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January 15, 2022

18 Student Loan Mistakes to Avoid

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Most students have to borrow student loans to go to college. But very few know anything about them. That’s pretty scary considering you’re likely to take on several tens of thousands of dollars in debt. And making mistakes with that much money could cost you just as much.

Take it from me. I borrowed six figures to get a doctorate to work in a notoriously low-paying field. And thanks to taking advantage of years of deferments, forbearances, and an income-based plan designed to help borrowers with high debt and low income, I now owe twice what I originally borrowed.

Don’t make my mistakes. Instead, learn about the most common student loan borrowing and repayment errors. That way, you can avoid an overwhelming amount of student loans and get out of debt faster.

Student Loan Mistakes to Avoid

Most student loan borrowing and repayment mistakes deal with misunderstanding what you’re borrowing, how interest works, how to pay off debt quickly, and how to avoid default. Steer clear of these top mistakes to ensure you borrow smartly and don’t end up in over your head.

Mistake 1: Applying for Aid at the Last Minute

The Free Application for Federal Student Aid (FAFSA) is the gateway to qualifying for all financial aid of any kind. That includes federal grants and student loans as well as state grants and most institutional aid — the grants, scholarships, or loans offered by your school.

The FAFSA opens for applications every Oct. 1, and you must complete it by June 30 before the academic year you need aid for. You must complete a new FAFSA every year you plan to enroll in school.

Many colleges and universities also require additional forms, such as the CSS profile (short for the College Scholarship Service profile), which dives even deeper into your family’s financial situation. So check with the financial aid office to find out what they are, and stay on top of deadlines.

But note that states and colleges have limited grant resources. And those resources tend to go to the students who apply early. In other words, they’re first come, first served. So the earlier you get your applications in, the better.

And while the federal government is unlikely to run out of education loan funds, if you miss the FAFSA deadline, you’ll have to resort to private loans, which are costlier and feature less favorable repayment options.

Apply as early as possible to ensure you get as much grant and scholarship aid as you can qualify for. The more grants you can get, the fewer loans you’ll need to borrow.

Mistake 2: Borrowing Too Much

It’s possible to borrow every cent you need to finance your education anywhere you want to go to school. But it’s crucial to ask whether you should. Getting in over your head with student loan debt can have catastrophic consequences. I’m living proof.

I needed a doctorate for my original career plan of teaching college. But few college professors earn enough income to manage the types of monthly payments I had along with other living expenses. That’s how I ended up in the deferment-forbearance cycle.

And it’s not easy to get out of.

Thanks to a loophole in the Public Service Loan Forgiveness Program I was counting on and how colleges operate, my teaching position doesn’t qualify me for forgiveness. Additionally, discharging student loans in bankruptcy is currently so difficult it’s nearly impossible. And settling federal student loans isn’t any easier.

The first step to reducing overwhelming student loan debt is to exhaust every other means of paying for college, including scholarships, grants, and work-study. Search online for scholarship aid using a national scholarship database like Fastweb.

And never count on options like the Public Service Loan Forgiveness Program. Historically, the government’s made it nearly impossible to get. Do your homework to increase your chances of getting it and apply for it if you qualify. But don’t base your student loan repayment strategy on it.

Additionally, consider less expensive colleges. State schools tend to give most students the best value. It only matters where you go to college for a select few graduates, such as those looking to build connections with specific financial or law firms.

Finally, do a cost-benefit analysis. I found out the hard way all degrees don’t pay off, so as much as you want to pursue your passion, it might not be worth it financially.

Search sites like Glassdoor or PayScale to find out how much you can reasonably expect to make in your chosen field and compare that to the cost of school. As a rule, don’t borrow more than you can expect to earn as your annual salary your first year out of school. That ensures you can pay it off in 10 years or less.

Mistake 3: Not Understanding How Loan Forgiveness Works

Historically, the Public Service Loan Forgiveness Program has been notoriously difficult to qualify for. The program was overhauled in the fall of 2021. But until then, only 2% of applicants who believed they qualified had their loans forgiven.

Much of that is likely due to bureaucratic mismanagement, hence the overhaul. However, the mismanagement led tens of thousands of borrowers into making payments under the wrong repayment programs.

On Oct. 6, 2021, the government announced Temporary Expanded Public Service Loan Forgiveness, which allows previously nonqualifying payments to be counted toward loan forgiveness as long as those payments are certified before Oct. 31, 2022.

But moving forward, it’s crucial that borrowers are clear about the rules of loan forgiveness. You don’t want to find out after 10 years that your application is ineligible and you have to start all over.

To qualify for loan forgiveness, you must:

Have Federal Direct Loans. Private loans don’t qualify for forgiveness, nor do other types of federal loans, such as Perkins loans. If your federal loans aren’t direct loans, you can consolidate them into a direct loan to qualify.
Work Full-Time for the Government or a Nonprofit. Payments only qualify while you’re employed full-time for an American federal, state, local, or tribal government or qualifying 501(c)(3) nonprofit organizations. That includes military service, Peace Corps, and AmeriCorps but excludes labor unions and partisan political organizations.
Enroll in an Income-Driven Repayment Program. No other repayment options qualify. But even if your income is so low your calculated payment under the plan is $0, being enrolled qualifies you.
Make 120 Qualifying Payments. They don’t have to be consecutive, but they must qualify, meaning you have to make them under an income-based plan.
Submit the Forgiveness Certification Form Regularly. You must fill out and submit a Public Service Loan Forgiveness Program certification form yearly and each time you switch employers. While not required, doing so ensures the payments you’re making qualify for forgiveness and allows you to make any changes you need to before you’ve made too many nonqualifying payments.

See all the rules at StudentAid.gov.

Mistake 4: Taking Out the Wrong Type of Loan

There’s more than one type of student loan. But it’s generally best to exhaust your resources for federal aid before turning to alternatives.

That said, while rare, some students may find the caps on how much you can borrow in federal direct loans don’t cover the total cost of attendance.

Fortunately, graduate students and parents of undergrads can borrow PLUS loans up to the total cost of attendance. So there’s no need for many students to resort to other sources. If that’s not an option for you, students can sometimes borrow from their state government or the school they plan to attend.

But the primary source of alternative loans for student borrowers is private student loans from banks or credit unions.

Federal student loans almost always win out over private student loans because of their lower fixed interest rates, flexible repayment options, borrower protections, and the potential for forgiveness.

But if you’re planning to borrow PLUS loans and definitely won’t qualify for the Public Service Loan Forgiveness Program, it’s worth it to find out whether you could get a better deal on a private loan if you have excellent credit.

Mistake 5: Not Shopping Around for the Best Interest Rate & Terms

If you decide to borrow private student loans, always shop around for the best loan you can qualify for.

Private lenders compete for your business. So going with the first lender you find could mean leaving a better rate on the table.

Use a comparison site like Credible, which matches you with prequalified rates from up to eight lenders with only a soft inquiry on your credit report, which doesn’t affect your credit score. That way, you can compare all your student loan options in one place.

But it’s not only interest rates that should matter to your bottom line. The best private student loan companies offer various borrower perks in addition to low rates.

For example, most lenders reduce your interest rate when you enroll in autopay. And some reduce your rate even further with loyalty discounts for doing other business with them, such as opening bank accounts or taking out personal loans.

Some lenders also offer perks for specific borrowers, such as special payment plans for medical and dental students during their residencies. And some even offer unique perks like free financial coaching or career planning services.

Just remember to read all the fine print so you know exactly what loan terms you’re agreeing to before you sign. For example, it may lack options for deferment if you fall on hard times or a co-signer release option. Don’t be lured by a shiny interest rate on its own.

Mistake 6: Not Understanding How Variable & Fixed Interest Rates Work

The rate is only one piece of the interest puzzle. How that rate works also affects how much accrues over time.

For example, all federal student loans come with fixed interest rates set each year by law. That means the rate stays the same for the life of the loan, which could be a good or bad thing, depending on the interest rate during the year you borrowed.

But some private student loans have variable interest rates. These fluctuate with market conditions. Although the variable rates are generally the lowest offered rates, it’s because the borrower is assuming the risk that the rate won’t go up, which is likely if you take 10 or more years to repay your student loans.

If you already have a variable-rate private loan, look into refinancing to a fixed-rate loan while rates are low.

And once you start making payments, contact the student loan company to find out if there are any ways to lower the interest rate, like signing up for an autopay discount.

Mistake 7: Not Understanding Interest Accrual & Capitalization

Another factor to consider is when the interest begins to accrue (accumulate). On subsidized federal loans, that doesn’t happen until after you graduate, leave school, or drop below half-time enrollment. Thus, whatever you borrowed is what you owe up until the day you’re no longer enrolled full time.

But interest on unsubsidized federal and private loans starts the moment you get the money. So on graduation day, you owe a higher balance than you originally borrowed.

Worse, that interest is capitalized (added to the principal balance as though it were part of what you borrowed) once you graduate, leave school, or drop below half-time enrollment. Since interest accrues according to the principal, that means you’ll then be earning interest on the interest.

Fortunately, you can reduce or even eliminate the burden interest can cause. Make small monthly interest payments while you’re still in school. That ensures none accrues and capitalizes on graduation.

If you have to, take on a part-time job. As long as you keep it to part-time hours, it shouldn’t interfere with your studies, and a well-chosen college job comes with numerous benefits, like teaching you the money management skills you need to pay off those loans after college.

Mistake 8: Co-Signing a Loan Without Understanding the Consequences

In some cases, a co-signer can help a student qualify for a loan or get a lower interest rate.

But co-signing their loan comes with a great deal of risk. You’re taking on equal responsibility for the loan. That means if they make a late payment or miss one entirely, it could impact your credit score. And if they default on the loan, the loan company will come after you for the balance.

And it doesn’t matter how responsible or well-intentioned the borrower is. No one can predict the future, and they could fall on hard times.

There are several programs designed to help people who have trouble paying back federal loans — if they enroll in them. But private lenders are especially hard to work with. Either way, there are risks associated with co-signing for a student loan.

If you do agree to co-sign, ask them to look for a company with a co-signer release option, which absolves you of responsibility for the debt after the student makes a certain number of on-time monthly payments.

If not getting help means they can’t attend college, a parent PLUS loan gives you more control than co-signing a private loan. You can borrow up to the total cost of their attendance, but the loan will be in your name.

If you want, you can still agree that they’re responsible for paying you back (though that agreement isn’t legally enforceable). Plus, if you experience financial hardship, you have access to federal repayment plans and borrower protections.

However, don’t sacrifice retirement savings or go into debt paying for your kids’ college. It could leave you unprepared, potentially placing a financial burden on them later.

Mistake 9: Putting Off Making a Repayment Plan

Many borrowers get lulled into thinking they can wait until after they graduate and their six-month grace period ends before they have to start worrying about their student loans. But you need to prepare your budget long before then.

A student loan payment could easily be $400 per month (maybe more). That’s a hefty chunk of anyone’s take-home pay. But recent grads won’t make as much as established professionals in any field.

And if you don’t think about it for the first six months post-graduation, it’s easy to establish a post-college life that doesn’t leave room for it, such as upgrading your apartment or buying a new car.

Before you graduate, find out what your monthly payment will be. You can check your student loan balance by creating a student account at StudentAid.gov.

Then, build the rest of your post-college budget around your monthly student loan payment. That ensures you won’t take on more financial obligations than you can afford. Unfortunately, that may mean living that ramen-eating college lifestyle for the first couple of years after you graduate.

Mistake 10: Choosing the Wrong Repayment Plan

The automatic student loan repayment schedule is 10 years of fixed payments, but it’s not the best option for all borrowers.

You don’t want to string out payments for decades unless it’s necessary. But income-driven repayment plans, which forgive any remaining balance after you make 240 to 300 (20 to 25 years) of qualifying payments, may be a saving grace for borrowers with high debt and low income.

And for those entering public service fields, an income-driven repayment plan is the gateway to the Public Service Loan Forgiveness Program, which forgives any remaining balance in as few as 120 qualifying payments.

But even if you stick to the standard 10-year plan, you still have options.

For example, you can repay your loans on a graduated plan, which lets you make smaller payments at the beginning. Your payments then gradually rise every two years. This plan is ideal for those who must start in a lower-paying job but expect their income to increase substantially as they gain work experience.

Use the loan simulator at StudentAid.gov to see how much you can expect to repay under different repayment plans. It shows your monthly payments, total amount owed, and any potential balance you could have forgiven under an income-driven repayment plan as well as the date you can expect to have your loans paid off.

Use this information to weigh your options. Ask yourself:

Is it better to pay off your loans as quickly as possible by sticking to the standard 10-year plan? Is that realistic at your current income?
How big will your payments be 10 years down the line if you opt for graduated repayment? Are you likely to make enough money for that to be practical?
Is it better to make your current situation more manageable through an income-driven or extended repayment plan?

Lowering your monthly payment will have consequences since it means more interest will accrue. But the loan simulator can give you an accurate picture of what those consequences will look like.

Mistake 11: Only Making the Minimum Payment

The longer you sit on debt, the more it costs you thanks to the interest. So if you have any wiggle room in your budget, put whatever money you can toward your student loans to pay them off as quickly as possible.

Even small amounts can make a big difference.

For example, if you borrowed $40,000 in student loans at 6% interest, your monthly payment would be $444. But if you paid $500 a month instead — a difference of only $56 — you’d save $1,957 in interest and have them repaid a year sooner.

If you can, opt for a side gig or cut your expenses. Additionally, put any windfalls — like tax refunds, gifts, or inheritances — toward your loans.

But this is key: When you make any extra payments toward your loans, ensure you indicate the company should apply it to the principal. The more you pay down the principal, the less interest accumulates.

Mistake 12: Refinancing Without Considering the Pros & Cons

Refinancing is a common strategy for lowering the cost of debt, whether it’s a mortgage refinance or a student loan. But while refinancing can score you a lower interest rate, interest rates aren’t the only consideration.

When you refinance a student loan, you can only do so through a private refinance lender. That means you lose access to all the benefits of federal student loans, including federal repayment plans, borrower protections, generous deferment and forbearance options, and federal loan forgiveness.

It may still be worth it to you, depending on the rate you can get. But it’s crucial to weigh that against all you’d be giving up.

Even if the private interest rate is lower, the future is unpredictable, and you never know if you could need those federal benefits. And you’ll lose all access to federal loan forgiveness with a refinance.

On the other hand, if you have private student loans, there’s no reason not to refinance.

Mistake 13: Postponing Payments Unnecessarily

Both federal and private student loans have multiple options for deferment and forbearance. These allow you to temporarily suspend payments for various reasons, including full-time enrollment in school, economic hardship, military deployment, and serving in AmeriCorps.

Sometimes, deferment or forbearance makes sense, such as while you’re enrolled in school. But prolonged use of these options just increases your overall balance because interest keeps piling up.

Interest accrues on all but subsidized federal loans during deferments. And it accrues on all loans during forbearance. Additionally, that interest is capitalized (added to the principal balance) at the end of the deferment or forbearance.

Only use these options when absolutely necessary. And if possible, make interest payments during periods of deferment or forbearance to prevent its accrual.

If you’re deferring or forbearing for economic hardship and anticipate the hardship will last longer than a month or two, apply for an income-driven plan instead.

Depending on the severity of your situation, your monthly payments could be calculated as low as $0. And some plans don’t capitalize interest and even have interest subsidies, which means the government covers the interest on your loans for a specified period.

Additionally, those $0 “payments” count toward potential student loan forgiveness. But only periods of economic hardship deferment count toward the forgiveness clock. No other form of deferment or forbearance qualifies. And there’s a cap on how long you can defer for economic hardship.

Plus, if your financial situation changes, you can always change your repayment plan.

Mistake 14: Missing Payments

Missing payments can result in late fees. The student loan company tacks these onto your next month’s minimum payment. So if you had a hard time paying this month, it won’t be easier next month.

Plus, when you make your next payment, your money covers fees and interest before going toward the principal. So multiple fees could mean paying your principal down slower. And interest accrues according to the principal balance, so the higher you keep that balance, the more interest you pay.

Worse, if you miss enough payments, it can result in a default of your loans, which comes with severe consequences, such as damaged credit or wage garnishment or seizure of your tax refunds, Social Security benefits, or property.

There’s never a reason to miss a payment on a federal student loan if you’re facing financial hardship. Simply call the company and let them know. Depending on what you qualify for, you can choose from multiple options, including deferment, forbearance, or an income-driven repayment plan.

Private lenders are tougher to work with, as fewer repayment options are available. But many are still willing to work with you if you explain the situation. Most of the top lenders have limited programs for deferment or forbearance in times of economic hardship.

Mistake 15: Keeping Your Assigned Payment Due Date

Student loan companies allow you to adjust your monthly due date. That can be helpful if you’re having trouble stretching your dollars from one paycheck to the next.

Plus, if your bills are anything like mine, most of them are due at the same time of month. Thus, if you get paid biweekly, adjusting your due date to a different time of the month can make things easier.

If you want a different due date, contact the company handling your student loans and ask if you can adjust your due date to one more beneficial for you. You may even be able to change it through your online account.

Ensure you get confirmation of the new date in writing. That protects you if you get hit with any late fees in error. Additionally, ask when the new date takes effect. It could take a billing cycle or two, depending on the lender.

Mistake 16: Falling for Student Loan Scams

Many borrowers have reported receiving phone calls, emails, letters, and texts offering them relief from their student loans or warning them federal forgiveness programs will end soon if they don’t act now.

But the services these scam debt relief companies offer usually steal borrowers’ money or private information rather than grant any actual relief.

Other student loan scams take fees for helping students apply for income-driven repayment plans or consolidate their loans. However, borrowers never have to pay to sign up for any federal repayment programs. They only need to contact the company in charge of their loan.

In general, if someone contacts you, avoid giving them any personal information. No matter who they claim to be, either tell them to send their request in writing or say you’ll call them back. Then verify their story by contacting your student loan company at their listed phone number or through their website.

Additionally, never pay an upfront fee for student loan services. The government doesn’t charge application fees for any of their loan programs. They also won’t claim an offer is only available for a limited time since all the terms are set by law every year and are available to all students.

For more red flags to watch for, check out the Department of Education’s tips on avoiding student loan scams.

Mistake 17: Forgetting to Update Your Contact Information

You are responsible for making all your loan payments whether you received the bill or not. Additionally, the lender in charge of your loan can change, and you need to ensure you’re able to receive that information so you always know who to contact about paying and managing your loans.

Thus, it’s on borrowers to ensure the company in charge of their student loans has all their current contact information, including mailing address, email address, and phone number. That’s especially the case if you moved after you graduated or listed a parent’s address on your application forms.

Log into your student loan account to ensure your contact information is current.

If you don’t know who services your student loans, check with your school’s financial aid office. For federal loans, you can always create an account on StudentAid.gov.

Then, each time you move, get a new email address or change your number, update that info with the company handling your student loans.

Mistake 18: Not Asking for Help

Paying off student loans can be overwhelming, especially if you’re dealing with low income or a large amount of debt. Depending on your circumstance, it could feel like you’re drowning and may never escape.

Trust me, I know how it feels. And I’m hardly alone. A simple online search reveals dozens of stories of borrowers who’ve consistently paid on their loans yet owe more than ever thanks to the compounding effects of interest, which often feels like quicksand.

But paying late or not at all only makes the situation worse. Damage to your credit report can make it difficult for you to rent an apartment, buy a car, or even get a job. And default can leave you subject to wage garnishment, steep collection penalties, and even lawsuits.

But hope isn’t lost. There is help. Resources exist for borrowers who need an extra hand.

The first step is to reach out to the student loan company. See if there’s a payment plan that’s manageable for you. Even if there isn’t, let them know what payment you can afford, and go from there.

If the company is uncooperative, contact the federal student loan ombudsman.

Borrowers can also reach out to nonprofit student loan counselors, such as the National Foundation for Credit Counseling or The Institute of Student Loan Advisors. These organizations work with borrowers to help them figure out the best strategies for dealing with their loans and overall financial health.

Alternatively, if you’ve reached the point of needing to settle your student loans or file for bankruptcy, seek an attorney who specializes in student loans. For private student loan help, try The National Association of Consumer Advocates. For federal student loans, search the American Bar Association.

Final Word

The United States is currently experiencing a student loan crisis because of how the debt has impacted American lives.

It’s affected borrowers’ ability to save for retirement and buy a home. It’s also impacted people’s ability to start a family or even choose a job for passion over a paycheck.

And it can do so for decades. Many millennials who’ve entered middle age continue to face debt repayment. And many feel college wasn’t worth it as a result.

But you don’t have to be one of these statistics. I write about student loans precisely to help others avoid my mistakes. Learn from this list so you can borrow wisely and avoid overwhelming student loan debt.

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Sarah Graves, Ph.D. is a freelance writer specializing in personal finance, parenting, education, and creative entrepreneurship. She’s also a college instructor of English and humanities. When not busy writing or teaching her students the proper use of a semicolon, you can find her hanging out with her awesome husband and adorable son watching way too many superhero movies.

Source: moneycrashers.com

January 15, 2022

Is a Warehouse Store (Costco, Sam’s Club, BJ’s) Membership Worth It? – Costs, Pros & Cons

Additional Resources

Smart-shopping blogs and magazines teem with stories about the great deals you can get at warehouse stores. Shopping experts say joining a warehouse club can save you money on nearly everything — groceries, tires, even vacations.

But there’s one obvious snag. Before you can fill up your cart with these bargains, you have to pay an annual fee of around $50 just to get in the door. How can you tell if your annual savings will be enough to offset this membership fee?

To answer that question, you need to delve into the murky depths of warehouse store shopping. That means getting the details on how warehouse clubs work, what they cost, and how good the prices are on the items you buy most.

How Warehouse Stores Work

Warehouse stores use a different pricing model from other retail stores. Regular retailers, such as Walmart, make their money from the markup they charge. That’s the difference between the wholesale price they pay to their suppliers and the retail price they charge to customers.

According to Entrepreneur, the markup at a typical retail store is around 50%. In other words, the price you pay is twice what the store paid.

By contrast, warehouse stores charge a much lower markup. For instance, Costco’s markup is only 14% to 15%, according to Forbes. They make up for the lost profits by charging a fixed yearly fee to each customer.

That’s why these stores sometimes refer to themselves as buying clubs. You pay upfront to become a member, and in return, you get to buy products at rock-bottom prices. In addition, you gain access to various other special deals on everything from health care to travel.

Top Warehouse Store Chains

There are three major warehouse chains in the United States. The biggest is Sam’s Club. Sam Walton, the founder of Walmart, started this store in 1983 as a supplier for small businesses.

Today, Sam’s Club is a nationwide chain with nearly 600 stores in the U.S. and millions of members. Its products range from groceries and office supplies to big-ticket items like jewelry and furniture.

The closest competitor to Sam’s Club is Costco. This chain started in Seattle in 1983. Ten years later, it merged with another club store called Price Club, which had been catering to business owners since 1976.

Today, Costco boasts over 100 million members and has hundreds of stores stretching across the United States and beyond. The chain sets itself apart from other warehouse stores with its focus on high-end goods, such as organic food and designer jeans.

The third major chain is BJ’s Wholesale Club. BJ’s is a smaller chain than its competitors, with 200-plus stores in the eastern U.S., Michigan, and Ohio. But like Sam’s Club and Costco, it offers a wide range of goods and services, from groceries to vacation packages.

People who love warehouse stores really love them. Forbes reports that Costco members are extremely loyal, with more than 9 out of 10 choosing to renew their membership each year.

And they have many good reasons to feel this way. Warehouse stores offer a plethora of benefits, including the following:

1. Low Prices — At Least on Certain Items

The main reason shoppers love warehouse stores is their low prices. Independent studies have found that warehouse clubs really do offer great bargains in certain areas, such as:

Groceries. In 2018, Consumers’ Checkbook went grocery shopping at warehouse clubs and supermarkets. It found that prices at both Sam’s Club and Costco beat major supermarket chains by 17% to 41%. (However, BJ’s prices failed to beat Walmart’s.)
Gasoline. A 2020 analysis by CSP compared prices across gas stations around the country. Costco was the winner, beating the national average price by nearly $0.25 per gallon.
Prescription Drugs. In 2018, Consumer Reports checked retail prices on five drugs at over 150 U.S. pharmacies. The complete set cost over $900 at CVS, but only $153 at Sam’s Club and $105 at Costco. And some generic drugs at Sam’s Club are only $4.
Car Tires. In a 2021 analysis by Clark Howard, Sam’s Club was second only to Walmart for the lowest average price on car tires. All three warehouse clubs were in the top six.
Booze. According to Spoon University, Costco offers the lowest unit prices on all types of alcohol. For those willing to buy in bulk, the club charges significantly less for Skyy vodka and Blue Moon beer than other retailers.
Pet Food. In a 2019 analysis of name-brand pet food prices by Consumers’ Checkbook, Sam’s Club and BJ’s topped the list for lowest average prices. (Costco, which mainly sells its own Kirkland Signature brand, was not covered.)

2. Access to Services

When you join a warehouse club, you don’t just get access to its products. These stores also offer a variety of services exclusively for members.

For instance, a Costco membership gives you access to Costco’s car-buying service. It provides haggle-free low prices on new and used cars and RVs from approved dealers. It also gives you 15% off car parts and services from participating providers.

Costco members can also save on vacations with Costco Travel. It provides special deals on airfare, hotels, auto rentals, cruises, and travel packages. The store also offers photo printing, banking services, insurance, home renovation, eye care, and bottled water delivery.

Other warehouse clubs offer a similar menu of services. Sam’s Club doesn’t provide banking or insurance services, but it gives members discounts on concert and theater tickets, theme parks, and attractions.

Sam’s Club also offers discounts on various subscription services. Members can get lower prices on music streaming, video streaming, educational apps for kids, and fitness apps.

Likewise, BJ’s offers travel, vision care, home improvement, and photo services for members. One special perk it provides is free technical support for all its electronics.

3. High-Quality Store Brands

Shoppers are impressed with the quality of warehouse stores’ house brands — especially at Costco. In a 2019 Consumer Reports survey, Costco was one of only three out of 96 grocery chains to earn top marks for the quality of its store brands.

The magazine’s editors get more specific in a 2017 article. They call several Kirkland products as good as or better than name-brand competitors. These include laundry and dishwasher detergent, batteries, toilet paper, bacon, mayonnaise, and organic chicken stock.

Another product that gets high marks from reviewers is Kirkland Signature dog food. According to DogFood.Guide, this brand has “surprisingly high quality” for a store brand. It’s made by Diamond Pet Foods, a leading manufacturer of high-end foods like Taste of the Wild.

Both Kirkland and Member’s Mark, the house brand from Sam’s Club, get good reviews for some wines and liquors. The Beverage Tasting Institute gives ratings of at least 90 points out of 100 to several Kirkland wines and to Member’s Mark tequila, vodka, and gin.

4. One-Stop Shopping

Warehouse stores allow you to condense many errands into one. You can pick up your glasses, shop for shoes, get new tires, book a vacation, and buy groceries all in one trip.

5. Free Samples

On weekends, shoppers at warehouse stores can stroll through the aisles noshing on samples of assorted food items. Naturally, the stores hope that trying the products will inspire you to buy them, but there’s no obligation. You’re perfectly free to chow down and walk away.

6. A Pleasant Shopping Experience

On the whole, warehouse club members are satisfied shoppers. In a survey by Consumer Reports, Costco shoppers reported being more satisfied with their experience than shoppers at nine other major retail chains.

A 2021 report by the American Customer Service Index found similar results. Costco topped a list of 20 retailers, with 81% customer satisfaction. Sam’s Club and BJ’s came in a bit lower down the rankings, with a respectable 79% and 77% respectively.

7. Good Returns Policies

One likely reason why warehouse store shoppers are so satisfied is that if they’re ever unhappy with a purchase, it’s easy to return. Both Costco and Sam’s Club offer an absolute 100% money-back guarantee on virtually everything they sell.

If you’re not satisfied for any reason, you can return it with your receipt at any time. One exception is electronic items, which can’t be returned after 90 days. BJ’s policy is a bit more restrictive, allowing returns only up to one year.

Although warehouse stores have undeniable benefits, they have their drawbacks too. Here are a few good reasons not to do your shopping at a warehouse store:

1. Membership Fees

The most obvious downside of warehouse club membership is the membership cost. The standard annual membership fee for a household or a business is $45 per year at Sam’s Club, $55 per year at BJ’s, and $60 per year at Costco.

In addition, all three of the major warehouse chains offer higher-tier memberships. They’re called Executive Membership at Costco, Plus at Sam’s Club, and Perks Rewards at BJ’s.

These tiers cost roughly twice as much as a regular club membership. In exchange, they give you 2% back on nearly everything in the store. That means you have to spend between $2,750 and $3,000 per year before the higher-level membership will pay for itself.

2. Oversized Packages and Quantities

Warehouse stores are known for their jumbo-size packages. Buying in bulk to save money makes perfect sense with nonperishable goods, such as soap or paper towels. You can safely stock up on these bulk items as long as you have the space to store them.

However, bulk buying can be a problem with products that don’t keep well. A five-pound bag of shredded cheese is no bargain unless you can (and actually want to) eat that much cheese before it goes bad.

3. Limited Selection

Warehouse clubs are good for grocery shopping, but you can’t always buy everything on your shopping list there. In the 2018 Consumers’ Checkbook study, the three warehouse stores only carried about half the items in a standard basket of groceries.

BJ’s was the best of the lot, with about 57% of the items available. Sam’s Club had 52% of them, and Costco had only 44%. Moreover, most of the items at all three stores were only available in bulk containers, not standard sizes.

4. Impulse Buys

Warehouse stores are huge and crammed with an incredible variety of goods. Even if all you need is cereal, milk, and toothpaste, you’ll probably have to walk past jewelry, clothes, and toys to get to those three staples.

This makes it very easy to fall victim to the temptation of impulse buys. You could easily go in with your three-item shopping list and walk out with a whole cart full of unplanned purchases. Worse, some of these could be big-ticket items like a TV set.

5. Restrictions on Coupons

If you’re in the habit of using coupons to save money on groceries, the warehouse store isn’t the place to do it. Neither Costco nor Sam’s Club accepts manufacturer’s coupons at all. BJ’s takes them, but it only accepts select coupons in digital form.

5. Deals That Aren’t So Great

With such a vast assortment of goods gathered together in one store, warehouse stores seem ideal for one-stop shopping. However, if you buy everything on your list there, you’ll probably spend more than you need to.

My local Costco has great prices on a few staple foods, such as nuts. But its fresh foods, such as produce and eggs, are nearly always more expensive than the ones at nearby supermarkets.

Even paper goods like paper towels and toilet paper aren’t such great deals. Two dozen rolls of toilet paper at Costco cost more per roll than one dozen of the store brand from Trader Joe’s.

Warehouse stores also tempt buyers with big-ticket items like appliances, furniture, and electronics. But these products are almost never bargains.

For instance, the current Costco savings brochure advertises LED TV sets for $700 to $3,000. But the top-rated LED TV in the same size range at Best Buy costs just $600. And a laptop Costco advertises for $700 is similar to one Lenovo sells for $565.

Deciding Whether It’s Worth It

The best way to figure out whether a warehouse club membership is worth it for you is to check it out in person. Scout up and down the aisles, check prices on the items you buy regularly, and compare them to the prices at your local supermarket.

There’s just one problem with this plan. Most warehouse stores won’t even let you in the door to check prices without a membership card. One way to get around this problem is to ask a friend who’s a member to let you tag along on their next trip.

Also, nonmembers are allowed to shop at Costco with a store gift card. However, only Costco members can buy these cards. To get around that rule, ask a friend to buy one for you or buy one secondhand through a gift card exchange site.

Two Real-Life Examples

Back in 2006, my husband and I took advantage of a free day pass to check out the prices at our local BJ’s Wholesale Club. We found that for most items we buy, BJ’s didn’t have lower prices than other stores.

For instance, the $18 DVDs and $700 laptops in the electronics section couldn’t beat online deals. A 12-pound bag of baking soda cost more per pound than a supermarket store brand. And 24-roll packs of toilet paper cost nearly twice what we paid per roll at Trader Joe’s.

We still found good deals on a few items, like cereal, rice, and chocolate chips. But crunching the numbers, we found that we wouldn’t save enough on these items in a year to pay for the club membership.

But in 2017, we decided to give Costco a try. My husband needed new glasses, and we found the savings on those would more than pay for the $60 membership cost.

Once we were inside the store, we started finding deals on all sorts of other things we buy regularly. Organic sugar, raisins, nuts, oatmeal, milk, and olive oil were all cheaper at Costco than at local supermarkets.

Here’s a sample of our savings from a single Costco trip. For each item, I’ve listed the amount we bought, the price, and what the same amount would have cost at the next cheapest store.

Product Costco Price Competitor’s Price Savings

Raisin Bran (14.34 pounds) $21.87 $24.38 (Aldi) $2.51

Brussels Sprouts (2 pounds) $4.99 $4.99 (Trader Joe’s) $0

Clementines (5 pounds) $5.49 $5.49 (supermarket sale) $0

Birdseed (80 pounds) $27.98 $31.96 (Lowe’s) $3.98

Organic Raisins (4 pounds) $10.79 $11.96 (Trader Joe’s) $1.17

Walnuts (3 pounds) $10.89 $14.97 (Aldi) $4.08

Canola Oil (6 quarts) $7.69 $9.00 (Shop-Rite) $1.31

Organic Sugar (10 pounds) $7.99 $17.45 (Trader Joe’s) $9.46 (less packaging waste as well)

On this one trip, we saved a total of $22.51 on a bill of $99.54. That means we saved about 22% off our entire bill. According to our credit card statement, we spent a total of $723.50 at Costco in 2018. If we saved 22% on everything we bought there, that’s a savings of $159.17.

In addition, by becoming members, we qualified for a Costco credit card. It offered 4% cash back on gas, 3% on restaurants and travel, and 2% on everything at Costco. Those rewards save us another $34 per year or so.

So, all told, our Costco membership is saving us over $193 per year. That’s more than three times the cost of the membership card.

Factors That Affect Your Choice

As you can see from our experience, warehouse stores aren’t all the same. BJ’s Wholesale Club definitely wasn’t a money-saver for us, but Costco definitely was.

However, what works for our family isn’t necessarily what will work for yours. It depends largely on what you buy and how much you pay for it.

Based on our experience, these are the factors most likely to make a warehouse club membership a good deal for you.

Bulk Buying

On our initial trip to BJ’s, we had to pass up a lot of deals because the containers were too big. A 30-pound sack of rice cost less per pound than a 10-pound bag, but it would have taken us years to go through it all.

However, if you have a large family or a small business, you probably go through supplies faster. That makes these jumbo-sized packages a more reasonable deal for you. All you need is enough storage space to hold them and keep them fresh.

Brand Loyalty

My husband and I usually prefer to buy store brands rather than name brands. For most products, we find their quality is just as good and their price is much lower. Most of the products we buy at Costco are the ones that come in the Kirkland store brand.

That’s one reason we didn’t have much luck at BJ’s on our first trip. Most of its products, at least at the time, were name brands. The store’s price for Star-Kist tuna was cheaper than the price for Star-Kist at our local Stop & Shop, but no cheaper than the Stop & Shop store brand.

However, many people are loyal to specific brands. For instance, your family may insist on Heinz ketchup or Downy fabric softener. If so, there’s a good chance that a warehouse store can offer you a better price on it than your regular supermarket.

But before you sign up for a membership, make sure the warehouse store actually stocks the specific brands you want. If you shelled out $50 for a membership card and then find out the store doesn’t carry Heinz ketchup, you’re out of luck.

Few Local Supermarkets

Nearly all our food savings from Costco come from just a few items. On most foods, especially fresh foods, the warehouse can’t beat the prices at our area supermarkets. Even if their regular prices are higher than Costco’s, we can always wait for a sale.

However, in some areas — especially rural areas — there are no big supermarkets. The main food sellers are local grocery stores and convenience stores with high prices and few great sales. If you live in an area like this, the regular prices at warehouse stores look a lot more appealing.

A Convenient Location

Finally, location matters. If the nearest warehouse store is 50 miles away, it isn’t practical to shop there more than once or twice per year. That hardly gives you a chance to get your money’s worth out of your membership. Plus, the cost of gas will eat into your savings.

But if the distance to the store is less than 10 miles, regular trips become practical. You can visit every few weeks to stock up on everything you need.

Avoiding the Pitfalls

If you decide to invest in a warehouse club membership — or you already have one — use it wisely. To get the most for your money, maximize the benefits of warehouse shopping and minimize the drawbacks.

Don’t Give In to Temptation

Impulse buys are one of the biggest hazards of the warehouse store. This can happen at the supermarket too, but Costco and Sam’s Club have a much wider array of shiny toys to tempt you.

However, you can avoid them the same way you would in any other store. Make a shopping list and stick to it. If you see something that looks irresistible, don’t stick it right in your cart. Instead, jot down the item and the price and walk away.

The next day, take another look at your note. If you still want the item, you can go back to the store and get it. But chances are, by the time you’ve had 24 hours to cool off, the new toy will have lost a lot of its appeal.

Check Unit Prices

Warehouse stores don’t always beat the supermarket on price. However, comparing prices is tricky because the containers at the warehouse store tend to be so much larger.

To be sure you’re getting a good deal, compare unit prices. That’s the cost per ounce, quart, or whatever unit the product is measured in.

Some stores have the unit prices of different products marked on the shelf. However, if your warehouse store doesn’t, it’s easy to calculate. Just whip out your phone and divide the total price by the container size.

Then compare this number to the price you’re used to paying at your regular store. It helps to keep a grocery price book that lists each store’s unit prices for items you buy often. That way you don’t have to try to remember one number while staring at another.

Don’t Overbuy

When you compare unit prices, the biggest container often looks like the best deal. However, a five-gallon tub of mayonnaise is no bargain if it goes bad before you use it up.

If you’re buying something with an unlimited shelf life, such as shampoo, then buying by the case is no problem. But when you’re shopping in the food department, try to be realistic. Go for a size you can handle, even if the unit price is a bit higher.

Focus on the Best Deals

It’s tempting to take advantage of the warehouse’s store’s variety and do all your shopping in one trip. But if you do this, you’re almost sure to overpay for something. To get the most bang for your buck, focus on the items that are great deals at your particular store.

This goes double when you’re shopping for a big-ticket item, such as jewelry or electronics. Don’t assume the warehouse store’s prices are lowest. Take the time to shop around and look for the best deal.

Final Word

A single visit may not be enough to figure out whether a warehouse club membership is a good deal for you. If you’re still on the fence, try signing up on a trial basis.

From time to time, BJ’s Wholesale Club offers a free 90-day membership to give shoppers a chance to get to know the store. Keep your eyes out for these offers in your mailbox and in coupon circulars.

If you don’t want to wait, try BJ’s discounted membership offer. It gives you all the benefits of membership for $25 — less than half the regular price. It’s not free, but it’s a chance to try the store without risking the full $55.

Moreover, all three warehouse chains — BJ’s, Costco, and Sam’s Club — promise a full refund of your membership fees at any time if you’re not satisfied. You can give any of these stores a try for a month or two, then cancel if you decide it’s not for you.

Amy Livingston is a freelance writer who can actually answer yes to the question, “And from that you make a living?” She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

Source: moneycrashers.com

January 15, 2022

The Problem with Todayâs Hot Real Estate Investment Market

Jessica Schmidt (not her real name) is a qualified intermediary for a large national firm specializing in 1031 exchanges for investment real estate. Lately, she has been working 10-hour days, six days a week.

Some days she takes up to 50 calls a day from real estate investors seeking to cash in on a hot real estate market without paying large sums of tax on their highly appreciated real estate investment.

It’s a seller’s market, and most real estate investors can garner a quick sale on amounts they had previously only dreamed of.

Everything’s great, right? Not so fast.

A Seller’s Market Isn’t Exactly a Dream

Jessica usually spends 10-15 minutes with a caller explaining the rules and regulations of a 1031 exchange. She often refers callers to her website for educational videos on the 45-Day Rule, the 3 Property Rule, and the 180 Day Rule. These are all essential and specific requirements for an investor to take advantage of our tax code’s ability to defer taxes upon a property sale.

She explains that the seller must open an exchange “ticket” BEFORE the sale of their investment property closes. Then the seller has up to 45 days to identify a qualified replacement property.

And that’s where the situation gets sticky.

Problems Finding Replacement Properties

“The problem with the inventory in the marketplace is that there isn’t any,” the chief economist for a large national title company was quoted as saying at a recent economic forum.

Today, more often than not, hopeful 1031 exchange investors find themselves in quite the conundrum. According to Jessica, the high-ticket sale and the tax deferral via the 1031 exchange may be the easy part, but finding a suitable replacement property seems to be the biggest obstacle and a common dilemma.

A Potential Solution – DST, or Delaware Statutory Trust

With that in mind, Jessica has been increasingly offering her clients a different option to consider instead of a 1031 exchange: a DST, or Delaware Statutory Trust.

DSTs are passive real estate investments that qualify as replacement property for 1031 exchanges. DSTs invest in multifamily apartments, medical buildings, self-storage facilities, Amazon distribution centers, industrial warehouses, hotels and other vital real estate asset classes. The investments are passive in nature and generate regular monthly income to investors and the potential and opportunity for growth.

Many DSTs are syndicated with some debt, usually about 50% loan-to-value. However, the debt to investors is considered non-recourse, which means that an investor has no personal guarantee or personal liability for such debt. This could be very helpful, Jessica explains to her clients, because they all want to receive a full tax deferral, and the rules stipulate that in an exchange, the investor must reinvest the sale proceeds AND replace any debt.

DSTs have been around since 2004 when the IRS issued Ruling 2004-86, which made DSTs qualify for replacement in a 1031 exchange.

Must Be an Accredited Investor

DSTs are for “accredited” investors only, which means that an investor must have a net worth of at least $1 million apart from their primary residence or have an income of $200,000 for a single person or $300,000 for a married couple. And DSTs are offered as SEC-registered securities and therefore are obtained from broker-dealers or registered investment advisers. The advisers perform extensive due diligence on the real estate syndications and each specific DST-sponsored property.

Jessica concludes that DSTs could be a perfect solution for many of her clients and investors, especially those getting closer to retirement and maybe not wanting to actively manage real estate assets any longer. Between the tax savings, the passive nature of the investments, and the high-quality assets that are generally part of DSTs, many of her clients’ problems could be effectively solved using this important passive investment strategy.

Although DSTs are attracting billions of dollars of investment funds, most CPAs and real estate investors are still unaware of this important and viable solution that could potentially solve so many problems for so many real estate investors.

After explaining all this so many times in calls from clients the past several months, Jessica decided to come up with the following “Letterman” style Top 5 Benefits of DSTs for her clients:

5 Top Benefits of DSTs in a 1031 Exchange

1. Potential Better Overall Returns and Cash Flows

It depends upon the investor. Still, some investors find DSTs could offer a better risk-return profile than a property they might manage themselves.

2. Tax Planning and Preserved Step-Up in Basis

DSTs offer the same tax advantages of real estate that an investor would own and manage themselves. Depreciation and amortization are passed along to DST investors by their proportionate share. DSTs can be exchanged again in the future into another DST via a 1031 exchange.

3. Freedom

Passive investing allows older real estate owners the time and freedom to travel, pursue other endeavors, spend more time with family, and/or move to a location removed from their current real estate assets.

4. As a Backup Strategy

In a competitive market, an investor may not be able to find a suitable replacement property for their 1031 exchange. DSTs might be a good backup option and could be named/identified in an exchange if only for that reason.

5. Capture Equity in a Hot Market

When markets are at all-time highs, investors may want to take their gains off the table and reinvest using the leverage inside a DST offering.

DST investments come with a risk common to real estate investing and are offered to accredited investors only and by private placement memorandum only. Therefore, a prudent investor would be best served by evaluating all details of each specific offering and the track record of the sponsor firm before investing in a DST offering.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Chief Investment Strategist, Provident Wealth Advisors

Daniel Goodwin is the Chief Investment Strategist and founder of Provident Wealth Advisors, Goodwin Financial Group and Provident1031.com, a division of Provident Wealth. Daniel holds a series 65 Securities license as well as a Texas Insurance license. Daniel is an Investment Advisor Representative and a fiduciary for the firms’ clients. Daniel has served families and small-business owners in his community for over 25 years.

Source: kiplinger.com

January 13, 2022

5 Best Esports Stocks to Buy in 2022

Dig Deeper

Additional Resources

According to Grand View Research, the esports and gaming industry is growing rapidly. By the year 2027, it will be worth around $6.82 billion after enjoying a compound annual growth rate (CAGR) of more than 24%.

Many esports and gaming enthusiasts who are looking for ways to exploit the stock market for financial freedom are starting to make investments. These investors know which companies in the space are the top dogs. The fact that most people enjoy video games makes research far less daunting when investing in esports than in other, less sexy industries like utilities.

But with so many esports and gaming companies out there to choose from, how do you choose the best companies in the space to invest in? Here are some top stocks to consider.

Best Esports Stocks to Buy in 2022

The esports and gaming industry is booming, with much of the growth being a side effect from the recent pandemic. When COVID-19 took hold around the world, traditional sports halted, and consumers were looking for things to do while under lockdown orders.

During this time, esports viewership grew rapidly. According to Statista, the growth in gaming interest is likely to continue.

During the pandemic, those who were into video games had nothing better to do, and many who wouldn’t have considered playing them in the past found themselves picking up the controls and immersing themselves in the gaming ecosystem.

Now, with a whole new wave of consumers in gaming and a growing esports audience, it’s time for the big players in the industry to capitalize.

What stocks give you the biggest opportunities in the industry? Below you’ll find my top five picks, all of which are great options to consider.

1. Activision Blizzard, Inc. (NASDAQ: ATVI)

You Can’t Talk About Gaming Without Mentioning Activision Blizzard

Market Cap: Activision Blizzard is one of the largest gaming companies in the world, trading with a market cap of more than $54.5 billion.
Earnings History: The company has a strong history of beating analyst expectations in terms of earnings, which it has done for the past four consecutive quarters. All told, the company has produced an average positive earnings surprise of over 9%.
Dividend Yield: The current dividend yield on the stock is 0.67%. Over the past five years, the dividend yield on the stock has ranged from 0% to 0.88%, averaging 0.57%.

Many who follow the esports and gaming industry closely will be surprised to see Activision Blizzard on this list, considering the wave of blues that has hit the company and the stock. To address the elephant in the room, the stock has recently seen a dramatic decline as a result of delays in the launches of Overwatch 2 and Diablo IV, leading analysts to downgrade the stock.

On top of the delays, the company has been dealing with a PR nightmare after an employee walkout resulting from management’s tone-deaf response to allegations of sexual discrimination and harassment. Additionally, co-head Jen Oneal stepped down after a short run in the leadership role that began in August 2021.

Nonetheless, there’s a strong probability that a significant undervaluation in the stock exists.

The company is the owner of several esports leagues, hosting several esports events per year. Keep in mind, we’re talking about the company behind Call of Duty and Overwatch, two of the most popular video games ever made and the center of some of the most popular esports tournaments in the space.

Although delays and discrimination are concerning, the stock has been thoroughly hammered, falling more than 32% from its highs in February.

Keep in mind that these declines have happened even in the face of gains in revenue and earnings, and consistent earnings beats quarter after quarter.

The bottom line is that even though the company is shrouded in bad press at the moment, general consumers and esports teams alike consider the company’s games to be legendary.

Moreover, the biggest declines were seen shortly after the company announced delays in the launches of Overwatch 2 and Diablo IV. However, delays in game launches have become more commonplace these days, as the world’s leading producers of video games have begun focusing more on launching polished games free of glitches rather than rushing to market and patching bugs later.

All told, there’s no question that Activision Blizzard will bounce back. The only real question is when it will happen. When it does, those who own the stock will be grinning from ear to ear.

2. Electronic Arts Inc. (NASDAQ: EA)

Leader in Sports Gaming With Massive Franchises

Market Cap: EA is another of the world’s largest esports and gaming companies, trading with a market cap of nearly $40 billion.
Earnings History: EA has produced stellar earnings over the past four consecutive quarters, beating analyst expectations each step of the way. Over the past year, the average quarterly earnings surprise has been 18.7%.
Dividend Yield: Like many others in the gaming and esports space, Electronic Arts currently pays no dividend.

While Electronic Arts had its ups and downs throughout 2021, the stock has remained relatively flat, gaining less than 2% cumulatively. However, this is yet another company that many believe to be undervalued.

Electronic Arts, better known as EA, isn’t just any game developer. It’s the developer that has signed into partnerships with the National Football League (NFL), Fédération Internationale de Football Association (FIFA), and several other massive sports franchises to develop a long line of games like Madden NFL and FIFA. The company is also the publisher behind non-sports-related hits like The Sims and Apex Legends.

In the world of competitive gaming, there are few in the esports industry that have garnered nearly as much attention as EA. Gamers from all over the world dream of competing for six-figure prizes at some of the gaming industry’s most popular tournaments hosted by the company.

If EA’s past is any indication, there will be plenty for investors to look forward to in the future.

One of the biggest draws for investors has to do with the company’s coming game releases. Not only have EA’s sports-related titles done incredibly well, in November 2021 the company launched Battlefield 2042, another game in its popular Battlefield franchise. Many experts expect this to be the best-selling title from the franchise to date, setting the stage for strong Q4 revenues, as the game is likely atop many holiday shopping lists.

All told, EA is a force to be reckoned with in the gaming industry, and thanks to a lackluster year of performance in the stock in 2021, a clear undervaluation is being born, setting the stage for a strong growth opportunity.

3. Amazon.com, Inc. (NASDAQ: AMZN)

Yes, Amazon is in Gaming Too

Market Cap: Amazon is one of the largest companies in the world, currently trading with a market cap of nearly $1.8 trillion.
Earnings History: Historically, the company has smashed earnings expectations, beating analyst projections in the past three out of four consecutive quarters. Even with a painful 32.75% miss in the most recent quarter, the average quarterly earnings surprise over the past year has clocked in at 38.2%.
Dividend Yield: Throughout its history, Amazon hasn’t been a dividend-payer. Instead, it piles its profits back into the company in an effort to expand, and with the company being one of the largest in the world, those efforts have definitely been fruitful.

You may be surprised to see Amazon on a list of the top gaming and esports companies, but it’s important to keep in mind that the company isn’t just an e-commerce powerhouse. It has its fingers in various areas of the tech industry as a digital conglomerate.

The company isn’t a game publisher, although it does sell video games on its e-commerce platform. Nonetheless, the company is a key player in the gaming market even beyond its role in the retail distribution of video games.

Amazon acquired Twitch, one of the largest game-streaming platforms in the world, in August 2014.

Twitch is a lot like YouTube. However, the big difference between the two is that while YouTube provides various types of streaming content, Twitch is a platform that focuses on streaming gameplay, giving players a way to show off their skills and esports teams a great venue for connecting with their audiences. This makes Twitch a top-pick among esports enthusiasts in terms of digital entertainment.

However, when you purchase shares of this stock, you’re not just purchasing exposure to Twitch. You’re purchasing exposure to Amazon.com’s entire ecosystem of opportunities and enjoying the stability that comes along with investing in one of the world’s largest companies.

At the end of the day, Amazon has grown from nothing to a dominant player in several high-value markets over the years and, by all accounts, that growth is far from over.

4. Huya Inc. (NYSE: HUYA)

An Underdog That Could Become a Massive Winner

Market Cap: Huya is the smallest company on this list by market cap, trading at an enterprise value of around $2.67 billion, and just making its way onto the large-cap playing field.
Earnings History: As a smaller, newer company, Huya’s earnings have been interesting to follow. During a couple of the past four quarters, analysts didn’t even provide expectations. In the most recent quarter, analysts didn’t even expect that the company would produce a penny of profit, but it surprised investors by reporting earnings of $0.34 per share.
Dividend Yield: Huya has not yet declared a dividend.

Of all companies on this list, Huya is definitely the smallest and one of the riskiest bets. However, many argue that the stock is significantly undervalued at current levels, and I happen to agree.

Huya was one of the pioneers in the game streaming industry in China and has quickly grown to become the largest game streaming platform in the region. As a result, many have compared it to Twitch, calling it the Twitch of China.

As a game streaming service, the company plays an integral role in the esports industry in the region, connecting fans with teams and setting the stage for the next wave of Chinese esports stars.

While what the company is doing from an operational perspective has been impressive, the idea behind the investment is more of a political bet than one aimed at the company’s operations.

Over the past year, the Chinese government has been flexing its muscles, enacting a wide range of laws that have hampered businesses in several sectors, including gaming. As a result, investment interest in companies in the region have faded amongst fears that new laws may impact corporate earnings capabilities.

Unfortunately, the selloff has been significant for some stocks, and Huya is one of those stocks. In the past year, the stock has given up more than 50% of its value, with no real negative catalyst to speak of. At the same time, the stock had no real reaction to the recent and dramatic earnings beat announced by the company.

Over time, political fears in the region are likely to subside, and when this happens, the hardest-hit companies in the recent Chinese stock selloff will look like heavily discounted gold nuggets. I believe Huya falls into this class of stock.

5. Take-Two Interactive Holdings, Inc. (TTWO)

A Growing Company with Significant Upside

Market Cap: Take-Two Interactive may not be the largest company on this list, but its market cap of more than $20 billion is nothing to shake a stick at.
Earnings History: The company isn’t just known for beating earnings expectations, it’s known for smashing them. Over the past year, the average earnings surprise produced by the company was over 100%.
Dividend Yield: Like many in the tech industry, TTWO does not pay dividends.

Take-Two Interactive Holdings is a game developer that has had some pretty significant hits in the past. Its portfolio of companies includes game publishers like Rockstar Games, 2k, and Firaxis Games. Companies under its umbrella are the developers behind wildly popular franchises like Grand Theft Auto, BioShock, Borderlands, and Civilization, plus a wide range of other games that capture consumer attention and imagination like nothing else.

Beyond its activities as a game developer, Take-Two is also a major player in the esports industry. The company currently owns a 50% stake in the NBA 2K League, one of the most popular esports leagues in the world.

Unfortunately, however, 2021 wasn’t a great year for the stock. While the company smashed expectations in all earnings releases all year, the investing community seems to have shunned the stock, leading to declines of 12%.

Nonetheless, many argue that the declines are an opportunity. The company has produced stellar revenue and earnings all year, and experts suggest more growth is on the horizon with positive guidance.

Many investors, like Warren Buffett, have made massive amounts of money buying stocks when companies were down on their luck or the stocks were simply undervalued. What we’re seeing from Take-Two Interactive stock suggests it might be one of these opportunities.

Consider Exchange-Traded Funds (ETFs)

If you’re not interested in doing the research required to choose individual stocks — or simply don’t have the time or don’t know how — don’t worry. There’s another way to gain exposure to solid picks in the esports industry.

One of the best ways is to buy into a themed exchange-traded fund (ETF) that’s centered around esports. A couple funds to look into in this category include the VanEck Video Gaming and eSports ETF (ESPO) and the Global X Video Games & Esports ETF (HERO).

ETFs pool money from a large number of investors and use those funds to buy shares in esports companies. As the companies grow or pay dividends, the profits are enjoyed by all shareholders of the fund.

Final Word

The esports industry is an exciting one. Whether you’re a gamer or esports enthusiast, or you don’t play games at all, it can be an incredibly lucrative investment opportunity.

However, as is the case when investing in any sector, it’s important to do your research before risking your hard-earned money. After all, each company is unique, offering investors a different mix of opportunity and risks.

Fortunately many people find researching gaming stocks to be fun. After all, you’ll have the opportunity to learn about the companies behind the games you play, find out about upcoming titles, and potentially earn a return for doing so.

Joshua Rodriguez has worked in the finance and investing industry for more than a decade. In 2012, he decided he was ready to break free from the 9 to 5 rat race. By 2013, he became his own boss and hasn’t looked back since. Today, Joshua enjoys sharing his experience and expertise with up and comers to help enrich the financial lives of the masses rather than fuel the ongoing economic divide. When he’s not writing, helping up and comers in the freelance industry, and making his own investments and wise financial decisions, Joshua enjoys spending time with his wife, son, daughter, and eight large breed dogs. See what Joshua is up to by following his Twitter or contact him through his website, CNA Finance.

Source: moneycrashers.com

January 13, 2022

Best Online Life Insurance Companies for 2022

Additional Resources

In the old days, applying for life insurance was tedious, time-consuming, and stressful. The process took weeks to complete, much of that spent waiting on the results of a medical exam. And you didn’t know how much your policy would cost until everything was said and done — or even if you’d qualify for a policy at all.

Fortunately, the old days are over, at least for life insurance applicants who apply online. Also known as algorithmic underwriters or algorithmic insurance companies, online life insurance companies give you an up-or-down decision within minutes, often without a medical exam or many questions about your medical history. You can apply over lunch or dinner and then get on with life.

Best Online Life Insurance Companies

Not all online life insurance companies are created equal, of course. These are among the very best.

Each of the companies on this list does at least one thing really well, and our top pick offers the best overall value for the widest number of potential applicants. Here’s what you need to know about each.

Best Overall: Ladder

Ladder is one of the best life insurance companies. It tops our list of the best online life insurance companies thanks to a potent collection of strengths:

Up to $3 million in term life insurance coverage without a medical exam — double what most competitors allow
In-home medical exams for policies larger than $3 million — the application process remains all-online otherwise
Choose from 10- to 30-year term coverage options
Option to scale down coverage over time without reapplying
Approval within minutes for many applicants
Backed by national insurers with strong financial strength ratings

Best for Fast Approval: Bestow

Bestow earns its spot as one of the best no-exam life insurance companies thanks to a streamlined digital application and underwriting process that produces results in as little as five minutes. If Bestow doesn’t need any additional information from you, you can apply for life insurance and get an up-or-down approval decision during your coffee break.

Its features include:

Term life insurance only
Term lengths from 10 to 30 years
Policy death benefits as low as $50,000
Coverage up to $1.5 million per policy with no medical exam required
Open to applicants ages 18 to 60
A+ (Superior) financial strength rating from A.M. Best

Best Premium Membership Rider: Haven Life

Haven Life is one of the best online term life insurance companies around, but it really shines for a reason that’s not directly related to insurance. Haven Life offers the best premium membership rider — an optional add-on filled with potentially valuable features.

That rider is Haven Life Plus. It’s free to policyholders wherever it’s offered and provides at least $150 in annual value to policyholders. It includes:

A customizable and legally binding will that you can store online
A subscription to Adaptiv, a workout video and music library
A subscription to Timeshifter, an app designed to fight jet lag
A subscription to Lifesuite, a secure digital storage vault
A 15% discount on eligible MinuteClinic products and services

Haven Life has some additional features worth noting, including:

Term life coverage up to $3 million with a medical exam
No-exam coverage up to $500,000 through Haven Simple
AgeUp, an annuity product that can supplement your retirement income after you turn 90

Best for Nontraditional Underwriting: Sproutt

Sproutt is an online life insurance broker that uses an innovative model called the Quality of Life Index (QL Index) to assess life insurance applicants’ risk.

While it doesn’t completely replace traditional considerations in Sproutt’s application process — or in the underwriting processes of the insurers Sproutt works with — the QL Index goes beyond the usual medical and lifestyle information to consider factors like:

How often you exercise and what kind of exercise you do
How much and how well you sleep
Your emotional health
Your eating habits and overall nutrition
Your work-life balance

Additional features:

Access to fully medically underwritten term life, no-exam life (simple issue life insurance), and guaranteed issue life insurance
Multiple types of permanent life insurance available, including whole, universal, and variable universal
Get quotes within minutes
Apply directly with the insurer with help from Sproutt agents

Best for Guaranteed Issue Life Insurance: Ethos

Ethos is rare among online life insurance companies because it offers permanent life insurance. Most competitors stick with term life.

Ethos’ permanent life insurance offering is a low-value whole life insurance policy for people between the ages of 66 and 85. Its features include:

Death benefit between $1,000 and $30,000
Guaranteed issue life insurance, meaning you can’t be turned down for medical reasons
No expiration, meaning the policy is effective until you die or stop paying premiums
Guaranteed level premiums, meaning your premiums won’t increase over time
Accidental death is covered right away
Nonaccidental death coverage kicks in two to three years after the policy effective date in most cases

Ethos’s term life offering is no slouch either. Its benefits include:

Amount of coverage ranges from $20,000 to $1.5 million
10- to 30-year terms
Guaranteed renewable after the term ends, albeit at a higher premium

Best for Higher Coverage Limits: Fabric

Fabric offers online life insurance policies with coverage up to $5 million. That’s an unusually high limit for a streamlined, all-online application process. And Fabric offers a no-exam option for applicants with uncomplicated health histories, although not up to the $5 million coverage limit.

Additional features:

Accidental death coverage available up to $500,000
A+ (Superior) financial strength rating
Low pricing, with monthly rates starting as low as $1 for $1 million in coverage
Will-making services available
Secure online vault for financial and personal documents at no additional cost

Best for Price Transparency: Walnut

Walnut sets itself apart with what it calls “price-first” term life insurance. Basically, you know how much you’ll pay for 10-year term coverage before you apply, making it easier to fit a new monthly payment into your budget (or decide to go a different direction). You never have to take a medical exam as a condition of coverage.

Walnut also offers a broad lineup of value-adds through a premium membership program included in the cost of insurance. Starting at $10 per month, this includes subscriptions to:

Headspace Plus, an app offering guided meditation and self-directed therapy
ClassPass Digital, a library of home workout videos
Dashlane Premium, a password manager and auto-fill app

According to Walnut, this package is a $25 monthly value. If you want even more, upgrade to a Digital Protection membership for an additional monthly fee and enjoy:

24/7 access to a cyber support helpline
Up to $1 million in stolen funds reimbursement if you’re the victim of identity theft

Best Online Broker for Life Insurance Only: Quotacy

Quotacy is an online insurance broker specializing in life insurance quotes. In fact, a life insurance quote is the only type of insurance quote you can get through Quotacy.

Quotacy’s narrow focus on life insurance gives it some advantages over other online insurance brokers:

Access to term life policies as long as 40 years — elsewhere, policies generally top out at 30 years
Access to a variety of types of life insurance, including term life
Multiple permanent life insurance options, including whole life policies and universal life policies
A five-minute, all-online quote creation process
Dedicated agents who understand life insurance
A vast insurer network that ensures competitive life insurance rates

Best Online Broker for Other Policy Types and Bundles: Policygenius

Policygenius is an all-purpose online insurance quote aggregator. Unlike Quotacy, it focuses on a variety of different types of insurance, including:

If you’re shopping for more than one type of insurance right now, Policygenius is your best choice for fast answers. And if you’re paired with a life insurance provider that offers other types of insurance too, there’s a good chance Policygenius can hook you up with a money-saving bundle discount.

Methodology: How We Select the Best Online Life Insurance Companies

We use several criteria to evaluate online life insurance companies and select the very best for our readers. Some relate to the application process or policy underwriting, while others speak to the overall user experience and quality of the insurers themselves.

Financial Strength and Customer Satisfaction

Third-party financial strength ratings assess insurers’ ability to pay out death benefits in the future. When possible, we use ratings from A.M. Best, a highly respected rating agency that specializes in the insurance industry.

Customer satisfaction is another important measure of insurer quality. The top authority for customer satisfaction ratings in this industry is J.D. Power, which ranks life insurance companies and life insurance products annually.

Policy Types Available

Many online life insurance companies offer term life insurance only. Those insurers that also offer permanent life insurance coverage generally require medical underwriting for it, lengthening the application process.

That said, if you prefer to have both options available when you apply, you’ll want to focus your attention on insurers that can accommodate.

Term Options

Online term life insurance policies typically range from 10 to 30 years. Some insurers offer shorter-term policies, down to five or even two years.

Unless otherwise specified in the terms of the policy, you can renew your policy once the initial term expires. However, this may require another round of underwriting and will definitely involve a higher premium.

No-Medical-Exam Options

One of the core benefits of online life insurance is the seamless application process. This process is helped along in many cases by a lack of medical underwriting.

The insurer might ask some basic questions about your personal and family medical history and lifestyle. It’ll check your answers against your health records as well. But it won’t require you to undergo a medical exam as a condition of coverage.

No-medical-exam coverage costs more than fully medically underwritten coverage because it provides less information about your risk of premature death. However, this is a price many would-be policyholders are willing to pay, especially if they have reason to believe a medical exam would turn up health-related red flags.

The best insurers for no-exam coverage have high coverage limits — above $1 million — and terms of at least 20 years for younger and middle-aged applicants.

Coverage Amount (Death Benefit)

Online life insurance death benefits typically range from as low as $25,000 to $50,000 for final expenses insurance to upwards of $1.5 million. If you have higher life insurance needs, look to an insurer that can accommodate — Haven Life’s coverage amounts range up to $3 million, for example.

Policy Add-ons (Riders)

Many online life insurance companies offer policy add-ons, also known as riders. Some of the most common include:

Return of premium riders, which reimburse the policyholder for premiums paid during the policy term
Accelerated death benefit, which allows terminally ill policyholders to claim a portion of the death benefit before they die
Accidental death rider, which pays out an additional death benefit if the policyholder dies in an accident covered by the rider

Online Life Insurance FAQs

You have questions about getting life insurance online. We have answers.

Do You Need to Get a Medical Exam When You Apply for Life Insurance Online?

Often, no. If you’re applying for a life insurance policy worth less than $500,000, you probably won’t have to get a medical exam if you don’t want to. Many insurers offer no-medical-exam coverage as high as $1 million or $1.5 million, and a few go higher still — up to $2 million or $3 million.

That said, if your top concern is paying as little as possible for coverage and you have no known health issues, opt for the medical exam. As long as the exam doesn’t raise any red flags about your health, you’ll pay less for a policy that requires one.

How Much Does Online Life Insurance Cost?

How much you pay for an online life insurance policy depends on a number of factors:

The policy value — coverage amount or death benefit
The policy term — the longer the term, the higher the premium
The type of policy — term life is always cheaper than permanent life
Your personal medical history
Your family medical history
The results of your life insurance medical exam if you take one
Your age when you apply
Your lifestyle, including whether you use or have ever used tobacco and whether you have any risky hobbies

The best way to estimate your life insurance cost is to use an online quote aggregator like Policygenius or Quotacy.

What Do You Need to Apply for Life Insurance Online?

To apply for life insurance online, you’ll need some or all of the following:

A good idea of how much life insurance you need
Basic personal information, like your address and Social Security number
Basic financial information, such as your annual income
Your height and weight
Your recent medical history
Information about your lifestyle and personal habits

If required, you’ll need to take a medical exam in the days or weeks after you send in your initial application for coverage. Many insurers offer in-home exams, but some ask you to visit a testing facility.

You’ll also need to give your consent for the insurer to pull your Medical Information Bureau file. This file contains important information about your medical history and previous insurance applications, helping would-be insurers check the information you provide on your application against the public record.

Is Life Insurance Worth It?

Often, yes. One of the most harmful myths about life insurance is that only certain people need it, such as parents of young children or people with lots of debt. In fact, there are many reasons to buy life insurance:

Covering final expenses, such as funeral and burial costs
Preventing major debts from passing to a surviving spouse or partner
Covering higher costs borne by survivors, such as child care and health insurance
Covering future education expenses for your children
Protecting your business partners’ financial interests
Maintaining your survivors’ standard of living
Creating a store of cash value that you can borrow against during your lifetime

Chances are, at least one of these reasons applies to you. And if that’s the case, some form of life insurance is probably worth it.

How to Choose the Best Online Life Insurance Company

These are the best online life insurance companies on the market right now, but that doesn’t mean they’re interchangeable. The best choice for your life insurance needs might not be the best choice for your neighbor — or even your spouse.

To choose the best online life insurer for you, think about why you’re applying for life insurance in the first place.

Do you want an affordable term life policy that lasts until you pay off your house in 15 years? Do you want to make sure your future kids’ college education is paid for, 20 or 25 years down the road? Do you want a policy that lasts indefinitely, creating a cash value reserve that you can tap as you age and possibly establishing generational wealth for your heirs?

Likewise, think about what you want out of your relationship with your insurer, beginning with the application process. Are you willing to pay more to forgo medical underwriting? Or do you prefer a seamless, super-fast application process that produces an answer — and an active policy — within minutes?

It’s your call. Fortunately, you can’t go wrong with any of the options on this list.

Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

Source: moneycrashers.com

January 13, 2022

How to Style a Gallery Wall

After moving into a new place, the biggest question you’re asking yourself is likely, “How am I going to decorate?”

A great use for all that blank, white space is a gallery wall. This is an easy way to feature your favorite framed artwork and personal photographs.

Follow our tips to style your own gallery wall:

1. Decide what to hang: Choose your medium (painting, drawing, photograph), size, and frame (including color, material, and shape). Don’t be afraid to mix and match! When adding variation, just make sure it’s balanced and doesn’t clash. If you have a collection of various frames but want to make everything uniform, consider painting them all the same color.

2. Plan the arrangement: Play around with the layout before you start putting nails into the wall. Decide if you’re going to group multiple pieces in a shape (diamonds, squares, and rectangles work well) or in a straight line. You might want to do a little sketch on paper (to scale). Then lay out your collage on the floor. Place each frame approximately one or two inches apart for cohesiveness. If you’re mixing sizes, start with the biggest piece and work around them with the smaller ones. Consider choosing one piece of art as the focal point and place it in the center.

3. Test your layout: Once you’re happy with the arrangement, cut out pieces of paper that fit each framed piece. Mock up your collage on the wall with paper and tape to help visualize the result. Make tweaks, and move the pieces around until the layout is just right.

4. Start hanging: This is the moment you’ve been waiting for! Break out your hammer and nails. Place the frames over the paper, replacing each cut-out with the actual piece.

Once you’re done, take a few steps back to admire your work! One of the best things about a gallery wall is that you can swap personal photos and art if you find a new piece that you want to feature.

Source: century21.com

January 12, 2022

Discount Grocery Stores: Are They Worth the Savings?

Additional Resources

Like most people, I’d rather not spend any more at the grocery store than I have to. Over the years, I’ve tried every trick in the book to save money on groceries. And the single best way I’ve found to cut my grocery bill is to shop at discount grocery stores.

Discount grocers like Aldi and Lidl offer much lower prices than big chains like Walmart and Kroger — not just on a few products, but on nearly everything they sell. When I hit my local store, I save money on every single item on my shopping list with no extra effort.

Admittedly, discount grocery stores have their limitations. They offer a smaller selection of products than a regular grocery store, and their quality can be uncertain in some cases. Hours are often limited, and the atmosphere isn’t fancy. But the savings make it well worth it.

Types of Discount Grocery Stores

The term “discount grocery store” can refer to two types of store: salvage stores and limited-assortment stores. Both types of discount grocers offer low prices. However, their selections and the strategies they use to keep their prices low are quite different.

Salvage Stores

Salvage stores sell goods rejected or discarded by other grocery stores. They’re also known as surplus grocery stores, closeout grocery stores, bent-and-dent stores, or grocery outlet stores. Like outlet fashion stores, they sell products other stores can’t at significantly reduced prices.

Salvage Store Inventory

Salvage and outlet stores can get goods at a discount for various reasons. Their merchandise includes:

Overstock. Sometimes, supermarkets find themselves with more of a product than they can sell. They sell them to a salvage retailer at a steeply reduced price to clear their shelves. The salvage store passes the savings on to its customers.
Discontinued Goods. Grocery stores often need to unload merchandise they no longer want to carry. Some of these are out-of-season goods, such as Halloween candy in November. Others simply didn’t sell well.
Damaged Goods. Supermarket shoppers prefer food in perfect condition. Slightly damaged food, such as dented cans or ugly-looking veggies, tends to get left on the shelf. Grocers sell them to salvage stores for less fussy customers to buy.
Late-Dated Goods. Some of the wares on a salvage store’s shelves are approaching or even past their expiration dates. However, that doesn’t mean they’re unsafe to eat. Their quality is no longer guaranteed, but they’re still safe and often still perfectly good.
Unsuccessful Products. Sometimes, a company like Kraft or General Mills tests a new product or new packaging for an existing one and finds it isn’t a hit. Rather than discard the unsuccessful products, they sell them to an outlet store.
Wreck Salvage. A few goods at salvage stores are literally salvaged. When a truck carrying groceries gets into an accident, goods often fall off. Salvage retailers reclaim the surviving items from these wrecks and put them on their shelves.

Because salvage stores sell items recovered from larger chains, most of their offerings are name-brand products. However, these rejected products sell at much lower prices than usual.

The selections at salvage stores aren’t limited to food, either. You can also find wine and beer, health and beauty products, cleaning supplies, and pet food. There are even some non-grocery products like garden supplies, office supplies, or clothing.

But the selection at these stores is a bit haphazard. It varies weekly based on what other retailers happen to discard. And a few products at salvage stores are unfit for consumption, such as half-rotted produce or severely dented cans.

In short, shopping at salvage stores is a bit like a treasure hunt. You can pick up some real gems, but you might have to dig through a lot of doubtful bargains to find them.

Examples of Salvage Stores

One sizable chain of salvage stores is Grocery Outlet Bargain Market. It has over 400 locations, mostly in the northwestern part of the United States.

This chain’s offerings include fresh meat, produce, frozen foods, health and beauty products, and wines. These goods can be as much as 70% off their retail price. Items marked as “WOW deals” are particular bargains.

There are also many independent salvage stores located across the U.S. They’re especially common in Amish country.

You can find stores near you by consulting the directory at Extreme Bargains or searching online for “discount grocer near me,” “outlet grocer near me,” or “salvage grocer near me.”

There are also chain stores known as job-lot or liquidation stores that sell salvaged and overstock goods. They don’t specialize in groceries, but they usually have some food products for sale. One example is the Ocean State Job Lot in the Northeast.

While not identical to salvage stores, dollar stores like Dollar Tree and Dollar General are similar. Their pricing model sets these stores apart, with most inventory priced at $1.

Dollar stores don’t focus on food, although most carry some grocery items. However, they often use the same methods as salvage grocery stores to score bargains on overstock and discontinued goods.

Limited-Assortment Grocery Stores

Limited-assortment grocers are just like regular grocery stores but with a smaller selection of products. Many of them offer just one brand and size for each product they sell. The stores are smaller and need fewer employees to stock the shelves. That helps keep prices down.

Limited-assortment stores also keep prices low by cutting out extras. For example, they typically don’t have fresh bakery, deli, or floral sections. These no-frills stores often display products right in their shipping cartons so employees spend less time stocking shelves.

If you shop at a limited-assortment store, expect to bag your own groceries. You must also bring your own bags or pay extra for bags at some stores.

Some chains even require customers to pay a $0.25 deposit to use a grocery cart. This small fee encourages shoppers to bring the carts back rather than leaving them in the parking lot. That way, the store doesn’t have to pay employees to collect them.

Limited-Assortment Store Inventory

Limited-assortment grocery stores tend to focus heavily on their own private-label store brands. At some stores, that’s practically every product on the shelf.

In fact, some limited-assortment stores, such as Trader Joe’s, have built a bit of a cult following around their store brands. Devoted customers regularly visit these stores for products they can’t find anywhere else.

If you’re loyal to any name brands, you probably can’t do all your grocery shopping at limited-assortment stores. But it’s worth visiting them for staple foods that are often similar regardless of brand. Examples include flour, sugar, salt, vinegar, and cooking oil.

Examples of Limited-Assortment Stores

There are many limited-assortment grocery chains in the U.S. Major ones include:

Aldi. This German chain has more than 2,000 stores across the U.S. Its stores are small — about one-third the size of a traditional grocery store. It sells primarily store brands, including organic, gluten-free, and European specialty food items.
Dollar General. This chain has over 17,000 stores in 46 states. Many of them are in small towns and rural areas with few other stores. Its fresh food options are limited, but it has great prices on staple foods, household goods, and non-food items like clothing.
Food4Less. Part of the Kroger family, this chain includes about 50 stores in Southern California, Illinois, Indiana, and Nevada. Its deeply discounted selections include produce, bakery, dairy, meat, and foreign foods.
Lidl. This European chain entered the U.S. in 2017. It now has over 150 stores along the East Coast, from New Jersey to South Carolina. It has higher-end goods than many discount grocers, including organic products, fresh-baked goods, and affordable wines.
Save A Lot. There are over 1,000 Save A Lot locations in over 30 states, many in areas with few or no other stores. Its small, no-frills locations carry primarily store brands. But it gets high marks for its inexpensive meats and fresh produce.
Trader Joe’s. Loyal fans flock to Trader Joe’s for its high-quality store brands. Its specialties include wine, cheese, organic foods, and goodies like cookies and frozen dumplings. The chain has over 500 locations in 43 states.
WinCo. This employee-owned discount chain has over 100 bare-bones stores concentrated in the western U.S. Most stores are open 24/7. One notable feature of WinCo is its use of bulk bins like the ones at Whole Foods to cut down on packaging.

How to Save Money at Discount Grocery Stores

To get the most for your grocery dollar at discount stores, you have to shop strategically. Some grocery shopping strategies are the same for both salvage and limited-assortment stores. Others are more useful for one type of store or the other.

Check the Store Hours

Many salvage stores have limited store hours, which helps keep costs down. They’re only open on certain days or hours each day.

But it’s seriously annoying — and a big waste of gas and time if the store’s far away — to plan a special trip to a closed salvage store. So always check the store hours before you go.

Confirm Coupon Policies

One of the most popular ways to save money on groceries is clipping coupons. Unfortunately, that trick doesn’t always work at discount grocery stores. Most salvage stores and many limited-assortment stores refuse manufacturer coupons.

But at the few stores that take them, such as WinCo, the savings can be significant.

For example, suppose you have a coupon for $1.50 off a 12-ounce bag of ground coffee. At a regular grocery store, that coffee might cost $8.49. That means your price with the coupon would be $6.99.

But at a discount grocery store, you might find that same bag of coffee for as little as $3.99. With your coupon, you’d pay only $2.49. That’s less than one-third the regular retail price.

To find out whether you can score bargains like this at your local discount store, check the store’s coupon policy. If you can’t find it on the store’s website, ask a cashier.

Even if a discount store doesn’t take manufacturer coupons, it may issue its own store coupons. For instance, you can sign up for the mailing list at Grocery Outlet to get deals such as $5 off any $25 purchase. Most limited-assortment stores also offer special deals to subscribers, though Aldi and Trader Joe’s do not.

Bring Cash

Few salvage stores accept credit cards, and some limited-assortment stores follow suit. That’s because credit card issuers charge merchants a fee to use their cards.

Most stores pass these fees on to customers through higher prices. By refusing credit cards, discount stores can keep prices lower.

Some stores are starting to relax their no-credit policies. For instance, on my most recent trip to Aldi, I was able to pay with my credit card instead of having to use cash. But to be on the safe side, bring cash or a debit card on your first visit to any new store.

Examine Containers Carefully

At salvage stores, it’s common to encounter food in damaged packaging, such as dented cans. In most cases, the food is still safe to eat. For example, the U.S. Department of Agriculture says it’s not dangerous to eat canned food if the dents are slight.

However, if a can has a deep dent — big enough to lay your finger in — leave it on the shelf. Deep dents can compromise the seal, letting bacteria in.

The same guidelines apply to rust. A little rust on the surface that rubs right off is no problem. However, heavy rust can create tiny holes that admit bacteria.

Food in torn or dented boxes is also safe as long as the plastic bag inside the box is intact. Boxed foods with no inner liner, such as pasta, are OK if the box is only dented. But if a box is torn open to expose the food, it’s best to leave it.

Examine Fresh Produce

Fresh produce at discount grocery stores is a mixed bag. On some trips to Aldi, I’ve failed to find a single bag of potatoes without at least one that was visibly rotten. On the other hand, the bagged Brussels sprouts and miniature avocados at Trader Joe’s have never let me down.

Since quality is hard to predict, it’s best to examine all produce carefully for signs of spoilage before you put it in your cart. In fact, that’s a good policy at most grocery stores. Even at big supermarkets, I often find a couple of mushy strawberries in a quart container.

Understand Expiration Dates

Food at salvage stores is often close to or even past the expiration date on the package. But that doesn’t mean it’s unsafe to eat. Dates on food are there to assure food quality, not food safety.

There are several different types of expiration dates, each with its own meaning:

Best if Used By means the flavor or quality of the food is best before the given date. Past this date, crackers might be a bit stale, or powdered milk might have an off-taste.
Sell-By dates tell stores how long to keep the product on their shelves. Food is still good up to this date and for several days after. For example, milk doesn’t go sour until five to seven days past its sell-by date.
Use-By dates tell consumers when the product will be at peak quality. They’re not an indication of safety for most products. The only product it’s unsafe to buy or use after its use-by date is baby formula.

Most products, including canned and frozen foods, are still safe after any of these expiration dates. The only time frozen food might be unsafe is if it has been thawed and refrozen. If the freezers at the store have puddles around them or don’t feel cold everywhere, pass them by.

There’s one non-food product on which dates are important: over-the-counter drugs. According to the Food and Drug Administration, drugs degrade over time. Any medicine past its expiration date may be unsafe or ineffective.

Know How to Spot a Good Deal

Although discount grocery stores generally offer low prices, they’re not always the lowest possible. Sometimes, you can do better at a regular grocery store by buying store brands or stacking sales with coupons.

The best way to spot the true deals is to keep a grocery price book. It’s simply a record of the prices you typically pay for the grocery items you buy most often.

For instance, the page for peanut butter in my price book tells me that the best price I can usually get is $2.85 per pound at Costco. So if I go to a discount store and see peanut butter for only $2 per pound, I know it’s time to stock up.

Consider All Brands

Salvage stores have a wide variety of brands on the shelves. Some are familiar name brands you know and love, like Campbell’s or Coca-Cola. When you find these, you can take the opportunity to stock up on your favorites.

But these name brands aren’t always available. Often, they carry off-brands you’ve never heard of before, like Banquet mayonnaise or Finest refried beans.

Similarly, when you shop at limited-assortment stores, there are very few name-brand products for sale. Most of the offerings are store brands, though they don’t always have the store’s name.

For instance, Aldi calls its cereals Millville and its snack foods Clancy’s. Save A Lot names its store brands after former employees, like McDaniel’s coffee and Sunny’s cookies.

Don’t discount these brands just because they’re unfamiliar. Some of them are just as tasty as the name brands you’re used to. But you can’t be sure until you try them.

To be on the safe side, buy the smallest package the first time you try an unfamiliar brand. If you like it, you can stock up on it next time. And if not, you haven’t wasted much money.

Stock Up When Appropriate

Discount grocery stores are great places to stock up on goods you use a lot. Even if you can’t use something right away, it makes sense to buy plenty, especially at salvage stores. Their stock is ever-changing, so the product might not be there the next time you shop.

But stocking up only makes sense for nonperishable goods or those you know you can use before they go bad. There’s no point in buying six avocados if four of them are going to turn black before you eat them.

The best products to stock up on are canned foods, shelf-stable foods, and produce with a long shelf life. Potatoes, onions, and garlic can all last a long time if you store them in a cool, dry place. Frozen foods are also a good choice if you have a big enough freezer to store them all.

Final Word

If you don’t like the offerings at one local discount store, don’t let that put you off the idea altogether. Each discount grocery store is different. If you don’t like the store brands at Aldi, maybe you’ll prefer the ones at Save A Lot.

Also, remember that the selection at salvage stores changes frequently. If you didn’t find anything you liked at your local store the first time, it’s still worth going back to see if it has anything better next time.

Shopping at discount grocery stores requires an open mind. The brand names aren’t as familiar, and the packaging isn’t as pretty. But if you’re willing to take a little extra time, these stores offer a way to save money every time you grocery shop.

For more tips on saving at the grocery store, check out our shopping archive.

Source: moneycrashers.com

January 12, 2022

Inter-Vivos Trusts: How Do They Work?

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An inter-vivos trust or living trust is a legal arrangement that allows a person to transfer ownership of assets to a trust while they are still alive. Inter-vivos trusts distribute property to beneficiaries when a person dies and helps an estate avoid probate. A financial advisor can guide you through the process of creating an inter-vivos trust and address other estate planning needs.

How Inter-Vivos Trusts Work

While a testamentary trust takes effect when the grantor (person who created it) dies, an inter-vivos trust allows a person or married couple to transfer assets like money, real estate or investments to a separate entity while they are still alive.

An inter-vivos trust can be either revocable or irrevocable. When a living trust is revocable, the trustor can change or cancel it, and can even act as its trustee (person who manages the trust). An irrevocable trust, on the other hand, may not be changed once it is created. Assets transferred to an irrevocable trust cannot be transmitted back to the original owner.

Whether it’s revocable or irrevocable, an inter-vivos trust must have someone assigned as the trustee. Even if the person who established the trust opts to serve as trustee, they still must name a successor trustee to manage the trust when they die. A grantor must also name beneficiaries who will receive assets from the trust at the time of their death.

Last but not least, an inter-vivos trust does not render a will unnecessary. In fact, a will is still needed to execute the trust. Wills can also serve as a backup of sorts and account for any assets not included in the trust. For instance, if you acquire real estate later in life and never added it to the trust, a will can ensure the property is transferred to the proper person at the time of your death.

Advantages of Inter-Vivos Trusts

Property transferred to an inter-vivos trust is not subject to probate, the legal procedure by which a deceased person’s will is processed. This court-supervised process ensures that an estate’s assets are inventoried and distributed properly and that its debts are paid.

By skipping these lengthy and potentially costly proceedings, the assets held by a trust can be smoothly transferred to beneficiaries without becoming public record like a will do.

There are also specific benefits associated with revocable and irrevocable living trusts. A revocable trust gives the grantor the option to add new beneficiaries, remove assets or make other changes. While flexibility is the main advantage of a revocable trust, their counterparts offer more protection for the assets they hold. When a grantor establishes an irrevocable trust, they give up ownership of the assets held by the trust, which protects them from creditors.

How to Create an Inter-Vivos Trust

There are two primary ways to create an inter-vivos trust: enlisting the help of a professional or doing it yourself. A financial advisor, especially one with the accredited estate planner (AEP) designation, or an estate planning attorney can streamline the process for you and ensure that your trust is created properly.

However, a basic living trust doesn’t have to be overly complicated and can even be set up online. If you’re looking to go it alone, you will first need to decide what kind of trust you want to establish and the assets that you’ll transfer to it. Next, you’ll have to pick a trustee and beneficiaries. Then, you’ll create a Declaration of Trust online and sign it in front of a notary. Lastly, you’ll need to transfer the titles of trust property to the trustee (even if it’s you) and then safely store the document.

While it may save you money, be aware of the potential pitfalls and dangers of DIY estate planning, which can create additional problems for beneficiaries when you’re gone.

Bottom Line

An inter-vivos trust is an estate planning tool that helps a person or couple transfer assets to beneficiaries without exposing their estate to the probate system. While some trusts go into effect when a person dies, an inter-vivos or living trust is created when the grantor is still alive. They can be revocable or irrevocable, and can be created with the help of a professional or one’s own.

Estate Planning Tips

As mentioned above, a financial advisor who specializes in estate planning can help you navigate what can be a complicated process of planning an estate. SmartAsset’s free matching tool can pair you with up to three local advisors in a matter of minutes. If you’re ready to find a professional, get started now.
Depending on the size of your estate and where you live, your assets may be subject to state or federal estate taxes. But remember that up to $11.7 million in assets are exempt from federal estate taxes in 2021. Married couples are also permitted to tap their spouse’s unused portion of this exemption limit, effectively allowing couples to transfer a combined $23.4 million to beneficiaries free of federal estate taxes.

Patrick Villanova, CEPF® Patrick Villanova is a writer for SmartAsset, covering a variety of personal finance topics, including retirement and investing. Before joining SmartAsset, Patrick worked as an editor at The Jersey Journal. His work has also appeared on NJ.com and in The Star-Ledger. Patrick is a graduate of the University of New Hampshire, where he studied English and developed his love of writing. In his free time, he enjoys hiking, trying out new recipes in the kitchen and watching his beloved New York sports teams. A New Jersey native, he currently lives in Jersey City.

Titan Invest Review – Advanced Strategies for Everyday Investors

At a glance

Our rating

What It Is: Titan Invest is a set-it-and-forget-it investment platform designed to give the average investor a simplified way to invest with a hedge fund-like style.
Advantages: The platform offers an aggressive investment style capable of yielding market-beating returns, an insured and secure investing experience, an intuitive mobile app, and multiple account types.
Disadvantages: Investors are sometimes turned off by the high cost compared to robo-advisors, relatively high account minimum requirements, and a lack of financial planning tools.
Price: Titan Invest charges a monthly or annual fee depending on your account balance. If you have under $10,000 invested, you’ll be charged a $5 monthly advisory fee, while accounts with a value of $10,000 or more are charged a 1% annual fee.

Additional Resources

Created by Clayton Gardner, Joe Percoco, and Max Bernardy, Titan Invest is a platform designed to give the average investor the ability to follow a hedge fund-like investment strategy without having to manage their portfolios on their own.

Gardner — the CEO of Titan whose long list of credentials includes a history as a financial analyst for a hedge fund — and his team of investment advisors, analysts, and traders manage your portfolio for you.

The goal is to give you the upper hand in the stock market, regardless of whether you’re an accredited investor or not. Although Titan Invest is young, it is already building a history of compelling performance.

Key Features of Titan Invest

Titan Invest is quickly becoming a popular option among the investing community, and for several good reasons. Some of the platform’s most important feature are:

Aggressive Investment Style

The number one reason to consider investing with Titan is the sheer scale of returns the firm has generated for its customers. In 2020, even in the face of the COVID market crash, the firm delivered a 44.42% rate of return, outpacing the S&P 500’s 18.39% and the average robo-advisor return of 14.90% by a wide margin.

On an annualized basis, the company’s investment portfolio has generated 22.4% growth since inception. That’s more than double the long-term average return of the stock market.

Titan generates these returns through an aggressive investment style that’s focused on picking high quality individual stocks and using inverse exchange-traded funds (ETFs) for hedging.

When you sign up, a percentage of your assets is placed in the equities side of the portfolio. The remainder of your portfolio value is invested in inverse ETFs, acting as a personalized hedge. From there, you can either watch your money grow or make regular contributions to increase your earnings potential, leaving the legwork to the pros at Titan Invest.

Three Portfolio Options

When you sign up, you’ll have the option to choose from three different portfolio styles. These include:

Titan Flagship. The company’s Flagship portfolio invests in a small group of large-cap domestic stocks. The average market cap in the portfolio is around $500 billion, with stocks being chosen for their potential to beat the returns of the S&P 500.
Titan Opportunities. The company’s Opportunities portfolio provides access to domestic small- and mid-cap stocks. The average market cap in the fund is about $9 billion, and stocks are chosen for their ability to provide exceptional returns. After all, small-cap stocks have a long history of outperforming their large-cap counterparts. However, for access to the Opportunities portfolio, you’ll need to maintain a minimum account balance of $10,000.
Titan Offshore. The Titan Offshore portfolio gives you access to a select list of international stocks outside the U.S. in both developed and emerging markets. As with the Opportunities portfolio, the stocks are chosen based on their potential to deliver exceptional returns.

Safety Is a Top Priority

When deciding where you’re going to invest your money, safety should be a consideration. As technology becomes more sophisticated, hackers and con artists do too. So it’s important that no matter where you park your money, it’s both safe and insured.

All Titan investment accounts are covered by Securities Investor Protection Corporation (SIPC) insurance on balances up to $500,000. So, if your money becomes lost for any reason other than general losses in the stock market, you can rest assured that you’re covered.

All Titan accounts are held and cleared with APEX Clearing. APEX is one of the largest financial technology companies in the world, with a history of providing the tech necessary for the safe clearing of stock market transactions.

Finally, on Titan’s website, your information will be safeguarded by several layers of security. Titan uses an SSL connection with 256-bit encryption and a firewall to ensure the safety of your data.

User-Friendly Mobile App

Everything happens on the go these days, and the same is true when it comes to investing.

If you enjoy having on-the-go access to your investing accounts, you won’t be disappointed. The Titan Invest mobile app is intuitive and user friendly, offering everything you get when you log in to the platform on a desktop.

Multiple Account Types

Titan offers multiple account types. Whether you’re simply investing for the sake of investing or you’re building a retirement account, there’s an option available for you. The available account types include individual taxable brokerage accounts, traditional IRAs, and Roth IRAs.

Popularity

While a fund or investment service’s popularity should never be the determining factor as to whether you’ll invest in it, it is nice to see that the platform is popular. After all, if investors were losing money, it would be hard to build a buzz around the opportunity.

Titan Invest has already attracted more than $600 million in assets under management (AUM), which is impressive when you think about the fact that the company just launched in 2017.

Advantages of Titan Invest

Considering the fact that so many investors are flocking toward Titan’s services, there’s obviously plenty to be excited about. Here are the biggest advantages to working with the firm:

Low Cost Compared to Typical Hedge Funds. Hedge funds and other active investment managers generally charge performance fees. Sometimes, these fees can be as high as 20% of the profits earned. Compared to these funds, Titan’s 1% per year and $5 monthly fees are far easier to swallow.
Not Just Available to Accredited Investors. Aggressive strategies that lead to gains that significantly outpace the market are typically only accessible by high net worth individuals and other big-money investors. The Titan Invest platform makes these exclusive returns available to the masses.
Compelling Performance. Titan has only been around a few years, but in that time it has generated multiples of the average market returns. The potential to consistently and significantly outperform the market is very appealing to investors.
Referral Program. Titan offers an opportunity to get rid of fees entirely and unlock the Titan Opportunities portfolio without the $10,000 minimum investment through its referral program. Refer two members and you’ll have access to the Opportunities portfolio with a minimum investment of $100. Refer four new members and you’ll get rid of your advisory fees entirely. Even if you only refer one person to the platform, you’ll enjoy a 25-basis-point (0.25%) reduction in your annual fee.

Disadvantages of Titan Invest

So far Titan may seem like a platform built of sunshine and rainbows, but there are some dark clouds in the sky to consider too.

High Risk. The strategies used by the pros at Titan Invest are high-risk/high-reward strategies. Without the use of fixed-income investments and heavy diversification, conservative investors with a low risk tolerance or investors with a short time horizon who can’t afford to absorb market downturns will find the volatility associated with the strategy to be a turnoff.
High Cost Compared to Robo-Advisors. While there are no performance fees, investing with Titan is more expensive than the average robo-advisor. For example, Betterment charges a management fee of 0.25% per year, which makes 1% seem like an exorbitantly high fee. For smaller accounts, $5 per month can actually be pretty pricey. To put it into perspective, if you have a $500 starting balance, $5 per month works out to annual fees of 12%. (Once you have between $6,000 and $10,000, $5 per month works out to an annual fee of 1% or less.)
Account Minimums. All Titan accounts have a $100 minimum investment, which isn’t a big deal. However, if you want access to the Opportunities portfolio, you’ll need to maintain a minimum balance of $10,000, which is too high for some investors.
Lacks Additional Features. Titan Invest doesn’t offer tax-loss harvesting, financial advisors, or financial planning, all of which are generally available when working with the company’s competitors.

You Should Invest With Titan Invest If…

There’s no such thing as a one-size-fits-all investing product. Everyone has different goals, a different risk tolerance, and different amounts of capital to put into the investing process. These factors make an investor a perfect fit for the Titan platform:

You Have $6,000 or More to Invest. With balances under $6,000, the fees you’re charged will work out to be more than 1% annually. That’s an expensive pill to swallow, and chances are that you’ll find better opportunities elsewhere.
You Have a High Risk Tolerance. Only investors with a healthy appetite for risk should ever consider an aggressive investing strategy that’s solely focused on investments in stocks. Risk-averse investors should consider other opportunities.
You Are Young. Due to the high risk associated with the Titan Invest strategies, younger people are the best candidates for this investing style. The younger you are, the more risk you can accept because you’ll have more time to recover should a significant drawdown take place. Investors nearing retirement or with short-term time horizons simply don’t have the time to recover from significant losses and should consider investing in a product or assets with limited volatility.

Final Word

All told, the Titan Invest platform is a great option for the audience it was designed to serve. Young investors with a high risk appetite will benefit greatly from the firm’s aggressive investment strategies.

Regardless of your age, it’s important to keep a sizable balance in your account if you’re going to use Titan to ensure that fees don’t eat into too much of your profits.

On the other hand, if you’re not a young investor or don’t have a healthy appetite for risk, it’s likely best to look into low-cost, highly diversified ETFs and choose an asset allocation that fits your investing goals and timeline. Also, it won’t hurt to mix some fixed-income assets in to further shield your portfolio from volatility.

The Verdict

Our rating

Titan Invest is a great option for investors with $6,000 or more to start with who are willing to accept increased risk for an opportunity to beat the market. Offering up a hedge-fund investment style with a history of compelling performance, the platform has become a popular option for individual investors.

The platform offers compelling returns on stocks, but that’s about it. Without fixed-income allocation and financial planning features, the platform leaves much to be desired for the average investor.

Editorial Note:
The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Source: moneycrashers.com

January 11, 2022

What Are Fringe Benefits and Which Ones Are Taxable in 2022?

Dig Deeper

Additional Resources

What keeps employees happy, engaged, and loyal? Salary, paid time off, health insurance, and retirement benefits are vital parts of the equation, but many employers also give their employees perks — otherwise known as fringe benefits.

You might think of fringe benefits as freebies that don’t impact your taxable income. But that’s not always the case.

Employers don’t have to count certain fringe benefits as employee wages, but others they do. Not including these benefits in employee income — and therefore avoiding federal income tax and employment taxes — can be a costly error for both parties.

What Are Fringe Benefits?

Fringe benefits are any type of pay or perks you receive in addition to your salary. Examples of fringe benefits include:

Adoption assistance programs
Cash awards
Cellphones
Child and dependent care assistance
Commuting assistance
Company cars
Continuing education
Disability insurance
Free snacks or meals
Flexible spending accounts
Gym memberships
Health, vision, and dental insurance
Housing
Life insurance
Moving reimbursements
Paid time off
Parental leave
Retirement plans like 401(k)s or savings incentive match plan for your individual retirement accounts
Stock options
Tuition reimbursement

Fringe benefits can be taxable (included in your taxable income and reported on your W-2) or nontaxable (not included in your taxable income and possibly not reported on your W-2). To avoid problems with the IRS, it’s vital to know the difference.

Taxable vs. Nontaxable Fringe Benefits

According to IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits, all fringe benefits are taxable and must be included in the employee’s taxable income unless the law specifically excludes it.

Section 2 of Publication 15-B provides a list of excludable benefits, including:

Accident and Health Benefits

These employee benefits include premiums the employer pays toward health insurance and long-term care insurance. They also include payments made directly to you for medical expense reimbursements.

Achievement Awards

Your employer can give you property worth up to $1,600 as an award for length or performance of service or safety achievement. The exclusion doesn’t apply to awards of cash, gift cards, or gift certificates.

Adoption Assistance

Your employer can help you cover up to $14,440 in adoption costs without including the benefits in your taxable income.

Athletic Facilities

If your employer provides an on-premises gym or other athletic facility, it can exclude the value of this benefit from your pay. To qualify, the facility can only be available to employees, their spouses, and dependents. The exclusion doesn’t apply if the employer sells membership or rents the facility to the general public.

De Minimis Benefits

De minimis fringe benefits are property and services the employer provides that have so little value that it would be unreasonable or impracticable for the employer to account for them. That includes token holiday gifts, times when you use the company’s copier, flowers, coffee and doughnuts, or occasional theater or sporting event tickets.

There is no specific dollar amount that automatically makes a benefit more than de minimis. However, the IRS usually considers benefits that cost $75 or less to be de minimis. The exclusion doesn’t apply to any cash, gift cards, or gift certificates, no matter how small the amount.

Dependent Care Assistance

These programs help you pay for the cost of the care of a child or other dependent while you work. Employers can exclude up to $5,000 of dependent care benefits from your wages.

Educational Assistance

Educational assistance programs allow an employer to fully or partially cover costs for your education, including tuition, fees, books, equipment, and supplies. Employers can exclude up to $5,250 of educational benefits from your wages each tax year.

Employee Discounts

Many employers allow employees to purchase the goods and services offered to customers at a discount. Employers can exclude the value of this discount from your wages up to the following limits: 20% of the price charged to nonemployee customers for services or the business’s gross profit percentage times the price charged to nonemployee customers for merchandise and other property.

Employee Stock Options

Typically, employee stock options aren’t part of your taxable income when the employer grants them. However, you may have to pay tax when you exercise the option (that is, actually purchase the stock) or later sell the stock at a gain.

Employer-Provided Cell Phones

If an employer provides a cell phone you can use for work, the phone’s value isn’t taxable income, even if you occasionally use it for personal use. However, if your employer provides a cell phone without a legitimate business purpose, they must include the phone’s value in your taxable wages.

Group Term-Life Insurance Coverage

Your employer can generally exclude up to $50,000 of group term life insurance coverage from your wages. The employer must include the cost of coverage over that limit in your taxable income.

Health Savings Account (HSA)

For 2022, your employer can contribute up to $3,650 to your HSA or $7,300 to a family HSA without including it in your taxable income.

Lodging on the Business Premises

Employers who provide lodging on their business premises (for example, a household employer who provides a room for a live-in nanny) can exclude the value of that accommodation from your wages.

Meals

Employers don’t have to count as wages the value of meals provided as long as the meals are provided on the employer’s business premises and for the employer’s convenience. This exclusion can apply to companies that provide an employee cafeteria and restaurants that allow employees to have a meal before, during, or after their shift.

No-Additional Cost Services

This exclusion applies to employers who provide their normal services to employees without incurring any additional costs. Examples include airline employees taking free flights or hotel employees taking advantage of a free room.

Retirement Planning Services

If your employer provides a retirement plan, such as a 401(k), it can exclude from your wages the value of any retirement planning advice they provide.

Transportation (Commuting) Benefits

Employers who provide transportation and commuting benefits, such as carpooling rides, transit passes or parking permits, can exclude up to $270 of benefits per month from your wages.

Tuition Reduction

If you work for a university or other educational organization that provides reduced tuition to you and your dependents, your employer can exclude the value of that reduction from your gross income.

Working Condition Fringe Benefits

This type of fringe benefit includes property or services that would have been deductible as a business expense if you’d paid for it. The benefit must relate to the employer’s business, and you need to document the business purpose of the expense with records (such as receipts). Examples of working condition fringe benefits include traveling to attend a client meeting, the cost of a business lunch or dinner, or attending professional conferences.

Your employer must include the cost of any fringe benefits that do not fall within this list of exclusions in your taxable income.

Taxable Fringe Benefits

Employers aren’t the only ones who can get into trouble with the IRS for improperly accounting for fringe benefits. As an employee, you should also take notice because you’re responsible for properly reporting your income each calendar year, whether or not you receive a correct Form W-2 from your employer.

The IRS can hold employers liable for Social Security and Medicare taxes they should have withheld on the underreported amounts. The IRS can also audit you and hold you responsible for the income tax owed on the underreported amounts. It can even charge you with tax fraud if you knowingly underreported your income.

There are five fringe benefits employers tend to miss when calculating employees’ income tax withholding and reporting taxable income to the IRS.

1. Gift Cards or Cash Equivalents

If you received a gift card, no matter how small the amount, you should report it as wages — even a $5 gift card.

2. Prizes and Awards

Did you win a contest at work? If so, did you receive an award? What about an iPad as a prize in a raffle? Achievement awards aren’t taxable, but you should include other prizes and awards in your wages.

3. Personal Use of Company Car

Do you use an employer-provided vehicle for work? If you’re also allowed to use it for errands and personal trips on evenings and weekends, you should include the value of that personal use in wages.

4. Moving Expenses

Before the Tax Cuts and Jobs Act of 2017, employers could provide tax-free reimbursement of moving expenses if you moved more than 50 miles away for your job. Moving reimbursements are now a taxable benefit.

5. Expense Reimbursements Under a Nonaccountable Plan

Employers often reimburse employees for business expenses the employee pays out of their own pocket. As long as you and your employer account for reimbursements correctly, they aren’t taxable to you.

Under an accountable plan, you must provide documentation, such as a receipt or invoice, showing the nature and amount of the expense. If your employer reimburses you for more than you actually spent, you have to return the excess to the company within a reasonable timeframe (usually 120 days).

Expense reimbursements under a nonaccountable plan are income, and employers must include them in your wages. For example, if the company gives you $100 per day for meals while traveling and you don’t have to provide receipts for meals or return any unspent funds to your employer, the employer must include that $100 per day in your wages.

A nonaccountable plan is different from a per diem allowance. Per diem is an allowance an employer provides for meals, lodging and incidental expenses you incur while traveling. Per diem amounts aren’t taxable income for you as long as you follow the special rules. The amount you receive must be no more the federal per diem rate and you must file an expense report with your employer within 60 days.

Final Word

While every employer has the responsibility to report wages accurately, you are ultimately responsible for correctly reporting your income to the IRS. If you receive any of the benefits described above, ask questions.

The best place to start is with your company’s payroll department. Make sure you report the fair market value of any taxable fringe benefits as income on your tax return, whether or not your employer correctly includes them in W-2 wages.

Even if your employer claims to report all wages properly, make sure you keep track of the benefits you believe are taxable and include that value on your tax return. Make sure you aren’t setting yourself up for any tax penalties for underreporting your income.

Janet Berry-Johnson is a Certified Public Accountant. Before leaving the accounting world to focus on freelance writing, she specialized in income tax consulting and compliance for individuals and small businesses. She lives in Omaha, Nebraska with her husband and son and their rescue dog, Dexter.

Source: moneycrashers.com

Additional Resources

Student Loan Mistakes to Avoid

Mistake 1: Applying for Aid at the Last Minute

Mistake 2: Borrowing Too Much

Mistake 3: Not Understanding How Loan Forgiveness Works

Mistake 4: Taking Out the Wrong Type of Loan

Mistake 5: Not Shopping Around for the Best Interest Rate & Terms

Mistake 6: Not Understanding How Variable & Fixed Interest Rates Work

Mistake 7: Not Understanding Interest Accrual & Capitalization

Mistake 8: Co-Signing a Loan Without Understanding the Consequences

Mistake 9: Putting Off Making a Repayment Plan

Mistake 10: Choosing the Wrong Repayment Plan

Mistake 11: Only Making the Minimum Payment

Mistake 12: Refinancing Without Considering the Pros & Cons

Mistake 13: Postponing Payments Unnecessarily

Mistake 14: Missing Payments

Mistake 15: Keeping Your Assigned Payment Due Date

Mistake 16: Falling for Student Loan Scams

Mistake 17: Forgetting to Update Your Contact Information

Mistake 18: Not Asking for Help

Final Word

Stock Advisor

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Factors That Affect Your Choice

Bulk Buying

Brand Loyalty

Few Local Supermarkets

A Convenient Location

Avoiding the Pitfalls

Don’t Give In to Temptation

Check Unit Prices

Don’t Overbuy

Focus on the Best Deals

Final Word

Stock Advisor

Related Articles

A Seller’s Market Isn’t Exactly a Dream

Problems Finding Replacement Properties

A Potential Solution – DST, or Delaware Statutory Trust

Must Be an Accredited Investor

5 Top Benefits of DSTs in a 1031 Exchange

1. Potential Better Overall Returns and Cash Flows

2. Tax Planning and Preserved Step-Up in Basis

3. Freedom

4. As a Backup Strategy

5. Capture Equity in a Hot Market

Dig Deeper

Additional Resources

Best Esports Stocks to Buy in 2022

1. Activision Blizzard, Inc. (NASDAQ: ATVI)

2. Electronic Arts Inc. (NASDAQ: EA)

3. Amazon.com, Inc. (NASDAQ: AMZN)

4. Huya Inc. (NYSE: HUYA)

5. Take-Two Interactive Holdings, Inc. (TTWO)

Consider Exchange-Traded Funds (ETFs)

Final Word

Stock Advisor

Related Articles

Additional Resources

Best Online Life Insurance Companies

Best Overall: Ladder

Best for Fast Approval: Bestow

Best Premium Membership Rider: Haven Life

Best for Nontraditional Underwriting: Sproutt

Best for Guaranteed Issue Life Insurance: Ethos

Best for Higher Coverage Limits: Fabric

Best for Price Transparency: Walnut

Best Online Broker for Life Insurance Only: Quotacy

Best Online Broker for Other Policy Types and Bundles: Policygenius

Methodology: How We Select the Best Online Life Insurance Companies

Financial Strength and Customer Satisfaction

Policy Types Available

Term Options

No-Medical-Exam Options

Coverage Amount (Death Benefit)