credit bureaus and download the apps. That makes it easy to freeze your credit report to keep it protected, then unfreeze it temporarily when you’re applying for credit.
To take it a step further, set aside a weekend each month to request one of the lesser-known or niche reports. That way, you can see what potential employers, insurers, or utility companies might see.
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Heather Barnett has been an editor and writer for over 20 years, with over a decade committed to the financial services industry. She joined the Money Crashers team in 2020, covering banking and credit content for banking- and credit-weary readers. In her off time, she enjoys baking, binge-watching crime dramas, and doting on her beloved pets.
Save more, spend smarter, and make your money go further
Do you want to invest better? Who doesn’t? Today, September 25, is Invest Better Day, a day of investor education dreamed up by the jester-hatted money mavens at the Motley Fool.
Any conversation about investments tends to get bogged down by excruciating details, jargon, and ideology. “My portfolio is outperforming your portfolio” is the petty grownup version of “my dad can beat up your dad.”
Fortunately, most of what it takes to invest better has nothing to do with choosing the right mutual fund. I’ve put together my top five investment tips, and only one of them involves choosing the right kind of fund (and it’s plenty vague).
This is good news and bad: choosing a mutual fund is easy. You can do it online in five minutes. But investing better is more about managing human psychology and less about managing money — it’s also about avoiding big mistakes, not about choosing the single best investment.
Enough backstory. Let’s get to the list.
What’s the most important factor that determines how much money you’ll retire with?
It’s not which investments you choose — it’s how much you’ve saved along the way. A recent study by Putnam Investments confirmed this, and the math is simple: save pennies, and no amount of great stock-picking will let you retire with a boat.
Save a high percentage of your salary (especially in your highest-earning years), and you can make plenty of investment mistakes and still come out okay.
Avoid high-interest debt
As Burton Malkiel and Charles Ellis put it in my favorite investing book, Elements of Investing, “There are few, if any, absolute rules in saving and investing, but here’s ours: never, never, never take on credit card debt.”
Credit cards, installment loans, lines of credit, unsubsidized student loans: all of these are the opposite of investing. When you invest, you turn your money over to someone else and hope they’ll do something smart with it and hand back more money later.
When you borrow at a high rate, someone else is doing the same with you, minus the “smart” part. Other than getting a 401(k) match, it doesn’t make sense to save for retirement while carrying an 18% credit card balance.
Everyone is so tired of being told to get a 401(k) match that I’m not even putting it on the list. Fewer people, however, understand the massive tax savings you get from using tax-advantaged accounts like the 401(k), traditional or Roth IRA, health savings account, or 529 college savings plan.
Every time you put a dollar in one of these accounts, it’s like getting a match from Uncle Sam. Unless you’re saving for a specific near-term goal or an emergency fund, saving in a taxable account while you still have space available in a tax-advantaged account means paying unnecessary taxes. Yuck.
Automate
How do you achieve the high savings rate from tip #1? Only one way: automation. Unless you’re self-employed, your federal taxes come out of your paycheck automatically.
Why does the IRS require you to pay taxes this way? Because if people were required to set aside taxes on their own and pay once a year, most of us would spend it before April.
Indeed, the self-employed get into this mess all the time.
Take advantage of what the IRS knows and automate your own savings as much as possible: set up automatic paycheck deduction or an automatic checking account transfer (or both) to your retirement account.
Pay less, get more
Mutual funds charge you a fee for investing your money, but the fee is invisible: it comes out of your returns before you ever see it. The fee is called an “expense ratio” and it’s expressed as a percentage, usually between 0.1% and 2%.
If a fund charges 1%, that means you pay 1% of whatever money you have in the fund every year. That sounds like a small fee but it’s not. The world’s biggest and most diversified mutual funds and ETFs charge less than .2%. Low expenses are an excellent predictor of better returns.
This goes for your 401(k), too. In addition to the expense ratio for each fund, your 401(k) may pile on other management expenses.
New rules this year require 401(k)s to disclose all fees. Read your statement, and if you’re paying more than a small fraction of 1%, call your benefits office, team up with your fellow employees, make protest signs — whatever you need to do. It’s your money.
So there you are: five ways to invest better, and none of them involve picking stocks, reading annual reports, or any other form of nerding out.
Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.
Save more, spend smarter, and make your money go further
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For most people buying a house is the most expensive purchase they will ever make. While there are government programs that help people get into houses without a lot of money, houses are still expensive. Many people believe buying their dream home is not within the realm of possibility, because of the costs associated with houses and life in general.
Real estate is an incredible way to build wealth thanks to the ability to buy real estate below market value and the United States tax code. Even someone with a modest salary can buy their dream home if they make some sacrifices and plan their real estate purchases well. I am not saying you should sacrifice what you think your dream home should be; I think it is vitally important to dream big. It will take time and hard work to get to a place where you can buy your dream home.
I own more than 20 rental properties, fix and flip 15-30 homes a year and own a real estate brokerage. I have learned many tricks over the years that can be used to build wealth through real estate and you do not have to have a lot of money to get started!
Cash needed to buy a house
There are many ways to buy a house, but most people will get a loan from a traditional bank or lender. If you are buying as an owner occupant you can put no money down with some loans like VA. Other loans will allow buyers to put 3.5 percent or 5 percent down as an owner occupant. When you get a loan, you will have to pay closing costs which consist of an origination fee to the lender, pre-paid insurance, taxes, appraisal, and a few other costs. Closing costs can range from 2 to 6 percent of the loan amount depending on what loan you use and who the lender is. On most loans 3 percent is a common amount for the loan costs on a low down payment owner occupant loan. Here is the cost break down on a 5 percent down loan for a $200,000 home.
Down payment: $10,000
Closing costs: $6,000
Total: $16,000
You can lower these costs by asking the seller to pay some or all of the closing costs or using a loan that has a smaller down payment. The amount needed to buy a home will also vary based on the purchase price. You may also have some more costs like an inspection that could run from $300 to $600. Remember you will also have to be able to qualify for the loan by having decent credit and a steady income.
Start small with a great deal
A $200,000 house may not be your dream house, and in many markets, $200,000 may not get you even a starter home. Most people will not be able to buy their dream house when they buy their first house. It will take time and hard work to build yourself into a position to buy your dream home. One way to buy your dream home is to make more money, but this article will focus on doing it strictly with real estate.
One reason I love real estate is that you can buy houses below market value. With the stock market and most products, you buy them at market value. Houses can be bought below market value because they are not easy to value, they may need work or the seller may need to sell the house quickly. I buy all of my houses below market value and that is how I am able to make so much money on my rentals and fix and flips.
If I were in the market for a $200,000 home that would be my personal residence, I would want to buy that house for at least 20 percent below market value. If it was a fix and flip, I would want to buy it for even more below market. I would buy the home for $160,000 assuming it needed no repairs and if it needed work, I would want to buy it even cheaper. It is not easy to buy homes this far below market, but it is possible.
How can the tax code help?
The United States tax code is very favorable to people who buy owner-occupied homes or investment properties. Investment properties are treated as a business and even if you make money on your rental houses, because of depreciation, they could show a loss on your taxes. The great part about owning a house as an owner occupant is that you may not pay any capital gain taxes when you sell the home. You have to live in the home for 2 out of the last 5 years to qualify for this tax treatment. Your interest payments on the mortgage for the home are also tax-deductible as an owner occupant. If I buy a home for $160,000, live in it for 2 years and then sell the home for $200,000 I would not pay any taxes on the $40,000 I made. Please note I am not an accountant, make sure you talk to one for all the details.
While you were living in that house for two years it may have even gone up in value or you could have made repairs or improvements that added more value. I bought a personal residence in 2008 for a little over $200,000 and ended up selling it five years later for over $300,000 and paid no taxes on that profit. While you are living in the home you are also slowly paying your loan off and increasing your equity in the home.
There is a good chance the home I would buy for $160,000 could be worth as much as $220,000 two years later. I would have some costs into the houses as I would probably spend money on maintenance and some repairs. Here is the cost breakdown when I sell the home:
Sales price: $220,000
Selling Costs: $15,000 (paying a real estate agent and other costs)
Repairs: $5,000
Loan Payoff: $149,000
Total cash: $51,000
After selling the home you would have $51,000 in cash leftover, but you paid a down payment and possibly closing costs when you bought the home so that is not all profit.
Next, buy a more expensive house
After selling the first house, you have $51,000 to buy another house plus any money you have saved up. You may be able to qualify for a larger home than you first bought if your income has gone up or your debts have gone down (I don’t think it is smart to buy the most house you can qualify for if you want to invest in rental properties). If you can now get a loan for $200,000 that means you can buy a much nicer home than your first home. With your next home, you want to buy a $300,000 house that is also bought below market. You will purchase the house for $240,000 and you can now put $50,000 or more into the home for the down payment. Your new loan is under $200,000 even if you have to pay closing costs and you can sell the house again in two years.
After two more years here are what the numbers look like:
Sales price: $340,000
Selling costs: $25,000
Repairs: $5,000
Loan payoff: $188,000
Total cash: $122,000
For the next house, you buy you will have an even bigger down payment, you will be able to buy a more expensive home and make even more money on the next sale. This process can continue to be repeated over and over until you buy your dream home.
Is putting all of your money into your dream home a good idea?
Buying houses this way will build wealth and help you buy your dream home. The tax advantages of an owner-occupied buyer in the United States are a huge advantage, but I don’t use this strategy. I try to buy my personal houses below market value, but I don’t move every two years and I don’t spend all my money on a personal house. I like to save money and invest it in rental properties that provide long-term cash flow. There are also some dangers like the prices could decrease instead of increase, but that is a risk whenever you buy a home or invest in anything. I also think it is very hard to save money if you buy the most expensive house you can qualify for. If your main goal is to buy your dream home and you are not as worried about saving and investing, this can be a great strategy to build wealth.
This guest post from Mike is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success â or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes.
Traveling to exotic new places is a passion of mine. My wife reminisces fondly over a dinner conversation we had about nine years ago while we were still dating. I emphatically told her, âI am going to show you the world.â Sure, she probably took it as a pick-up line, but little did we know that those words would become prophetic for us.
At the time, I was a federal employee living in San Diego, California, working within the Department of Defense as a civil servant (non-military) employee. Over the next four years, we wed and my wife gave birth to our first child. Prior to marriage, we made the decision that having my wife stay at home with the kids was important to us. Anyone who has spent some time and money in San Diego knows that the city’s cost of living makes choosing to be a single-income family difficult. As our family grew and our costs increased, we decided to consider looking for a more affordable place to live.