Saving is a finite solution. You can only save so much, can only be so frugal. Your power for earning is unlimited with the right resource (you), the right tools (knowledge), and the right force (hard work). That isn’t to discount saving. Saving is an important part of the equation too. But, because of it’s limited ability, it can only be so much a part of your overall wealth and financial independence equation. Do you know what limits savings’ ability? Your earnings. You can only save so much as you earn. If you only earn $8 an hour, you can only save $8 an hour. Far less, really, because who can live on $0 an hour? Not many. So, the more you make, the more you can save.
There’s another side to that, even. The more you make, the more ability you have to make more. That’s the root of the old saying, “It takes money to make money”. While you can actually make money without having much money, the more money you have, the more opportunity you will find to earning more money.
Increasing your earnings isn’t always an easy equation to solve, though. Many people feel like they’re trapped in the job they have, the payscale they’re in, and the life path they’ve chosen. Not at all true! Your earning potential is unlimited if you combine the resources at hand and improve the ones that aren’t. You’ve already got you. Increasing you knowledge of the work you want to do is pretty easy as well. It just takes a bit of time, and some crafty searching online. Pretty much anything you want to learn about is available online. Heck, there are even entire sites dedicated to free college courses. All you need is to dedicate some time to learning whatever it is you want to learn. You can find that time by taking it from some of your TV watching time.
Follow all that learning up with some good old fashioned hard work. That’s it. Just hustle a little. Unfortunately, there isn’t any magic formula for that one. I don’t know how to motivate you to work. I don’t know the right things to say to you to make you want it. You’ve got to provide that part. If you can’t find the motivation to pull yourself away from American Idol for an hour to learn something, or work on making yourself a better earner, there’s just nothing that I can do for you. You’ve got to find that part for yourself.
But, listen. If you’re capable, like me, of getting your finances under control; of learning how to keep a budget, pay your bills on time, and learn from mistakes, there’s no reason you can’t learn how to earn more. You CAN learn how to do something you want to do. You CAN learn how to make yourself more marketable. And you CAN earn more. And, if you do, you WILL tip the scale in your direction. You’ll start to earn more. You’ll be able to save more. And you’ll find that opportunities will present themselves to you.
How are you going to improve yourself today?
We’ve all heard about the many different crowdfunding organizations out there. Probably the most famous of them is Kickstarter. Or maybe Indiegogo. Adam from Man vs. Debt recently crowdfunded his documentary “I’m Fine, Thanks” through Kickstarter. Using crowdfunding sites has become pretty popular. It’s a great way for artists and creators to fund the products that they are creating through the fans while still giving something back to the fans.
Recently, I found a site called GoFundMe. It’s another crowdfunding site. Except, in this case, it’s more of a crowd fundraising site. Personal crowd funding if you will. Individuals and organizations can post a need, and then share it with friends, family, and the public through social sites and links that they can share. Their friends, family, and anyone else interested can then go and fund the need. Best I can tell, there aren’t many restrictions at all as to what it is that you can post as a need. Want to use it to fund the down payment on a house? It’s been done. Want to use it to pay for a wedding? Been done.
Anytime I see something like this, my mind starts to wander about and find stuff that’s a bit “funny.” I can see the good of a site like this. It only takes a few seconds on their homepage to see that there are lots of people using the site to help people in need. People who have medical issues. People who have had house fires. People who want to set up memorial funds. I can even see how it would be kind of cool to create one to have people contribute to a wedding fund or honeymoon fund instead of buying wedding presents. But, with every one of those that I see that seem to be legitimate things that people might want to create a fund, I see ones where you really have to wonder what some people are thinking.
you really have to wonder what some people are thinking.
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For instance. I ran across one that was a fund to help with the down payment on a new car. Another asking for help with a down payment on a house. It’s ones like that where my cynical side really comes out. I’d like to think that the people really have just had a bit of down luck and just need that little bit to dig themselves out of a hole. Or that little push to keep going to work. Or whatever. But, there’s that personal finance blogger side of me that wants to know why, if you knew you were going to need a car, or wanted to buy a house, weren’t you saving in the first place?
I guess there’s a small chance that the fund wasn’t intended to be seen by anyone more than the persons friends and family. But, it is public. And then there’s the question of taxes. If I go create a fund, call it my retirement fund, and then raise a million dollars, what does Uncle Sam think of that. I did a little digging, and, according to the sites FAQ section, they state that “most donations on GoFundMe are simply considered to be ‘personal gifts’ which are not taxed as income in the US.”
Which makes me wonder. Maybe I should create a “don’t want to work anymore” fund. Set a goal of about $45,000 and see if I can’t take a year off work…
What do you think? Am I being too hard on this? Are you going to go out and give it a try? Would you give/donate to someone you knew who used it?
Gary Dek is a contributor to Gajizmo.com and is always looking for ways to make and invest money. Gary previously worked for an internet company on their M&A team, as well as investment banking and private equity firms in California.
Some of life’s necessities, like homes and arguably cars, cost more than most people can save in 5 or 10 years. This means they have to borrow money to be able to pay for their needs. Unfortunately, if you are like many Americans, you have probably borrowed money for things you want and cannot afford. The average American family carries more than $10,000 in high interest credit card debt. This is in addition to other loans like mortgages, car loans, student debt, and home improvement loans. It is important to spot signs you care carrying too much debt before the burden of interest rate payments starts eating into your savings and investments for retirement.
Are You Paying Down Your Debt?
If you are only able to make the minimum payments on your credit cards and other loans every month, it may take years to become debt free. If you are missing payments or just scraping by with the minimum payment, this is a sign of too much debt. A credit counselor may be able to help, or you may be able to negotiate with credit card companies for lower payments and interest rates. Companies will often alter interest rates and payment schedules for customers with a good payment history and credit score, but it is essential that you negotiate these terms before your credit dries up, your score is affected, or the company doesn’t want to lower their rates for you.
Another way to lower credit card interest and pay debt faster is to transfer balances to cards with 0% to 3% APR introductory offers on balance transfers. Look for cards with offers of 12 to 18 months of reduced interest on balance transfers which will give you time to make higher payments on balances without accruing interest. A low interest rate means that even if you continue to pay your current minimum payment, you will be paying more on the principal/balance so you can reduce the amount you owe, and therefore the interest payments, faster. However, don’t rely on transferring balances between companies – this is not a substitute for financial discipline and wise money management.
Have You Have Been Denied New Credit?
Too much debt can affect your credit score even if you make all your payments on time. Banks and other lenders look at both your credit score and your debt to income ratio when deciding whether to approve loans like mortgages. If your debt to income ratio is too high, meaning you would have difficulty paying additional debt, lenders will not approve new credit.
If a bank or other lender has rejected a loan application, they will send a letter explaining their reasons for denying your loan. The most common reasons are a poor credit score, unacceptable debt to income ratio and no credit history. While it is necessary to use some credit to establish a credit history and score, too much credit can make it difficult to get new loans, especially when those loans could be financing an investment opportunity that would contribute to your long-term financial security and wealth. Never let a new luxury car loan or excess spending impede your ability to take advantage of an investment opportunity.
If a high debt to income ratio is your problem, consider simultaneously lowering your debt while finding ways to increase your income. Like many financial bloggers explain, a side hustle can be crucial to meeting your future financial goals. You can research ways to make money from home, including freelancing, consulting, and teaching classes, or pick up a part-time job on the weekends, many of which offer health benefits that can save you thousands on premiums each year.
Does Every Paycheck Go Towards Paying Bills?
If everything you make is going toward paying off your debt, with very little or nothing left over, it is a sign that you are carrying too much debt. There should be some money left after paying monthly expenses like rent or mortgage payments, utilities, phone and groceries, for savings and small, unexpected costs called emergencies. If all the money left after paying your monthly expenses is going to pay credit card bills and other loans, you have too much debt.
Financial experts counsel individuals to have at least 3 to 9 months expenses in a savings account to provide a safety net in case you lose your job or are injured and unable to work. This is in addition to retirement accounts and other savings and investments. Those with no savings or short term investments have to depend on personal loans, or worse, cash advance companies, if an emergency arises.
If you do not have enough left after paying creditors to put aside money for savings, consider taking a temporary part time job to help pay down debt and accumulate money for emergencies. Talk to creditors about reducing interest payments and start putting any extra money in a savings account or types of safe investments. The best advice is probably to change your spending habits. Avoid buying unnecessary items like expensive clothing, jewelry or the newest electronics until you have provided yourself with enough savings to cover emergencies.
Do You Pay Your Bills On Time?
If you do not pay your bills on time because you need to wait for another paycheck, you definitely should avoid overspending for a few months to catch up on your payments and avoid completely ruining your credit history. Living pay check to pay check is stressful and leaves no margin of error if you lose a job or even a day or two of work. Paying your bills after the due date costs more since most creditors and utility companies add a late fee as a penalty for late payments.
Talk to creditors about rescheduling due dates so you can make your payments more easily and try to consolidate and reduce as many payments as possible until you get your debt under control. Imagine how much happier you would be if you didn’t have financial stress to compound all the other obstacles in life you already face.
Is Your Debt Making You Sick?
If you are struggling with debt, you may be experiencing stress leading to physical and emotional illnesses like ulcers, depression, headaches, high blood pressure and heart attack. It may also be taking a toll on your personal relationships, especially your marriage. Financial problems are one of the leading causes of friction and arguments in marriages. It can also cause people to avoid friends and family because they are embarrassed by their financial difficulties or because they can no longer afford to participate in activities with their friends.
While getting your finances back on track will help alleviate many of the symptoms of stress, talking to family, friends and/or professional counseling can help you get back into the life you once enjoyed. You may be surprised to find that other people in your circle are not as prosperous as they seem, and the support of friends and family can help you through difficult times until you get out from under your debt.
In America, debt has become a way of life for most families. Instead of trying to keep up with the neighbors, try paying off bills, putting money in savings and keeping debt to a minimum. You may not have a new luxury car, but you also will not have the large payments and the stress that goes with buying things you cannot really afford.
Original image credit: Carrying a heavy sack of potatos by canorus, on Flickr
Ok, so I saw this post over at FStoppers about What a Week of Groceries Looks Like Around the World, and I couldn’t help but mark it for a second look, and eventually an article here. Click on that link and go take a look. Look at what each picture contains and then come back and see if you come to the same conclusion that I do. I’ll wait.
Done? Ok, first, let’s talk about some “givens” that I found to be somewhat ironic, simply because they also could be considered stereotypes. I’ll start at the top.
- Mexico: OMG, you guys like Coke!
- Germany: First thing I noticed was all the beer and wine right up front.
- Italy: Lots of the expected breads and pastas
- Japan: Fish, noodles, and rice.
- Mali and Chad: That’s it?
Obviously, there are some things that we expect. Countries like Mali and Chad that we’re hearing about starvation or near starvation like conditions in sometimes have an obviously lesser pile of food. Japan is notorious for it’s high-fish diet. And Germany. Germany! I suppose I can’t expect much else from the country of Octoberfest.
A couple of surprises. I’m a little bit surprised by the lack of sausages in the Poland picture. For the number of Polish sausages we eat here in the states that is. (Ok, that’s kind of tongue in cheek.)
Now, let’s see if you noticed the same thing I noticed. Every single country on that list eats way more fresh food than the American family. Seriously. Look at that picture. There’s a little section of it that’s got some produce (a couple of tomatoes, some onions, and some grapes), and another small section of fresh meat. That’s it. The rest looks to be processed and packaged foods. The only other countries that appear to even be close are Canada, Great Britain, and Australia. Which is funny. In an ironic sad way.
All four of those countries are usually lumped together as “first-world” countries. We’re rich! We have everything we could ever want! And somehow, every other country on that list eats better than we do… Heck, let’s look at Mexico. Most Americans tend to think of Mexico as a drug addled, gang run, hovel. But, look at that food! Fresh herbs right off the plant! A whole table of fresh fruits and vegetables! Same story for India, Bhutan, Guatemala, and Equador!
Why is it that we all think that produce is so expensive, but we’ll gladly pay $10 for a large pizza? Or $10 for a burger and fries? It also makes me wonder just how much of that food those people grow themselves. It’s not that expensive to start a garden. Heck, even a container garden will do. We’re just getting ready to plant out our second season (see season one’s results) of container gardening. So far, I’ve spent about $2 on seeds. Buy a few pots, get some soil, and plant some plants. Fresh produce!
I’ve gotten a bit ranty, but it amazes me how poorly we eat in our “rich” country. You’d think we’d be smarter than that…
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Mother’s Day is all about showing mom just how special she really is and what a positive impact she’s had on your life. Unfortunately, finding a gift that says all of that can be a daunting task. Coming up with the perfect present is even more challenging if you’re on a budget. It fact, the challenge can seem downright impossible. This is where a lot of people panic and end up at an all-night convenience store sifting through leftover cards the night before Mother’s Day. However, it is possible to get a great deal on Mother’s Day gifts; here are some ideas….Diamonds are a girl’s best friend.
Okay, real diamonds are out of the question if you’re on a budget; however, jewelry is still a possibility. Instead of something formal go for something fun like a bangle bracelet, chunky ring, or an eye-catching necklace. Charming Charlie is an excellent option for fun accessories that won’t break the bank. The best thing about this store? It’s color coded so you can find mom’s favorite color in a snap!
Add a personal touch.
Want to give mom a one-of-a-kind gift this Mother’s Day? No problem. How about giving her a personalized item with your image on it? The options of what you can personalize are just about endless from throws to calendars. One great option is the multi photo color changing mug from personalcreations.com. This mug is under $20 and you can add up to 5 photos of you, your children, your siblings, or you and mom together. IT makes for a fun surprise because it just looks like a plain black cup until hot liquid is added.
I need a spa day.
Your mom could probably use a luxurious spa day; however, for the wallet weary that simply may not be an option. Luckily, you can still give mom a relaxing spa-like day. Head on over to Bath and Body Works and check out their Mother’s Day gift baskets. They’ve got options for all different budgets; for example, there’s a Kiss, Sparkle, & Scent gift basket that includes a travel size warm vanilla sugar body lotion and shower gel, a candle, and a whipped vanilla lip gloss for $15.00. You can get this basket and then add in a bottle of nail polish and facial mask for just a couple of dollars more.
It’s the thought that counts.
Yeah, the line “it’s the thought that counts” sounds totally cliche, but it’s often true. When it comes to Mother’s Day, you can probably make mom’s face light up without spending a dime. How? Make mom a coupon book full of things you’ll do with no complaints. For example, if you have younger siblings still at home, give coupons for free babysitting. You can also include coupons for things you know mom doesn’t like to do such as weeding the flower beds.
There are a lot of things you can do for mom this Mother’s Day without spending a fortune. The trick is to know what mom likes from hobbies to special foods to tastes in jewelry and clothing and then to think outside of the box.
Mother’s Day is right around the corner. If you’re scrambling to find ways to show mom how much you love and care for her, don’t worry. There are many ways you can do just that without breaking the bank or relying on the same old boring gift of breakfast in bed or dinner out.
Projects for Younger Children
I have one word for you–Pinterest! Seriously, head over to Pinterest and just search “Mother’s Day Crafts.” There are so many creative, frugal ideas to choose from. Here are some of my favorites:
Hand print flower–Paint your little one’s palm, then press their palm down on paper. Either paint or add flowers to the tip of each finger. Your child’s hand makes the stem of the “flowers.” Then, cut out paper to make a flower pot and glue that to the bottom of the hand print. On the paper pot, write a message stating something your child loves about mom such as, “You make the best chocolate chip cookies,” etc.
Book mark–Does mom love to read? Cut out a rectangular strip of construction paper, and then glue a small picture of each of your children on the front. Laminate it; use a paper hole punch to make a hole in the top, and hang some yarn through the top.
If you’re an adult, your mother probably has every consumer item she could want or need. Instead of shopping and spending money on something she may or may not enjoy, why not go the non-consumer route. Why not give mom a gift from the heart?
A letter–If you haven’t told mom lately how much she means to you, now is the time. For instance, when I was in high school, my friend and I spray painted our biology teacher’s rocks in his front yard in the middle of the night. Not the best idea, I know. I felt so guilty, I woke my mom up at 2 a.m. to tell her. She didn’t freak out or lecture me; she just told me that we’d need to clean it up in the morning. I appreciate that she could stay so calm, but I’ve never told her that. I’d include that in my letter and also all the ways she has helped me grow into the woman I’ve become. (The spray painting days are long behind me!)
A gift of experience–If you do want to spend some money on mom, why not give her a gift of experience? My grandma always wanted to ride a hot air balloon. However, she was a child of the Great Depression and was extremely frugal. Even in retirement, when she knew she’d have enough money for life, she couldn’t justify spending money on what she viewed as an extravagance. Instead, her kids chipped in and got her a hot air balloon ride for Mother’s Day. She talked about that gift for years. It was one of her favorite experiences.
This Mother’s Day, take the time to plan something special for mom to show her how much you love and appreciate her. Often, you just need to use some creativity, not money, to show mom how much she means to you.
What’s the best gift you ever gave your mom for Mother’s Day?
Creative, Frugal Mother’s Day Gift Ideas for Kids and Adults is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.
Let’s be honest. We’re all a little bit irrational with money.
Think of the person who drives 5 minutes out of his way to buy ten gallons of gas that is 2 cents cheaper per gallon. Was the additional .20 cents savings worth 5 minutes of his time? No.
What about the person who buys clothes she had no need for just because they were on clearance 75% off and were such a great deal? Is spending money for something you don’t need ever a good deal? This person just spent more than they would have if they hadn’t run across the “bargain”.
Stop Short Term Financial Thinking In Its Tracks: Do The Math
Take the person who drove 5 minutes out of his way to save .20 cents on gas. An easier way to see how worthless this endeavor was is to compute an hourly wage for his savings. There are 12 five minute increments in an hour. Twenty cents saved per 5 minute increment gives us an hourly wage of $2.40. If you’re always chasing the gas bargains, ask if it’s worth $2.40 an hour.
Of course, only you can decide when an endeavor to save money becomes worthwhile, but doing the math will help you decide.
A friend was recently asking me whether she should refinance. She just refinanced a few years ago, and as part of the deal, she opened a high interest rate checking account that nets her about $200 in cash back a year. If she refinances with another company, she’ll lose the high interest rate checking account, which she didn’t want to do.
However, she found a new company that offered a mortgage interest rate that is 1.5% lower than her current interest rate. In addition, she would have no fees to pay to refinance. We did the math and found out if she refinanced with the new company, she would save $700 in interest on her mortgage in one year.
Not refinancing to keep the high interest rate checking account was essentially costing her $500 a year, but in her short term thinking, all she could focus on was the “loss” of $200 a year in cash back.
Take the Emotions Out of Your Financial Decisions
Have you ever noticed that it’s much easier to tell other people what they should do with their money rather than figure out what we ourselves should do with our money? That’s because we’re not emotionally tied to someone else’s decisions.
Too often our emotions muddy up our financial decisions.
If you’re contemplating a major financial decision like buying a house or refinancing your home loan, first do the math. Look at hard numbers to see which decision would benefit you most. In my friend’s case, refinancing is the clear winner. Over the course of her 10 year home loan, she’ll save $5,000 total by refinancing rather than keeping her current loan, even when factoring in the high interest rate checking account. It’s hard to argue with the numbers.
If you’re still unsure, talk to friends about your decision. Just make sure to talk to friends who are financially savvy, not those who are broke. As Dave Ramsey says, “Broke people giving financial advice is like a shop teacher with missing fingers.” Take the advice from those who will steer you toward the right financial decision.
We’re all guilty of irrational money decisions. Recognizing this weakness and taking the time to do the math and seek other people’s opinions can help each of us make smarter financial decisions.
What irrational money decisions have you made?
Original Image credit: Burning Money Isolated on White by Images_of_Money, on Flickr
Are You Guilty of Short Term Financial Thinking? Here’s How to Fix It is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.
I recently had the chance to chat with Todd Tresidder. If you don’t know the name, don’t worry. Up until about a year ago, I didn’t either. But, the short of it is that the guy is retired. In fact, he retired much earlier than most will. At the ripe “old” age of 35, he retired. Which must mean he’s off golfing around in the Arizona heat, right? Or down, sipping OJ at some southern Florida retirement village? Not likely.
Todd is retired in the sense that he doesn’t report to a boss. He does what he wants, when he wants to. One of the things that he wants to do is write books that help people like you and I become better financially. He’s got several that he’s written so far, and I’m sure he’s working on more. During that first meeting, Todd and I spoke for a while on retirement. Speaking with another financially minded person, I usually expect to hear people talk about 401(k)s, IRAs, and stock purchasing. I don’t discount those tools, but I just don’t feel that, like Social Security, you should be depending on them for your whole retirement. Surprisingly, Todd agrees. The longer we spoke, the more we found that we agreed on. At the end of our conversations, Todd offered me a copy of his book on retirement. I accepted.
If there’s anything that stands out about the book, is that Todd knows what he’s talking about. He’s got the experience behind him to talk about the subject in an informed and educational manner, and technically, probably knows more about some of his subject matter than I ever will. He spends the first several chapters of the book dispelling a few myths about retirement, and about the way in which most people tend to think about it. He then takes off on a few chapters of some of the math and logic behind the different ways of calculating your retirement needs, and calculating that mythical “number” that everyone seems to be seeking out that will indicate that they’ve saved all that they need to save for retirement. Not only does that one perfect number not exist, he argues, but the calculations that we make to arrive at it are completely flawed.
The rest of the book is focused on what I like to call the New Retirement. He goes into detail on the ways to properly estimate your income needs for the future, and then into ways that he believes (and I agree) that a properly diversified retirement “portfolio” should be structured. I don’t want to spoil too much of the book so I won’t say much more. What I will say is that the book isn’t terribly long. It’s not a deeply structured manual on all the different retirement accounts. And it’s not terribly expensive. It’s $4.99 on the Kindle (free for Prime members), and about $10 in paperback.
If this is the first of my Lending Club return updates that you’ve read, let me catch you up a bit. It all started with a little Lending Club / Sharebuilder experiment. It’s moved on past that, to an ongoing series here at Beating Broke where I share, on a quarterly basis, how the account is doing, the things I’ve done with the account recently, and the things that I might be thinking about trying over the next quarter.
How I invest in Lending Club
Because of where I live (North Dakota), I’m not able to directly invest in fresh loans. I’m forced to use the FolioFN trading platform to buy (and occasionally sell) the notes that I’m investing in. But, based on my returns, I don’t think I’ll be complaining anytime soon. If you’d like to read more about how I select my Lending Club notes, you can read my post on that subject here.
While I consider investing in peer-to-peer investing to be a nearly passive income source, it isn’t a pure passive income source. What I mean by that is that it does require some active management in order to keep the money invested in loans, and not just sitting fallow in your account. Without meaning to, I put that to the test this last quarter. In February, I don’t even know if I logged into the account. I certainly didn’t buy any new notes. What that means is that for the better part of February, the money that I had coming in just sat in the cash account not doing a darn thing. By the end of February, the cash account was nearly 10% of my Lending Club portfolio. I invested all of that back into notes in March, but it was a lesson in needing to log in and check the account once in a while.
Lending Club Loan Analysis
Analysis might be a bit too strong of a word. At the end of the quarter, I had invested in a total of 62 notes. Of those 62 notes, 19 had been paid off, and there have been no written off loans. There is one that has slipped into the delinquent status column, however, and is showing signs of ending up in the written off column. The balance on principle of the loan is less than 1% of my total portfolio. I might be able to sell it, but it’s far enough delinquent that I’d have to sell it at a significant discount. Honestly, I haven’t decided if I’ll do that or not. I’d rather it just came back around and was paid off, but I’m more of a realist than that. Maybe we’ll be talking about the written off loan effect at the end of next quarter.
Lending Club Return
So this is the part that everyone’s been reading for, right? If you look back at the 4Q12 update, you’ll see that my rate of return (displayed as NAR in the account dashboard) was 14.48%. I screwed up a bit and didn’t record the NAR displayed at the end of March. As of 4/24/2013, it’s being displayed as 14.63. That still includes the one delinquent loan, so it’s likely to go down some if that loan is sold at a significant discount, or if it is written off. The spreadsheet I use to keep track of the numbers shows a a return of 15.86% and 13.26% (adjusted with inflation, which may or may not be necessary).
The cash flow in the account remains pretty good. I had several loans paid off in the last quarter that was reinvested. All told, the portfolio of active (principle remaining) loans grew by 2 over the first quarter. The average amount of money churning back into the account each month is averaging well over $30 a month now allowing me to invest in one new note (at $25/each) each month and then another when the balance grows beyond $25 again. Monthly interest received is teetering around the $10 a month line. I think my next goal might be to get the interest income up to $25 a month. That would be pretty sweet. I’d be investing in a new note each month on just the interest along. If I want to do that anytime soon, however, it means I’ll have to start putting money into the account again. I haven’t put anything into it since November of last year, and I haven’t yet decided when I’ll start putting money into it again, but it will likely be soon.
Embracing Risk, and Increasing Returns
I suppose that somewhere along the way, here, I should mention risk. The notes that I’m investing in all carry a risk of potential default. If they all were to default, I’d lose every penny in my account. The odds of that happening are pretty small. But, the odds of having one or two loans default out of a couple hundred is significantly higher. If you’re going to invest in Lending Club notes, or any investment, you need to know and understand the risks. That’s your warning, and my disclaimer.
Now, take a minute and go look to see what your bank or credit union of choice pays on their savings account. How about their best rate on a CD? Now, even if I were to invest my portfolio into loans with a better credit rating (and, supposedly lesser risk), I could easily be making 6-9% if there weren’t any defaults. It beats the heck out of the rates at my credit union.
One last disclaimer. Please don’t put your liquid (or, emergency) savings into risky investments. You need those readily available, and relatively risk free. Even at a paltry 0.25% in a savings account, it’s in the best place. Every other drop of savings is fair game though. Your money needs to be working for you, not the bank.
Let’s face it. The current level of personal finance education is staggeringly poor. Students in our public schools are receiving little, if any, education on how to properly handle their finances. Most of the parents of those same students are so bad with finances that they are unable to teach their kids anything either. One of the cool things that has happened in recent years is that many of the companies that depend on people’s finances to make money are starting to see the light. They’re beginning to recognize that if the schools and parents aren’t going to teach the children the proper way to use their finances, someone has to do it. And they’re taking the reins and developing programs that help to educate children and teens.
H&R Block is one of those companies. They’ve created the Dollars & Sense program to help parents connect with their children on financial matters. Through the H&R Block Dollars & Sense website, and Dollars & Sense facebook page, they’re providing helpful resources to parents to help educate teens on the best ways to use money, and to safely navigate the many different financial pitfalls.
“Kids are going to make mistakes with money. It’s easier to help them through these mistakes when your teen is a minor and still lives at home. Teaching teens money management skills before they graduate can help them avoid costly mistakes as an adult,” said Susan Ehrlich, president of financial services for H&R Block, which provides financial education for teens through its H&R Block Dollars & Sense philanthropic program.
I think part of any program like this is getting people to participate. H&R Block seems to get this too. They’ve developed several programs and giveaways to help entice teens to participate. They’ve partnered with DoSomething.org to develop materials to lead teens in having open conversations about money. The program is called Mind on My Money, and encourages teens to download workshop materials and lead other teens in a workshop. Teens that lead a workshop are eligible for a chance to win a $10,000 scholarship, and teens that participate in a workshop are eligible for a chance to win a $1,000 scholarship. The program runs through the end of April, 2013, which doesn’t leave much time to participate, but it’s a cool way to learn a little something about money, and get your friends involved.
Part of the Mind on My Money program is a companion scholarship chance that they’re calling The Craziest Thing I Did to Save Money which asks teens and young adults 25 and under to submit a picture and story about the craziest things they’ve done to save money. A winner will be chosen, at random, from the participating entries to win a $4,000 scholarship. This one also ends on the 30th of April 2013, so hurry and get your entries in.
Participating in the education of our children is important. Having programs like the Dollars & Sense program can be very helpful in giving us a place to start and the topics and information to give them the financial education that they need. Chances are, parents will learn a few things along the way.
H&R Block Dollars and Sense has partnered with Beating Broke to sponsor a giveaway as well! From now until the end of the day on April 30th, 2013, tell us what the craziest thing you’ve done to save money is, or share a tip on how parents can engage kids in learning about personal finance. Share it in the comments below. Shortly after the 30th, we’ll select one of the comments via random.org to win a $50 Emerald Prepaid Debit Card from H&R Block.
UPDATE: A winner has been picked. I’ve sent an email off to the winner, and as soon as the winner confirms, the Emerald card will be on it’s way!
For many years, I was a user of ING Direct and their online banking products. When word went out a while back that the US branch of their online bank was being sold I began to worry that a good thing was about to be ruined. When we learned that the company that was buying them was Capital One, it didn’t exactly help me not worry. I’ve had a credit card from Capital One for longer than I’ve had an account at ING Direct, and while I’ve never had a terrible experience with them, I’ve never really felt that I was anything more than just another cardholder; easily replaced and nothing worth going out of their way for. If that level of service came to the online bank side after the purchase of ING Direct, I might have had to find something else.
The prospect of having to move my accounts at what was ING Direct to somewhere else upset me a bit. I’ve tried several of the online bank options, and so far, haven’t found one that was as easy to use as the accounts were with ING Direct. Now that ING Direct US is no more, and it’s been sold to Capital One, and re-branded to Capital One 360, what has my experience been?
Surprisingly, I have no complaints. I truly expected that they’d start squeezing in some new fees, or making it harder to get things done, but the experience so far has been very similar to what it was with ING Direct. There’s the obvious rebranding that came with a change of logo and color scheme, but for all intents and purposes, they’ve done a very good job of keeping the function and service levels where they were when it was ING Direct.
I suppose there may be some things behind the scenes that I don’t see that are different. And they may just be biding their time before they start implementing some new fees and roadblocks, but if so, they are taking their sweet time doing it. In the mean time, many of the features that I really loved about ING Direct are still resident in the Capital One 360 system. It’s still super easy to create a new account, making it simple to have an account for each purpose and being able to segment your money by purpose. Every other place I’ve tried this at, make it much more difficult to create a new account and that process becomes a roadblock to use.
The interface of Capital One 360 is very easy to use, with all of the major functions and features that most bank customers use right at your fingertips (or mouse pointer I suppose). The rates that they pay on their savings and CD accounts still aren’t the best around, but they remain competitive with most other online banks, and they are double and triple what my local banks and even Credit Unions are paying.
The connection between Capital One 360 and Capital One Sharebuilder remains, making it easy to transfer money to investment accounts and IRAs at Capital One Sharebuilder. Does that make a huge difference? Not really, but it is convenient.
Overall, I think Capital One has done a really good job of bringing the Capital One 360 accounts into the fold and not rocking the boat. I hope that they remain dedicated to keeping the excellent service and system in place. Even with a new name, Capital One 360 is still my favorite online bank.
This post brought to you by Eden Smith, a professional business analyst from London.
In that odd communist/capitalist empire called China the rules are flexible and the goalposts are mounted on wheels. Even when new rules are announced it is not always easy to see through the alterations and understand what their new impact will be. So it is with the latest announcement about capital gains taxes on residential property. Anxious to forestall a real estate bubble, the authorities in Beijing have announced a strengthening of the restrictions on property purchases and a stricter implementation of the 20% capital gains tax on sales. With details still unclear it is possible that the rule change will cause a short-term spike in prices and in foreign currency exchange rate by moneycorp as investors hurry to beat the new legislation.
Against such a chaotic background the Liberal Democrat’s fruitless attempt to impose a “mansion tax” on large UK houses looks quaintly English. It isn’t going to happen and, for the foreseeable future, residences will remain free of capital gains tax. That consistency of tax treatment is one of the attractions for overseas buyers of UK real estate.
Another is the undervalued send money abroad feature by moneycorp especially in pound, which has become even more affordable since the turn of the year. Compared with its levels on 1 January sterling is down by 7% against the US and NZ dollars, 6% against the euro, 5% against the Australian dollar and 4% against the Canadian dollar. Investors who have been biding their time will be delighted to see how much further their money will go.
A recent development that has helped their situation is the decision by Moody’s to lower Britain’s credit rating from Aaa to Aa1. Although the move was widely expected, and despite the United Kingdom retaining AAA ratings from Fitch and Standard & Poor’s, the time-honoured reaction of currency traders is to sell the currency of a country that receives a downgrade, and that was exactly what they did.
In the event, it was only 72 hours after the post-downgrade sell-off that the pound rebounded sharply against the euro. Investors found something bigger to worry about; the rudderless political situation in Italy. In February’s general election the Five Star Movement, an anti-establishment, anti-austerity group with no previous representation in parliament, won a quarter of the vote and, with it, a controlling position in the Senate. The result raised the spectre of Italy abandoning the Mario Monti government’s strategy of fiscal prudence and austerity. Were that to happen, Italy would almost certainly lose the support of the European Central Bank safety net and the euro would once again face an existential threat.
So the pound is not the only major currency under pressure but Britain offers Europe’s – if not the world’s – premier real estate investment opportunities. Affordable property and an even more competitive pound together make a compelling case to invest now before the opportunity slips away.
Currency Exchange Market affecting Property Values and Exchange Rates is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.
The other day, as my daughter was on her way to the car when I picked her up from daycare. Along the way, she noticed something on the ground. In the excited voice of a 4 year old, she said “Daddy! Look! A rainbow!”, and then pointed at the spot on the ground she was looking at. As I got closer, I found that she was looking at a spot on the wet ground where some sort of oily fluid had likely leaked out of the bottom of a vehicle. Of course, oily fluids, on wet ground tend to separate out into what you and I would probably best describe as an oil slick. But, to my 4 year old, it was a rainbow on the ground. As we drove off to pick up her brother at school, I began thinking about what had just happened.
The thoughts were amplified when she noticed another “rainbow” on the ground on the way into the school. On our way back out of the school, with her brother, she excitedly called her brother over to show him what she had found. My son is 6 (nearly 7), and so has a slightly more advanced knowledge of the world than his sister. I fully expected, in the way that only a brother who doesn’t understand a 4 year old is likely to do, that he would quickly dismiss it for what it was, an oil slick on wet ground, and that her excitement would quickly dissipate. Instead, as she pulled him over and pointed it out, saying “Look!”, he quickly said “A rainbow!”. He saw it too.
As parents, we’re always so excited to teach our children new things. We’re often quick to correct them when they don’t get something right, or don’t understand it. They saw a rainbow. I didn’t. All I saw was an oil slick. Obviously, I saw the resemblance. But, I knew what it really was, so the wonder that my children had for it was lost on me. But, it kept me thinking.
How often do we take what we know, and use it as a filter for the world. Surely, that’s what knowledge is for, right? I know that 1+1=2, and that certain letters spell words, and that drops of oil on wet ground make a oil slick. Yes, it’s colorful, but it’s an oil slick, not a rainbow. How many times do we become so certain in our knowledge, and the filtering that we use it for, that we fail to see the rainbow?
How many people out there are so set in the knowledge that a bank is the lender, and use that to filter the idea of peer-to-peer lending as a sham, without allowing for a little of the rainbow to shine through?
The point is this: If you never question what you think you know, how will you ever know if you’re wrong? Sometimes the formula and constants change. Sometimes, the environment itself is what has changed. Heck, look at the newspaper industry. How long did they refuse to see the emergence of blogs (like this one) as a major change in the dynamic of how people get their news? Some of them still refuse to see that rainbow.
If you do one thing to improve your personal finance today, question what you think you know. Most of the time, you’ll still be right. But, maybe, just maybe, you’ll see a rainbow instead.
What are some rainbows that you’ve found by questioning what you thought was true? What methods do you use to find the rainbows in your life?
Original Image credit:Oil slick. @blackmetalbike by Growinnc, on Flickr
There are plenty of ways to save on a daily basis–clipping coupons, resisting the urge to buy something, packing your lunch instead of eating out, etc. There are many ways to live a more frugal life, and chances are, you incorporate the ways that are easy. You know, the ones that don’t cause you to change your lifestyle much. Things like giving up cable and getting streaming through your Xbox instead. That’s fairly easy and doesn’t change your lifestyle.
Another easy way to save that doesn’t change your lifestyle is to ask for discounts. Have you tried it?
Asking is surprisingly easy, and even more surprising is how often you actually get the discount. You just have to get up the nerve to ask the first time; once someone says yes, you’ll gain confidence, and it’ll be easier to ask next time.
Credit Card Fees
A few years ago, I made an online payment to my credit card on the day it was due, which was a Saturday. The web stated that any payment made on the weekend wouldn’t post until the next business day. Yep, my on time payment was counted late, and I was charged a $25 late fee.
I called the company and asked them to remove the late charge. They did immediately. Why? Two reasons. First, I asked. Second, I never make late payments, so they rewarded my good payment history by removing the late payment. I’ve had this happen to me 3 times in about 10 years of credit card usage. Each time I called and they removed the charge.
Credit Card Interest
We’re paying down debt, and one thing that slowed our progress was our credit card APR of 13.99%. I called to ask to have the rate reduced. I had to talk to a supervisor, but she lowered our rate to 9.99%, and she gave me enough reward points to cover the cost of our annual fee. I saved a few hundred dollars right there in about 10 minutes, just by asking. (But when I got an offer to move my balance to a 0% APR card a few months later, you better believe I did it.)
Grocery Store Purchases
Asking for discounts isn’t limited to credit cards. If I see something at the grocery store that is at the sell by date, I’ll ask someone in that department to discount it. I’m only successful here about 50% of the time, but still, that’s half the time that I save more than I would if I hadn’t asked!
Garage Sales & Craigslist
I love shopping garage sales in the summertime. If things are already priced dirt cheap, I don’t haggle, but if the price is too expensive, I have no problem asking for a lower price. Most of the time people will say yes because they just want to get rid of their stuff.
Likewise, people on Craigslist expect you to ask for a lower price than they have listed. Just don’t get ridiculous with the amount you ask. That can be insulting for the seller and usually won’t lead to a deal.
These are just a few examples of how I’ve saved by asking for a discount. However, any time I think asking might lead to a discount, I ask.
What was your most successful discount you got just by asking?
Looking for More Ways to Save? Try Asking for Discounts is a post from: Beating Broke, if you enjoy it, please visit us and subscribe to the Feed.
In the world of frugality, there are few things that will save you more money than learning a few DIY skills. From simple things like replacing the light switch cover, to more difficult things like wiring electrical, the savings of doing it yourself over hiring a professional to do it can mean hundreds and even thousands that remains in your pocket. It also seems like the more money a DIY project can save you, the more likely you are to find people who think the prospect of attempting it to be scary.
While I can’t advocate trying something that you’re completely uncomfortable doing, and uneducated about, I think both situations are completely solvable. Learning what you can about a task can make it something that you’re far more comfortable doing. We live in the information age, with access to so much more information than any other time in the history of our species. We have the ability to learn things by watching videos on YouTube. We can access websites that will have all the detailed instructions for a repair project, or new project. Many of those have step-by-step instructions. In short, there’s just no excuse for at least attempting to learn how to do the project and then deciding whether it’s something you want to tackle or not. Sometimes, you decide it’s not something you want to tackle. And that’s O.K. too.
So, what are some DIY projects that sound scary, but really aren’t all that bad?
- Plumbing – Ok, I have to admit this is one of my least favorite project types to take on. I do take them on, but it seems like every time I do, it takes me a few times to get it right. And a few extra trips to the hardware store. At it’s core, plumbing isn’t all that complicated. The water starts in one place, and you place some pipes to move it from the starting place to the ending place. For me anyways, it’s all the different fittings and fixtures that seem to always give me trouble. My kitchen sink was a notorious problem project for me. I redid that mess three times before calling in the big guns (my dad) when we remodeled the whole kitchen. I was slightly reassured when even he made a few extra trips to the hardware store.
- Electrical – If plumbing is the project type I dislike but do, electrical is the project type that I dislike and usually don’t do. For some reason, I just have a really hard time getting my head around the way it works. Outlets are easy, I suppose, but then you start getting into switches, circuits, and crazy electrical diagrams. One day, I’ll take the time to do the right research and learning and actually feel confident enough to take a few of these project on. I know they aren’t all that scary, I just don’t understand them.
- Appliance repair – With some of the newer appliances, all the gadgetry can be a daunting adversary. Fortunately, in most cases, the real machinery of the appliance hasn’t changed much over the years. There’s just new, smarter, brains driving the machine. Which means, if the issue isn’t with the brains of the appliance, you can easily find and fix the problem. In the last year, I’ve repaired our fridge, coffee machine, and dryer. And a little maintenance to your appliances goes a long way. Sure, the coffee maker could have easily been replaced, but I was able to fix it and we still use it today. A few spare parts and some time saved us the expense of a repair technician coming and fixing the fridge and dryer and there are plenty of guides to be found online that give instructions on some simple appliance fixes like here at Repair & Protect.
- Tiling – When we remodeled our bathroom, we decided that we wanted to tile the floor and shower splash. I’d never tiled before, so it was a somewhat daunting task. I spent a little time going over instructions and videos on DIY Network’s site to get a general handle on it, then went and bought the supplies and did it. Like many things I do for the first time, there are plenty of things that I would do differently, but the end result was that the floor and splash got tiled, and several years later, it still looks great.
I suppose the point isn’t really to list out all the projects that might sound scary to a DIY homeowner. It’s really to point out that a lot of the projects that you and I might think are scary to take on really probably aren’t that hard. A little time spend learning the techniques and basic principles of the project will likely lead us to being able to learn the skills needed to complete the task. Even if it takes a couple extra trips to the hardware store.
This post brought to you by Repair & Protect, an appliance repair company specializing in dishwasher and washing machine repair.
By: Jeff Rose & Ben Edwards
Ben and Jeff approached me a couple of weeks ago and asked if I’d like to read a copy of their book, Debt Heroes. They released the book as a companion to the Debt Movement that Jeff started back in February. They even offered it for free on Amazon for a couple of days. I was hoping to release this review during those days, but I just couldn’t get it finished in time. Unfortunately, it’s back up to it’s regular price of $2.99 (free for Amazon Prime members). That’s probably good for me, as I’ll be using my Amazon affiliate links to link to the book here, but I’m a bit disappointed that you won’t be able to take advantage of the free deal.
Ben and Jeff set out to write a book about debt heroes. Everyday people that you and I, the readers, can look up to as heroes in the fight against debt. Inside the book, you’ll find profiles of 21 debt heroes that have conquered debt, and some tips from each on how they did it. What I found even more interesting in each profile is that each debt hero points out what their weakness was. Not surprisingly, it isn’t the same for each one. Also not surprisingly, that weakness played a huge part in each of their debt story.
The book is a pretty quick read (about 177 pages if it were printed), and it’s full of inspirational stories about getting out of debt. It’s not another “get out of debt with these steps” book, but a book to give you inspiration in your own debt battle. Of course, the hope is that you read it and it gives you the push that you need to become your own debt hero.
I think I would have liked to have seen a little bit more of each debt hero’s story. Each of the stories is accompanied by a link to where you can read the full story, so it’s accessible; I just haven’t progressed in my kindle reading to be clicking on links and such.
If you’re looking for a little inspirational reading to help you keep on track (or get on track) with your debt elimination, I think you’ll find what you need inside the (electronic) pages of this book. Also, remember that you don’t need a Kindle to read the book. Amazon has Kindle apps for Android and iOS phones, as well as for PC and Apple computers, and most tablets.
Pick up Debt Heroes today.
You’ll read about it at the end of the book, but Jeff and Ben have also created a “Debt Heroes Club” that you can join to get more tips and inspiration at DebtHeroes.com.
The following is a guest post by CollegeMom, who is a staff writer at ConsumerFu.com She has a background in commercial banking and is an expert at raising children on a budget. She and her husband live on four acres of old farmland with their two dogs, one cat and enough gardens to feed them year round.
Have you anchored yourself to a pile of belongings – most of which hold no meaning beyond once being something you didn’t own? It’s no secret most Americans own way too much stuff. We’re lured in by the newest technology and we buy gadgets that are outdated often within months of their purchase. We cave to our desire to own the newest and the best of everything.
In February, Melissa addressed this in her post, Do You Really Need that Stuff? Think Twice Before You Spend. We aren’t just sabotaging our monthly budgets. We are weighing ourselves down, stressing ourselves out and limiting our ability to take advantage of new opportunities.
If you have a stash of broken items that you’re convinced might come in handy, a closet full of clothes that no longer fit or collections of “valuable” things stored in every nook and corner; it is time to take action. New opportunities won’t wait while you clean out your house.
Use These Tricks to Declutter Your Life and Keep Your Accumulation Habits in Check.
First, curb your spending. It will be difficult to get your belongings in order if there is a constant flow of stuff coming into the house. Make shopping lists to avoid impulse buys and stay off of sites like Ebay, Etsy and Fab. When your paycheck arrives, sweep what you don’t need for survival into a savings account. If you still need some help, follow these 11 Tips on Smarter Spending.
Next, it is time to get rid of the clutter. A good place to start is your bedroom. Tackle the rooms where you spend the most time because if they are free from clutter you will feel better and be more inclined to take on the rooms that are a bit more of a challenge.
Tricks to Declutter: Use these guidelines to stay on track
- Go through your clothes. If something doesn’t fit or you haven’t worn it in a year, get rid of it. Go through your jewelry, shoes, pocketbooks, hats, belts and other personal items and get rid of everything that is broken, worn, torn or too small/too large.
- As the bags fill with your donations, take them directly to your car. Once your car is full, take a trip to your charity of choice. The important thing is to get it out of your house or apartment.
- Get an accordion file folder or file box to carry from room to room. Sort papers, bills, receipts and other documents into files that mirror your main filing system. As the files fill up, carry them to your home office or wherever you keep your files and transfer the papers to the correct file. Go room by room and in no time your filing is up to date.
- Get rid of instruction manuals for appliances you no longer own. Throw away receipts you do not need. Do not shove them in a junk drawer.
- Books can be donated to libraries, community centers or nursing homes / assisted living facilities. Video games, CDs and DVDs can be sold or traded to certain stores for credit.
- As you complete the decluttering of each room, take inventory. Video and photo inventories are excellent for insurance claims.
- Tackle storage rooms, the attic and the basement last. These areas tend to be overwhelming, so it is best to get the rest of the house in good shape first.
- Be brutal. You do not want to take those boxes back up the attic stairs. Don’t save 6 boxes of your children’s school work, just save a few important items from each year. Don’t save every baby outfit they looked cute in, save their Christening gown or the outfit they wore home from the hospital. Make good use of your scanner and digital camera. Sometimes it is easier to get rid of something with sentimental value if we know we have a photograph of it stored on our computer. (Next we declutter the hard drive!)
- Enlist your children’s help to go through their old toys and mementos. They should have a say in what stays and goes. I’ve found it easier to go through their things every few years. Each time they seem to get rid of more stuff as it loses its sentimental meaning.
- When you are ready to put things back in the attic or storage room, make sure to store them properly. Cardboard boxes attract silverfish and cockroaches. Now that you have so little stuff to store in the attic you can afford to buy storage bins that will seal out the bugs and moisture. These are also much easier to move or store when you get that exciting job offer or other new opportunity in another state or country.
- Make sure each box has an inventory list placed inside the box and a list taped to the outside of the box. This is another step that makes it easier to pack up and go.
- If you plan to have a garage sale or to sell anything on eBay, do it as quickly as possible. Set a deadline so if the items haven’t sold you know it is time to get them out of the house.
Some of us have more of a problem than others simply because we’ve been accumulating for decades instead of years. Take the time now to stop the flow of new stuff and get rid of all the old stuff. Next time opportunity knocks, make sure it isn’t buried under an avalanche when you open the door.
Be warned. This post has absolutely nothing to do with personal finance. It does have to do with how some of you get your personal finance articles from Beating Broke, however.
More specifically, with those of you who use Google Reader to read the articles here on Beating Broke. The latest stats show that there are a couple hundred of you or so. Last month, Google announced that they would be discontinuing the Google Reader service on July 1st, 2013. As a result, if you use Google Reader, you will no longer get updates from this and other websites.
Now is the time to make a few changes to make sure that you can keep updated. Lifehacker has a good roundup of some other popular RSS readers that serve as replacements for Google Reader.
There are a couple of other ways that you can make sure you don’t miss any of the content from Beating Broke. Use one of the services listed in that Lifehacker article, or subscribe to receive new content via email by clicking this link (Subscribe by eMail) and then entering your email and clicking subscribe. You can also subscribe to the Beating Broke newsletter for additional content (it doesn’t include the regular articles).
You’ll likely want to rinse and repeat that for each of the sites that you currently subscribe to through Google Reader. Be sure to do it before July 1. I’m not sure what their plans are for after July 1, or if you’ll even be able to access the site, so getting it done earlier is better.
The following is a guest post from Simon Cunningham who is the editor of LendingMemo.com, a site devoted to heralding the amazingness of peer to peer lending.
Imagine it is Monday morning. You just had a great Sunday with your family, doing chores around the house and watching a movie together. But now you are back in the literal driver’s seat, and on the drive to work your mind begins to wander, cataloging the day’s tasks.
And then the urge hits you, that tempting nagging gently haunting concern about your retirement account. “Has it gone up?,” you think to yourself. “Oh no, maybe it is down.” You know it really makes no difference, but you realize you have not checked the mutual fund you are invested in within the last three days. You know things are probably fine, but you can’t help but wonder. After all, you and your spouse’s well-being for the next forty years is wrapped up in those tiny digits on your browser screen.
You sigh, wishing there were another way to do this whole investment thing.
The Toll of Volatility
The headache in the first section is the price we pay for trusting our future in the US markets. This is because the market contains what investors call volatility; it can dramatically rise and fall within hours or minutes of breaking news. The supposed benefit of this volatility is that, in theory, things eventually become more steady. Millions of people trust these markets to give them an eventual positive return on their investment. “Give the market patience,” common wisdom says. “Trust your hard earned savings 30 years at a time.”
Then you turn on the evening news and watch channels like NBC Nightly News devote weighty portions of their show to how the market is faring. “The DOW rose/fell today by 1.4%…”, a report will start. Why do they talk about it every day if long term returns are all we should focus on? Because of volatility; because they lack trust. The 2007-2008 financial crisis five years ago was the largest since the great depression, even causing something as steady as copper to rise and fall like a ship in a storm.When looking at the graphic above (the price of Copper over the past 25 years), it is no wonder that people struggle with checking their retirement fund throughout the week!
The Peace of Peer to Peer Lending
There are many non-volatile ways to invest outside the US markets, and peer to peer lending is one of these. Instead of being tied to the global market, rising and falling on a whim, peer to peer lending returns just steadily trickle in throughout the day.
Of course there remain some risks. Some have lost money. But if a lender remains diversified in at least 200 peer to peer loans, there is an extremely low chance they will experience a negative return. In a study I did in February, only four diversified peer to peer lenders out of 3800 have lost money on Prosper.com.
In contrast, you can bump up your returns by using savvy filters on the available loan pool. Examples of good filters to use target borrowers with are:
- No past bankruptcies
- 10+ years of credit history
- 5+ years of consistent employment
- 10+ total credit lines on their report.
Lenders who compile a diversified peer to peer lending portfolio out of borrowers like these experience much less volatility than investing in the stock market.
I used to be like those folks who was tempted to daily check the status of my retirement mutual fund. Articles kept telling me not to, but I could barely help myself. Checking my account was like a financial version of pornography; it was a need that could not be satisfied.
Then I discovered peer to peer lending. Since then, I found the emotional ease I had been looking for. I am diversified in 200+ notes across both Lending Club and Prosper, so I worry little about the state of my accounts. My returns are refreshingly boring in contrast to the US stock market: they neither rise nor fall by the day, staying at a healthy 13% or more every single day of the year.
Yesterday was Monday, and (against my better judgment) I logged into my peer to peer lending accounts to see how things were faring.
Nothing had changed. I closed my browser window and called my Mom.
You’ve likely heard the phrases, “No man is an island, entire of itself” and “It takes a village to raise a child.” What these phrases get at is the importance of having a circle, a group you can depend on. Although we like to think we can do it all alone, life is generally much easier if we get through it with support from others.
Years ago, before people moved frequently, their circle consisted of family members, neighbors, and friends. Their circles were large and included not only their own family and friends, but their parents’ friends.
Now, people move frequently, and we are connected more through social media rather than in person. It’s increasingly easier to be isolated (and many people are), yet we still ultimately need a circle of those close to us. The larger your circle, the more advantages you have and the healthier you’ll be.
Why We Let Friendships Lapse
In our busy world, friendships and connections often fall by the wayside because they require time. You need to spend time nurturing your friendships, connecting, and helping others. Some days you may be so busy that you feel that you don’t have time for yourself, let alone others, but ultimately, nurturing your circle will reward you in multiple ways.
The Benefits of Having a Large Circle of Support
1. A healthier life. Time recently reported that those who have strong social ties are more likely to live longer than those who don’t. In fact, researchers at Brigham Young University and the University of North Carolina at Chapel Hill found that “a healthy social life may be as good for your long-term health as avoiding cigarettes” (Time).
2. More likely to get a job. The larger your circle is, the more people who can help you find a job. Mashable argues, “People get jobs through other people, not computers. By having a personal connection to the company you’re applying for, your chances of getting a job multiply.”
I saw this first hand in the 1980s when my dad was unemployed for nearly two years. My mom babysat at home, and one of the moms of the children she babysat for, Carla, was able to get my dad a job interview at the company where she worked. When the man interviewing my dad started to smoke during the interview, my dad did, too, which was enough for the boss to decide not to hire him. Carla was able to smooth things over, and my dad was ultimately hired. Without Carla in our circle, who knows how much longer my dad would have been unemployed.
3. More likely to feel secure. If you have a difficult decision to make, you can bounce ideas off your friends and those in your circle. If you run into hard times, you know your circle of connections can help support you. Having a safety net, so to speak, in the form of friends and family, can make you feel more safe and satisfied with your life.
4. Feel better about yourself. Giving to others can make us feel better about ourselves and our own life. If you’re part of a circle, you’re expected to give back. They help you; you help them. As you help friends and family, you also feel better about yourself.
In our society, it’s increasingly easy to let personal relationships fall by the wayside. Resist the urge and take the time to nurture your friendships and family connections. You’ll benefit financially, medically and personally.