Finance

Credit Cards And Rebuilding Credit

by Benjamin Roussey|Posted on | 4 minute read | Advertiser notice
credit cards

There’s a lot of talk about having a sparkling credit score. But what most people don’t realize is the difference between no credit history and a poor credit history and how they affect your credit score. Even a decent credit score can be damaged if credit cards are not used wisely. On the flip side, credit cards can also be used to improve this personal financial number.

You would think that we would have a better system. You build a credit score by something you may not need, pay it off via monthly payments, and pay even more because of the interest rate (well, you may be able to avoid paying any interest). How ridiculous is this? How come credit scores cannot be dependent on school grades, ability to pay utilities on time, education, salary levels, collateral (own a home or a car and so on), criminal history, financial history, and metrics such as this? Well, this is another topic so let’s get back on track.

Using a credit card is a convenience, but it also has a direct effect on your credit score. Credit cards are often known to put people into debt.

When handled wisely, credit cards can also build or rebuild that coveted credit score. Whether you’re a student, a working professional, or a business owner (and your business will improve with tax cuts), the following are some of the ways you can rebuild this pivotal number that in some cases defines who you are with credit cards.

Limit the number of cards

There are a number of credit cards you could have. These include:

  • Gas card
  • Store card
  • Student card
  • Charge card
  • Prepaid card

People prefer to have separate cards for different purposes. But that could affect your credit score negatively. You could justify having separate cards because of rewards or discounts. But keep in mind that these discounts are not offered without a reason. Companies offering such discounts know that the majority of people do not pay off the balance in full each month, and they make a lot more money in interest than you do in savings.

When you have credit cards, it is often a tempting prospect to spend money that you don’t have, without realizing how your credit score is getting affected and also not understanding interest rates. When you don’t pay off your dues each month, your credit score keeps dipping. Instead of having multiple cards, keep only one or two. Make sure to choose cards that have low fees and penalties.

Make full payments on time

Your credit score reflects your history of borrowing money and paying it back on time. A fantastic credit score means you have a record of making on-time repayments. If you have never had to borrow money, you have no credit score. That’s as bad as having a negative credit score unless you have the ability and patience to save up your money and buy things with cash which some people do but most Americans do not. Even if you don’t need a loan, you can start putting regular expenses on a credit card to help you establish credit without going into debt.

When you pay off your credit card bill in full each month on time, the card issuer reports the payments to the credit bureaus. This way you establish a record of making timely repayments and improve that magical financial number. Besides, when you make payments in full, you don’t have to pay any interest.

Limit your spending

The problem with credit cards is that money doesn’t go out of your bank account when you make purchases. It’s only when you pay your credit card bill that your account is debited. This is the biggest reason why it is easy to lose track of your spending and end up in debt.

To curb your spending, restrict your credit limit. This can be done by calling up your bank and asking to your credit limit to not be increased after a certain point. For instance, keeping your limit at $500 is a wise place to start. The less you spend, the easier it will be to pay off the bill.

Keep your used credit low

Another important factor to consider is keeping the amount of your used credit low. Using up a large portion or all of your available credit will make your credit score dip. When there is any credit card balance for a few months, make sure to use within thirty percent of your available limit. If it goes any higher than this your credit score will drop significantly.

Look for the right cards

When you have a poor or no credit score, it is difficult to get approved for a new credit card. Instead of going after just any credit card, look for the ones specifically made for people with low or bad credit. Some of the cards designed for people with bad credit are:

  • Capital One® Secured MasterCard®
  • Credit One Bank® Cash Back Rewards
  • First PREMIER® Bank MasterCard® Credit Card
  • Total VISA® Unsecured Credit Card
  • Credit One Bank® Platinum Visa® Credit Card

Although these cards do not have exciting offers or perks, they are a sagacious place to start. You can always apply for other cards when your credit score improves. It is easier to get approved for credit cards when you have an average to good credit score.

Credit cards are the salient avenue to take to build your credit score when handled responsibly. However, if you have a history of credit card debt, then it isn’t advisable to rebuild your credit score with the help from plastic. In such a case, other methods to rebuild your credit score should be used.

Finance, Lifestyle

How Millennials Prefer to Invest Their Money

by Benjamin Roussey|Posted on | 4 minute read | Advertiser notice

Millennials – or Generation Y, the people born between 1982 and 2002 – have money habits vastly different from the previous generation.

Several studies have found that although millennials are more planning-oriented, the things they prioritize are not what the Generation X gave importance to. While the previous generation found family planning and retirement saving more important, millennials prioritize concepts such as buying a home or cars, vacations, weddings, and higher education.

A major money trend among younger millennials – those between the age of 18 and 25 – is the lack of investment initiative they tend to be seeking or considering. They are not Peter Lynch or Steve Forbes! Hopefully they are not Colin Kaepernick either – that would not be impressive! If you think you are mistreated in America you should consider leaving this country and then you can find out what real mistreatment is.

No one is mistreated in this country, if anything, certain groups are coddled which really does not help those students (just watch the 4th season of The Wire – you cannot learn in that system – certainly when there are not any standards) out but inner city schools and those teacher unions do not care about that though this is another topic.

Weak job growth

Moreover, according to investment information website Bankrate, only one out of three millennials invest in stocks, bonds, or retirement funds. Young millennials tend to blame this one two factors: not understanding- and thus being afraid of stocks, and not having enough money for investment. That latter is true. Dodd/Frank has crushed small businesses and the ACA health care law has limited job growth and opportunities. So this is going to affect incomes of this economic group.

Young people are also more cautious than previous generations which is another reason they are not investing that much, and do not easily trust stock brokers or advisors. The fear of risk and not enough understanding of the market keep millennials away from investments. Well, Alan Greenspan and Barney Frank did not help here that much at all.

Having said that, it must also be noted that millennials tend to save more than their parents did, and have been found to be more prepared for financial emergencies. While the average millennial saves more than five percent of their income per year, some even save more than 10 percent, which is a huge improvement from Generation X and other age groups.

Being too safe

Since millennials tend to be more cautious than previous generations, they avoid risky investment options like stocks, and choose less volatile options such as cash. In other words, instead of putting their money where they can quickly lose it, they prefer to keep money in their bank accounts. Financial experts call this ‘bad news’ because millennials have the maximum retirement saving burden, and without investing in stocks and other similar options, it is hard to build up enough wealth.

But cash as a mode of investment is preferred not just by young millennials, but by most Americans too. Real estate is the second most favored investment option among millennials, while stocks feature at number three. The fear and uncertainty around stocks, especially after the Frank/Greenspan financial meltdown of 2008, has resulted in this widespread mindset.

It is also true that millennials in their 20s and 30s do not have enough money left over for investing after paying bills, loans, and other debts. A large section of millennials also prefer to spend now rather than save for the future.

Since young millennials are also more digitally inclined, they prefer information from the Internet over a financial advisor. This is not good since Facebook is known for putting out fake news, for example. In addition, this goes on to show that being able to manage their investments online is one of the key elements they look for when choosing an investment company. The second major element in choosing a company is low fees. This is a marked difference from how their parents chose an investment company, and it was definitely not by prioritizing them based on what they found out on the Net (there was no Net!).

Different outlooks

Another group of experts choose to differ. They claim, that because older generations were conservative in their spending and preferred to buy everything via a loan, they ended up spending a good part of their lives paying off debts. Millennials, on the other hand, prefer to buy whatever they want, whether they can afford it or not. This hurts their chances of qualifying for a loan. Millennials are also not really thinking long term like their parents did either.

It goes without saying that millennials are ambitious, and like to strategize their financial circumstances. Unlike the previous generations that were afraid of the future and preferred to save instead of spend, millennials usually get what they set their heart on, and are not lazy or shy to take up a second or third job to make some extra cash for something they desire (certainly when having a large family is not vital to you). Well, when full time jobs are hard to come by because of the ACA health care law and other regulations, this is only sensible.

Millennials choose to live life to the fullest by spending on ‘experiences’ rather than material possessions. This includes vacations, music festivals, good food, and the like.

It is also true that millennials have a long time ahead to grow their wealth, and with new technologies always coming to the forefront, the financial future of millennials may not be as bleak as some old school experts make it seem.

Business, Finance, Tax

Top Accounting Software For Small Businesses

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice

Numerous software solutions for accounting are available in the market, each with its unique features, and which cater to the specific needs of small and medium businesses. This has made the accounting software development industry a highly competitive one and any standard modules includes general invoicing, ledger management, as also payment processing.

This software is vital in America since America still has a tax system that is ludicrous and puts people in boxes and divides this country up. OK, let’s get back on track here….

These key features apart, the ones that claim top position in the market do so by virtue of their integration and compatibility; ease of use; and more importantly, security. For smaller businesses particularly, using a cloud-based software is more advisable.

These accounting software allow you to customize processes, integrate third-party apps and also scale pricing based on the business’s current needs. These accounting solutions are moreover, helpful to all small businesses during times of regulatory upheavals.

For example, when the FASB or Financial Accounting Standards Board and/or the IASB or International Accounting Standards Board finalize any new revenue standard from contracts with your customers, most accounting systems need updating to match such freshly set standards. With a cloud solution, the vendor takes care of the system upgrade. The following are the leading accounting software for small businesses:

Freshbooks: By far the most popular leader among small business accounting software solutions. Reasonably priced and comes with great customer support. Known for its scale depth, Freshbooks also comes with expense management and time tracking.

It has also cloud invoicing, payment processing and reporting among its features as also an extremely reliable API with add-ons for tax management. A highly responsive, clean interface mobile app makes it accessible to iPhones, Android and users of the mobile web. You also get the most advanced security tools like HTTPS and data backup for multiple locations. A free trial plan is also available.

QuickBooks Online: Yet another vastly popular accounting software for small businesses. Its intuitive interface along with multiple scalable functions makes end-to-end accounting operations much simpler and more than a few million users will vouch for that. The system is empowered to automatically sync the business’s total finance profile to a single dashboard. This enables multiple users to view in-depth accounts and reports of the company.

It also creates trading and profit & loss accounts and invoice and billing solutions that are completely mobile compatible as also print friendly. You get over forty reports that include the cash flow statement, profit & loss account statement, balance sheet, budgeting capabilities and inventory management. However, its only drawback is ample customer support and a QuickBooks-certified accountant may be required to optimize the software.

Xero: In terms of its virtues, Xero is somewhat similar to QuickBooks Online, particularly as far as the feel and interface are concerned. Xero’s greatest advantage is its ability to integrate with a Mac.

Unlike other accounting solutions that come only with a plugin, Xero comes with a Mac module for connecting natively with a Mac UI. Its other assorted features are an integrated payroll module, bank reconciliation, dashboard, expense claims, inventory, financial reporting, invoicing, and balance sheet. However, Xero doesn’t relate directly with US-based banks but offers a free trial nevertheless.

Wave:  By far the most popular basic accounting software for consultants, freelancers or any small business with a staff of nine or less. Wave is being widely used for recording daily office processes as also simpler financial reporting issues.

This includes preparation of the profit & loss account, balance sheet, receipts and invoices. It is also capable of managing direct deposits and payroll. It is however, somewhat handicapped to handle cash management because it lacks the ability to report cash flow or track payments and bills. It’s so basic by nature that complex transactions would need other accounting software to be tackled. Nevertheless, a salient freemium for businesses with really tight budgets.

Zoho Books: The popularity of Zoho Books is growing among micro-businesses because its app is well equipped with numerous basic accounting tools including customizable templates.

The most notable features of Zoho Books are: automatic payment notifications and bank feeds, facilities for online customer collaboration, reconciliation, invoice and time tracking, inventory management, API as also automated workflows. The Zoho business and productivity suite is an added advantage which natively integrates with more than 25 Zoho apps. Great customer support is also available by way of phone, knowledge base, online, and video tutorials. No free trials available.

It’s the commonality of their ease of use, android and iPhone compatibility, reasonable rates, sterling customer support, and security features that have singled out the above mentioned five accounting software solutions for small businesses in the current year.

Business, Finance, Insurance, Lifestyle

What The Banks Don’t Want You To Know: Secret Financial Tricks Of Higher Finance

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice

All of us are aware of the fact that banks and customers share a mutual relationship with one another. Just the way we need banks so does the bank need us.

But the problem is even if we think that our banks are looking out for us, they are not as transparent as we think them to be – we all remember those infamous words regarding the ACA health care law when we were told we could keep our doctor and we know how that turned out – that is not being transparent. Banks do not have a golden record here either.

In fact, there are numerous aspects of banking that is neither much known nor advertised and most customers are not aware of these banking secrets. Not even the NSA knows these secrets and they are supposedly everywhere right?

You will not always get the rate that is advertised

You might be feel that banks are offering a stellar rate but the truth is that not all customers get the rate that has been advertised. In fact, only a small percentage of customers are offered a low rate and the others are offered a higher rate of interest so that they can compensate for the low rate that was offered to certain other customers.

Banks make more money the more you swipe your card

Did you know every time you swipe your credit or debit card the bank is making money by charging the merchant some fees? There are promotional credit cards which will require you to spend a certain amount of money within a particular time frame so that you are eligible for a financial reward. You do not want to get a card like this. Why deal with it? Just stick with a debit card and watch the impulse buying.

Another aspect of using your credit card is that banks know for sure if the amount is around $1,000 or more you may not be able to pay off that purchase at that time. The result is that you will end up accruing some interest which in turn is a way for the bank to make more money.

This is another reason you want to pay in cash for most items. A car or a home is an exception (but if you buy a car with cash that is the way to go) but you certainly do not want to borrow money to pay for a flat screen, furniture, or some appliance unless it is an emergency. But this is not an ideal way to do things. You do not want to be paying more for items and you will be paying more if you do not pay in cash and buy the item you want outright.

If you cannot buy that item outright then wait until you can.

A closed checking account can be a salient and clever way for your bank to make some extra money

When you close a checking account you might feel that it is over. But that is not the case. It may so happen that you forget to switch over your auto-pay transactions. The result is that the closed account is charged anyway. The result is not at all pleasant because there are instances where customers end up paying heavy penalties, fees, and some of the cases are even turned over to collection agencies.

Banks have a tendency to make deposits last which many customers may not be aware of

For example, if you ever schedule a few payments (or one large payment) to go out on the same day you expect some money to come into your account to cover this expenditure your bank may do something that is slightly unethical. The bank will actually issue those payments before the money is deposited into your account. The result is you end up using the overdraft feature of the bank which in turn allows your bank to charge you overdraft fees.

Banks make money by selling insurance

When banks try to sell insurance to customers in lieu of some credit you take from them, it is actually a way to extract more money out of you. This is because if you go through the fine print of those insurance policies you will realize that it will not cover all the debt that you owe. Something you need to think about!

Lastly, we should consider what Bill Gates (who has had some positive discussions with Trump in 2017 but this is another subject) once said, “Banking is necessary; banks are not.”

Culture, Finance, Lifestyle

5 Reasons You Need a CPA for Accounting and Filing Taxes

by Benjamin Roussey|Posted on | 4 minute read | Advertiser notice

Whether you’re an entrepreneur, small business owner, or a working professional, you may not realize that a lot of your time goes into managing your money. Keeping track of your income and expenses, filing taxes, recording tax returns, and other financial issues are a regular part of any job or business.

Various studies have found that most entrepreneurial enterprises and small business do not survive beyond five years and health care laws like the ACA do not help, ridiculous rules imposed by the thuggish EPA are terrible, high taxes, Dodd/Frank is another salient threat, and so on are certainly viable reasons why many business do not make it. While the reasons for closure can be many (and some strong reasons were just mentioned), a lack of suitable financial management happens to be one of the major reasons.

A certified personal accountant (CPA) is the solution to this aspect of having a business. A personal accountant makes sure your financial data is correct and updated at all times, helping you focus on your business, marketing, development, and/or jobs without worrying about managing your money.

Still not convinced? Here are five reasons why you need a CPA for your accounting and taxes.

Tax laws and compliance are not simple

Admit it or not, but comprehending taxes is no mean feat. America’s tax code is a disgrace but certain groups, want it to remain complicated so we have to depend on others to operate. The tax code should be simple and should be able to be completed with 5th grade math in about 15 minutes (most of that time involved in just organizing your paperwork – 2 minutes for the actual arithmetic if that).

Taxes are mindboggling, confusing, and they keep changing frequently. Trying to stay updated on taxes while understanding all of it will take up a significant portion of your time and eat into your work schedule or family time. If you’re confused when filing your taxes or tax returns, you could either end up paying more than you should or you could be penalized.

A CPA is there to help you understand your taxes, and take care of it on your behalf. You can rest assured that your taxes will be filed correctly and on time. Giving you time to watch that amazing Transformers, Star Trek, Sicario, Horrible Bosses movie and so on.

Finances come in various forms

Your earnings aren’t just your salary or monthly income from your business. There are stock options, mortgages, capital gains, loan repayments, and several other things that make your earnings more complicated. Managing your loan repayments, stock dividends, along with your monthly income from your business or job are just too burdensome to deal with on your own. You could even end up filing the wrong taxes and attracting a penalty by the massive bureaucracy known as the IRS which is part of the swamp but is another topic.

A CPA is able to prevent this and helps you keep track of all your taxes – this is their profession and they take this serious. Whether you’re buying a house or investing in stocks, a CPA is your best friend in getting your taxes figured out. They can offer you advice and they more than pay for themselves.

You like tax credits, but don’t understand them

How much did you spend this past week? Uh….you don’t seem to remember. Now, how much did you spend in the past year? Those Chalupas at Taco Bell are delicious but how many did you buy in the past 6 months, year? You probably cannot count that high! OK, this is going a little too far but Taco Bell is fantastic.

If you like deductions or tax credits, you first have to remember what counts as a deduction and going to your favorite fast food joint such as Taco Bell, Wendy’s, McDonalds, and so on, you know the business who hires people that understand what you are saying, may or may not be eligible to be counted as a tax credit or a deduction.

This is when working with a CPA is certainly beneficial. An accountant will keep track of your income and expenditures throughout the year, and help you avoid paying more than you should by recognizing the deductions you’re eligible for. With the help of financial accountant, you could file the best tax returns.

You have multiple jobs

Times are challenging, and working only one job is seldom enough if you have a family to feed. More and more people are turning to side-jobs, be it bartending, freelancing, or working part-time at a supermarket. When you have multiple jobs and more than one source of income, your taxes will become more difficult.

Managing multiple forms and calculating different taxes is time-consuming, and not to mention confusing. To avoid chances of erring, get a CPA to handle your finances and help you out. And if she looks like Kate Veatch in Dodgeball then good for you but if your paperwork is tossed in a closet like Peter La Fleur’s was from the same movie that is pretty pathetic.

It’s best to avoid risks

Taxes are an area where it is best to be safe than sorry. You must have often heard that it does not take a genius to file taxes. While it may not take a genius, some help is definitely appreciated and beneficial when handling something this complex. One wrong move can result in penalty or additional fees, and the mess can take months to clean up.

Even if you consider yourself a risk-taker, it is best avoid taking these types of risks – even if you are an extreme athlete always looking for the next thrill or mighty challenge. A CPA ensures you’re safe and sound when it comes to understanding and filing your taxes, and also helps you save money.

Your financial health is crucial to your professional success. Hiring a CPA is an investment that leads to constant support and guidance so your finances are handled properly and you make the right moves based on the information and advice they offer you.

Culture, Finance, Lifestyle, Tax

How And When Do You Start Retirement Planning?

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice

There is no one particular time to start your retirement planning. You can do it from the day you start working or from a later age. It is your proclivity. But the sooner you start, the better. In your early years, it is easier to always think that retirement is far away.

However, time flies and one day we all realize that the time to hang up our boots and jackets has finally arrived. And those folks who chose not to plan well for retirement earlier on are most likely to find themselves in financial trouble and extremely stressed out because their best working days are behind them and they still have many more years left on this planet to live. So start planning early!

It is pretty hard to forget about but it is easier to ignore when you are younger. The thing is, the longer you put this off the more you are going to have to save later on which could be difficult for a number of reasons. The simple fact is, if you do not save for retirement you may not be able to. Not everyone can perform so terribly in their job like Lois Lerner and Barney Frank did and be able to retire comfortably. Though most people are more honest than those two but this is another topic.

And do not think you are going to end up with boat loads of cash like Louis Winthrope III and Billy Ray Valentine did the hilarious movie Trading Places. That is just illogical!

Now is the Right Time

As you work and pay off loans and bills you need to contemplate how much you should be saving for retirement. As life changes, your plans too can change. But staying on track is vital. Once your familial responsibilities set in (you will most likely have a family), you still need to continue saving.

How much is needed to retire?

The thumb rule is to put aside 10 to 15% (according to CNN Money and do not worry about this being fake news since this information by CNN is also supported by other sources) when you are in your 20s but you should save as much as you can. This harkens back to what was said before, if you do not start saving early you are going to have to make up for it later on in your life.

You also have to maintain favorable credit rating (unless you are one of those strange ducks like me who just pays for everything in cash and does not go out much but since most people are not like this, play the game and maintain your credit) and manage your debt burden if any, carefully. A poor credit score can prevent you from obtaining reasonable loan rates, leaving you with less amounts of money to save.

Planning Your Future Finances

If your current employer offers you a 401(k) plan, sign up for it and have contributions deducted automatically from your monthly paycheck. If your employer matches your contribution with the same amount, you only stand to gain in the long run. It pays off when you accept superannuation.

If you are changing jobs, consider rolling over your 401(k). You can transfer your employer-sponsored 401(k) funds into an IRA or Individual Retirement Account as you switch jobs. This will give you a clear picture of how much you have in reserve after working for so many years and what needs to be done to enhance it further.

For those in their 50s, retirement isn’t far off (though it could be which is the point here!). It’s time to take a look at your retirement savings and to evaluate whether you are on the right track or if you should begin to start tucking more away. If you need a qualified financial professional to advise you on reducing your tax burden so that you can save more for retirement then you should consider getting one. This financial advisor can also offer you salient advice on how much you should be investing and what you should be investing in.

You could even ask your employer to deduct more from your pay as your earnings go up, provided they are willing to match your contribution every month. Moreover, catch-up contributions are always useful for making up for any shortfalls you may have in your portfolio. Evaluating your monthly expenses is also critical. You do not want to be spending too much on a car or a home and so on. You also have to pay attention and consider any interest rates on loans that you are contemplating taking on via a house or car and you should never borrow to pay for furniture. That is a terrible move to make!

Clear thinking and clearer vision are the two main facets for successful retirement planning. And the sooner you start, the better. There’s no greater relief than knowing that you are well provided for as you put your feet up and relax knowing you made the right moves in life.

Business, Finance, Lifestyle

What Do You Understand About Social Impact Investing?

by Benjamin Roussey|Posted on | 4 minute read | Advertiser notice

Investing is a topic of interest for almost all of us. In some way or the other all of us are trying to find out the most suitable and lucrative investment options but we all know what happened with Peter La Fleur at the end of the hilarious comedy Dodgeball was ridiculous (he became rich that easily and quickly!) though this is another topic. For example and moreover, some of the most well-known options of investing your money include stocks, bonds, debentures, and real estate.

However, the decision to invest to a large extent depends on the amount of risk you are willing to take. You are not the federal government, you do not want to make an Obamacare or Solyndra type mistake! Those were both loser investments and the former continues to be – just see the national debt. It is true that investing helps you earn money which can be put to use at a later stage of your life. How about an investment which allows you to earn money while promoting a social good?

In fact, this is a new emerging trend in the world of investing and is known as impact investment.

What is social impact investing?

Social impact investing is an investment strategy that emphasizes on invoking a positive social impact along with suitable financial returns to an individual (unlike donating money to the Catholic Church or any church for that matter since that is just a straight donation with no return expected accept the return of knowing that donation is going to a righteous cause). However, this does not mean that social impact investment will mean giving money to a charity as just explained.

But at the same time it has strong philanthropic connections. The concept of social impact investment and socially responsible investment might have similar purposes but both these investment strategies are not the same thing. Social impact investment on the other hand is a kind of investment that has measurable impact either in social, economical, or environmental domains.

The term social impact investment had been coined in 2007 and it is not what Michael Moore or George Soros does since they promote anti American causes and interests which are the main reason inner city schools are in disarray, America is trillions in debt, ISIS exists, and so on but let’s get back on topic.

The two approaches to social impact investing

If you are interested in impact investment there are two options from which you can choose from. They are the following:

  • Impact first approach: With the impact first approach, the primary objective of an individual is to bring about some amount of social, economic, or environmental good. The ones who invest with the impact first approach are ever ready to sacrifice a considerable amount of their financial gains in order to satisfy the social cause first.
  • Finance first approach: A person who has invested with the approach of finance first focuses mainly on making considerable financial returns as they invest their money. The ones with this particular approach will tend to invest their money in companies, initiatives, or funds which in turn work towards augmenting positive social change, but their primary goal is to make money out of their investment.

Differences between social impact investment and socially responsible investment

Many a times you will hear that people are using terms like social impact investment and socially responsible investment interchangeably. But one needs to keep in mind that both these terms are not same. They might be similar.

The main difference between the two types of investment essentially lies in the approach of investment that is used. For example, the ones who make socially responsible investment screen companies based on certain positive and negative guidelines. To put it simply, socially responsible investing means putting your money in companies which are either known to be socially responsible or companies who do not do any irresponsible acts.

Social impact investing on the other hand does not categorize companies based on their positive or negative features. Rather, social impact investing tries to seek out investment avenues which renders a financial return along with measurable positive social, economic, or environmental benefits.

Another way of putting the difference between the two is that socially responsible investing emphasizes the philosophy of do no harm while social impact investing goes a step ahead. They aim at making a difference for the overall betterment of society.

The social impact investors are keener to measure the social or environmental impacts that their investment does compared to socially responsible investors. Social impact investors use IRIS metrics to measure the social, economic, or environmental impacts of the investment. The socially responsible investors on the other hand do not have any metrics to measure the positive impact that occurs because of their investments.

Areas of social impact investing

There are numerous sectors that might be targeted by social impact investors for making financial gains as well as a positive social impact. However, the most common are the following:

  • Education
  • Fair trade
  • Healthcare
  • Eco-friendly companies
  • Community development
  • Small business and micro-finance
  • Conservation and renewable energy
  • Sustainable products and agriculture

Last but not the least, it can be concluded saying that there is no reason to think that social impact investing does not offer high financial returns. This is because a considerable amount of data testifies to the fact that even social impact investing can be profitable.

Business, Finance, Lifestyle, Tax

How Much Do You Need to Retire Comfortably On?

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice

In order to retire comfortably, the first thing you need to know is how much income your retirement funds are going to generate when you’re no longer going hard at it. That’s a moot point though. In fact, there isn’t a one-size-fits-all formula to work this out.

The basic calculation

However, the general thumb rule is that about 80% of your income in the pre-retirement period will allow you to maintain a comfortable lifestyle after retiring. So, the first thing to do is to multiply your present income by 0.8 and make appropriate adjustments according to your preference to live frugally or lavishly after retirement. You can live moderately as well, of course!

The next step involves subtracting your other assorted sources of retirement income. You can calculate your social security benefit amount by visiting www.ssa.gov to view your latest statement. Take into account any expected annuities and/or pensions also. The figure that you get from these is the income required from your savings.

Then there’s 4% rule that will help you estimate how much is required in terms of savings to generate this income sustainably. Multiply your need for savings income by 25.

But do bear in mind that this step gives you a retirement figure in today’s economic scenario. Keep inflation at the average rate of 3% per year in the back of your head too. To work out the inflation factor, take 1.03, raising it to the power of the number of years you have until you retire. If it’s 15 years, 1.03 raised to 15 (1.03 ^ 15) will give you 1.56 (yes, you will have to find that funny button or sequence using your smart phone to determine this). Multiply this factor of 1.56 by the figure achieved from the previous step that will give you an appropriate idea of what your target for retirement savings ought to be.

More art than science

Contrary to popular belief, figuring out your retirement corpus is more of an art than mathematics or science. Your corpus will depend largely on your plans after retirement as also certain unpredictable and uncontrollable factors like health issues and future performances of your investments. It’s vital to know that those with a definite goal for retirement savings retire more comfortably than those who don’t have a sound goal kind of like America which is only damaging itself as it continues to pile on debt year after year (the previous president doubled our debt for example).

Finding your multiplier

The average retiree needs to save about 11-12 times their current salary for retirement to be reasonably confident that sufficient funds are available at the time of retirement. However, the fundamental problem with this method is that you may not have an exact idea of what you’ll be earning at the time of retirement. Thus, multipliers may be used based on your present income and age.

This in other words means you should already have put aside 1.4 times your current annual income when you are 35 years of age (so if you make $50,000 a year you should have $70,000 saved by this point, for instance); 3.7 times the then annual income when you are 45; 7.1 times the annual income at the time when you are 55 years of age and 12 times the income when you are aged 65 years.

However, if you haven’t reached your target already, don’t despair. Enhancing your savings rate may help you make up for any lost ground. If you live on 70% of your annual salary or work for a few extra years, you can cut the required savings levels to reach by 10% to 25%.

Experts opine that 70% of your annual pre-retirement salary put aside will allow you to live comfortably, provided mortgages have been paid off and you are in good health when you call it a day. However, should you plan to build that dream home or even go globe-trotting, 100% of your last annual income or maybe even more could be required.

You do not want to waste money like those irresponsible people did in that 90s show Party of Five! Wow, how can a group of people be so clueless?

Superannuation sums

Thus, making realistic and objective estimates about your would be expenses during retirement is absolutely necessary. Review your current expenses category and then work on how they are likely to change. According to average calculations, a couple could expect to have a ‘comfortable’ retired life if they have a superannuation sum of $535,000 at least, based on an ROI (return on investment) of 5% annually along with a Part Age Pension.

Should the ROI be 7%, then a superannuation sum of $400,000 at least would be required along with Part Age Pension. If a couple decide to invest more conservatively, a superannuation sum of $720,000 at least would be required if the ROI is on an average 3% per annum.

For someone who’s single, a ‘comfortable’ life is most like assured under the following circumstances:

  • Superannuation sum of $490,000 at least, assuming that investment returns will be 5% annually along with Part Age Pension.
  • Superannuation sum of $370,000 at least at 7% annual returns along with Part Age Pension.
  • A lump sum of $650,000 at least at 3% annual returns from more conservative investments.
Business, Finance, Lifestyle

What Are The Top 6 Ways To Generate Passive Income?

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice

All of us are after income generation. Along with our regular source of income we are quite interested to find out other avenues to generate some extra income. One such option is to earn passive income.

What is Passive Income?

Passive income involves regular earnings from a source other than an employer or a contractor. To be more precise, it can be said that passive income can come from just two sources. Some of the examples are rental income or income from a business in which an individual does not have an active participation. Earnings from book royalties or dividend paying stocks are also examples of passive income.

However, one might think that earning a passive income is a lot easier. You can do that as you sip your mojito on a beachside shack or watch another amazing Transformers movie or something incredible like Sicario. But that is the not the case.

In order to earn a passive income you need to do some homework and also know that a considerable amount of effort will have to be involved. It is true to have a secondary source of income apart from the regular source of income. Nothing is free in this world despite what the left always says such as that things can be free. Someone has to work and pay for it. In this case, it is you. But there are long term benefits.

So before we turn our dreams into reality, we need to have an idea of some of the ways to earn a passive income.

The top 6 ways to earn passive income are the following:

  1. Dividend stocks: As far as passive income is concerned, dividend stock is a tried and tested medium to earn a passive income. However, before you invest in dividend stocks you need to carry out careful research to find out about some fantastic companies where you can invest a significant amount of money. In fact, if you go on investing money in stellar stocks for years on end you can accrue a considerable amount of residual income.
  2. Peer to peer lending: This is typically a practice to lend money to borrowers who do not qualify for traditional loans. When you become a part of peer-to-peer lending you can actually spread your investment and mitigate the risk factors. The benefit of such lending is that you can choose the borrowers and charge a high amount of interest. In this form of lending you will be able to charge an interest rate higher than 10% or more which is considerably more than the conventional interest bearing investments. The most popular peer-to-peer lending platform is the Lending Club.
  3. Rental properties: If you have a property that is suitable enough to be rented then it can be a salient way to earn passive income. In fact, you can outsource the upkeep of the property to a management consultant and then it becomes a true source of passive income. The best way to get started with rental properties is crowd funding. The bright concept about doing this through a platform instead of doing it alone is that the income becomes even more passive.
  4. Invest with a robo-advisor: In this method you put money into an account and allow an algorithm to manage your investments. It is called a passive income because the algorithm does all the work for you. It is the algorithm that keeps your profile balanced. The pleasant aspect about these robo-advisors is that the fees of maintaining an account are much lesser than that of an account that is managed by a person. The two key players in the world of robo-advisors are Wealthfront and Betterment.
  5. Put money into high-yielding savings account: It is true that the conventional savings account could be quite boring to earn some passive income, but they are also the safest. Online banks are doing well in the field of savings account. They give a lot better interest rates to the clients than the conventional banks to which we are used to. It is now possible to obtain a decent savings rate without having to lock away your money for a long period of time.
  6. Affiliate marketing: This is another effective source of passive income. Affiliate marketing involves partnering with a company so that you can receive commission on their products. It seems a poignant method for folks who have blogs or websites since they may have a better understanding of the virtual world than others. However, as far as affiliate marketing is concerned it takes a long time before it actually becomes a passive income.

Last but not the least, research anything well before you make an investment to pursue these ends and to build a passive income portfolio or to develop another source of income.

Business, Finance, Insurance, Lifestyle

Should You Pay-off Your Mortgage or Invest the Money?

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice

You are faced with a Hobson’s choice: Whether to pay off your mortgage or invest that money instead. A double-edged sword that works both ways. However, it’s truly a tricky problem to handle and to make a decision quickly becomes difficult and perhaps treacherous.

Benefits of Paying Off Your Mortgage Early

When you start making regular payments on your mortgage, you stand to save money – probably to the tune of thousands of dollars by way of interest costs. You also buy mental peace as you get to be the real owner of your home without any further liabilities. You are now confident that there’s a secure place for you to live in and won’t have to hit the streets if you suddenly find yourself unemployed which happened a lot for years because of the Barney Frank and Alan Greenspan recession which was continued by Obamanomics.

Moreover, you also reduce your living costs because in many cases, mortgage payments are the largest monthly expense post deduction of taxes. Without the liability of a mortgage payment, you save more, can work less, or take up that dream job you couldn’t afford but always wanted because of the lower pay. You also bid adieu to PMI or private mortgage insurance by accelerating the process of paying off your principal amount.

Your home equity reaches a point where PMI is no longer required. This helps you save money long before you pay off your mortgage and enhances chances of accelerating the principal pay-down while you continue to make the same payment on a month to month basis.

Then there is the added advantage of asset protection also. Many states have their own laws protecting home equity should there be a lawsuit or any other legal procedure.

Homestead rules provide substantial protection to home equity. Retirees sometimes use their home equity as a strategy for estate planning to protect their assets for a surviving spouse should one member use up all resources available due to an illness or by way of prolonged nursing care. In sum, there are numerous situations where home equity represents a more secured asset having its own special legal privileges as compared with other investments.

A home with a clear and free title is greatly significant for those on the verge of retirement. When you retire with a fixed income from your pension, social security, and fixed annuity, it can truly work to your benefit if you pay off all outstanding debt rather than investing your money in investments that fluctuate.

This enables you to substantially reduce your financial variables and reliably match forecasted income to expenses.

After retiring, moreover, the mortgage payment may require shifting funds from accounts that have been tax deferred when those funds would have been better off if left to grow on their own. Finally, should your taxable income get reduced after retirement, it may reduce the benefit of the tax deduction on the mortgage interest and tilt the equation in favor of the payoff.

Since the stock and real estate markets fluctuate, it’s more secure to invest in your home, knowing with certainty what your ultimate ROI is likely to be. You stand to get the imputed rental value of a living space as also the instant return of interest expense that has been eliminated.

The sureness of this particular return is a salient benefit for investors who may be disappointed with the unreliable returns from the financial markets. Last but not least, when you pay off your mortgage, it is a serious confidence boost that you did things right.

The Cons

On the flip side of the coin, however, even though the mortgage interest that you pay is deductible from your tax return, there are certain “caveats” to such deductions: The rules guiding deductions are somewhat complicated and you may receive a lower deduction than you thought of getting; in certain cases, your payments of mortgage interest merely replace the standard deduction and don’t provide for any real savings; even when you get a deduction, you’re still having to pay $1 to get 35 cents worth of tax breaks, which isn’t very lucrative; and the deduction’s effective value diminishes over time with the loan maturing and you end up a paying a lesser amount of interest with every payment.

Final Thoughts

You can invest in the market and pay off your home simultaneously. You can do both. It is not a zero-sum game. So perhaps you can breathe a little easier now. You do not have to pick and choose.

If you understand the stock market or have a prudent financial advisor (if there is such a thing – almost all of them missed the call on the tech bubble during the turn of this century) then invest some of your money (check out dollar cost averaging). You can have the best of both worlds but continue to make your monthly mortgage payments.